Why other cities are watching San Jose

Struggling to pay rising pension and health care costs, it has a plan to cut benefits -- which a court will have to rule on.

By Aimee Picchi Sep 24, 2013 1:55PM

San Jose Mayor Chuck Reed (© Paul Sakuma/AP)For many municipalities struggling with rising pension and health care costs, San Jose, Calif., is the one to watch. 

That's because voters in Silicon Valley city passed a referendum last year that will offer a two-tier system of benefits, giving new city employees smaller pension and health benefits. But unions are opposing the plan in court, arguing that it's illegal, The New York Times notes.

The disputes' outcome could serve as a model for other cities. In the meantime, San Jose Mayor Chuck Reed (pictured) is considering joining together with other California mayors to create a campaign for a state ballot initiative to give city officials more control over pension and health spending, The Times notes. 

Other towns would likely follow San Jose's lead, if the state court mulling the case rules in the city's favor. 

Already, San Jose is suffering from financial stress, despite being the home base for tech companies ranging from eBay (EBAY) to TiVo (TIVO). The city has an unfunded pension liability of $3 billion, and its police department has seen officers quit amid cuts to pay and benefits.

Unfunded pension plans are a problem across the country, affecting cities from Omaha, Neb., to Little Rock, Ark., according to a January study from the Pew Charitable Trusts. Altogether, 61 cities have a gap of $217 billion in pension and health care guarantees.

Reforms are certainly needed, although some cities have undertaken different tactics than San Jose. Omaha, for instance, created a 2.5% restaurant tax to help cover unfunded liabilities.

Whatever the solution, chances are it won't be easy or painless.

Karol Denniston, a San Francisco-based bankruptcy attorney, told The Times: "There is growing recognition that there is not enough money to keep doing what they're doing, and something's got to change."

Follow Aimee Picchi on Twitter at @aimeepicchi.

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Sep 24, 2013 4:35PM
Another example of the greedy,"we don't give a damn about anyone else" policies of public employee,teachers,police and firemen unions. As it is now ,in most cities in California, cities are effectively broke but cannot do anything about it. The politicians are owned by the unions and are deathly afraid to propose solutions to these coming financial disasters out of fear of being turned on by the unions. So, in LA and other places, we citizens have to just sit back and watch as our cities deteriorate and we go without basic services, so union member can get their bloated retirement packages which include no deductible health, vision and dental for their lives as well as the lives of their dependents. And the entire thing could be resolved by union members just contributing SOMETHING towards the future payments of the health, vision and dental plans. These are the reasons unions are bad for America and everything they do is only about them .Raise the minimum wage, they get a raise because their existing contracts call for a certain spread between their minimum charge and the minimum wage as set by law. Raise the minimum wage by a dollar per hour and every union member gets a dollar per hour raise in addition to any predetermined raise. That's nice if we can afford it but we can't afford it!
Sep 24, 2013 4:51PM

I would think SOME pension and health care benefits after retirement is better than NONE.


Yes, the unions are mad, as it appears the city is reneging on the original contract.  Guess what, the original contract was unreasonable and unsustainable.  So what is being offered today is the best the city can do.


It is what it is.

Sep 24, 2013 5:04PM
Easy solution to this, don't give any pensions to those lazy liberal progressive Dumbocrat voting lack of public service workers union members. Problems solved anything else you need help with today, Californicators?
Sep 24, 2013 5:08PM

"Unfunded pension plans are a across the country, affecting cities from Omaha, Neb., to Little Rock, Ark., "


If I"m trying to describe a nationwide problem, I pick different cities.

Sep 24, 2013 5:55PM
Omaha, NE just created another tax to help pay the pensions?  OK, but how does that solve the real problem? 
Sep 24, 2013 7:36PM
The working stiffs were lied to.   Nothing new here.

Part of government's nature is to lie.

Get used to it, don't take them seriously, and move on without them.

Sep 24, 2013 6:11PM
Yeah,lets blame it on the working stiffs, why should they make a decent salary and have health care like the  politicians do,,who do they think they are !!! And don't make those poor billion dollar silicon valley companies pay more taxes, make those greedy union workers pay more !!! (Wake UP America)
Sep 25, 2013 7:53PM
I'm going to preface this by saying I am an independent.  While I can agree on "decent" wage arguments, and corporate greed, and unwillingness to pay their lower level employees a reasonable wage, I would say now that liberals have their way 100%  It's tax, tax, tax, and spend, spend, spend.  And why not?  We are heading for 6 full years with Mr. O'Bama in charge, and the economy, meaning, working people, are feeling the pinch every single day.   And I doubt quite confidently this will not change for the remainder of his time in office.  There are no policies to promote robust economic growth.  You will never ever tax the nation into a prosperous, consumer driven machine.  The Fed is spending the last 5 years pumping millions and millions of dollars into the economy, and the future holds a very strong likelihood of severe inflation.  It could take two decades to climb out of all of this, and that's only if the average American can see through the problems that come with taxing so many businesses and wage earners.  A wage earner today making approximately 70k a year has already paid over $17,000.00 dollars in taxes.  That is "hard" money that is not in her pocket to spend, but in Mr. O'Bama's pocket to spend "on her behalf".  So the food stamp people get their food stamps, the welfare folks get their welfare, the unemployment folks get their share, and on, and on it goes without an end or a way to curtail the exhaustion of money toward government, and not toward the individual that earns it.  We are on a ledge that never, ever recovers from this kind of reckless take, and spend behavior. 
Sep 25, 2013 6:06PM
Most municipal pension & health care liability problems are due to excessive compensation paid to police and fire. Those are the groups that scream loudest when attempts are made to alter their sweet deals. Unfortunately, they have been very good at convincing many folks that there job is difficult, dangerous, and well-deserving of everything they've gotten so far. Yet, the facts tell a different story. Neither police work nor firefighting rank among the 10 most dangerous occupations. Most police officers never even draw their weapon over a 30 year career. In suburban cities such as San Jose firefighters have little to do, and spend most shifts in the station watching TV, maintaining equipment, and performing general cleanup tasks. Nobody is suggesting that police and fire staff be paid minimum wage, but retiring at 50 with $150K annual pensions + gold plated medical care is absurd. 
Sep 24, 2013 7:04PM
Chuck Reed is a Dweeb!  If he knew how to run this city we'd be in better shape, but he doesn't.  He along with his state level idiots are doing everything they can to drive business OUT of San Jose.  There have been some changes to San Jose that have been good, but the vast majority have been wrong.  I just wish we could get ole' Chucky boy fired.

One of the other issues with San Jose are the cities attorney staff, many cost the city more in their screw ups then they save...what a bunch of losers.  They are the ones that gave the city these great deals with the unions...costing the city probably a huge chunk of the $3 Billion.  All why getting themselves over paid.

Oh, and by the way Ms.Picchi, TiVo is NOT based in San Jose, they are in Alviso.
Sep 24, 2013 6:50PM
You made promises to your workers, keep your damn promises or how can we trust a city, county, state or federal government that consistently lies to us?
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