San Jose, Calif. mayor launches pension reform initiative

Reuters

By Jim Christie

SAN FRANCISCO, Oct 15 (Reuters) - The mayor of California'sthird largest city offered a plan on Tuesday to help the staterein in spending on public pensions, drawing rebukes from agroup representing public employees as well as the state'spension fund for public-sector workers.

San Jose Mayor Chuck Reed said his measure, which he hopesto qualify for the November 2014 ballot, would urge voters toamend California's constitution to allow local governments toreduce pension expenses associated with their current employees.

Local governments in the most populous U.S. state may reducepension benefits for their future workers to lowerretirement-related spending but they face legal roadblocks indoing the same for current employees.

"In order to save significant dollars you have to go wherethe significant costs are and that's current employees," Reedtold Reuters by telephone.

Reed, a Democrat, has emerged as a high-profile advocate forpension reform in California after successfully winning ameasure in his city last year that garnered national attention.That measure allows San Jose's workers to keep pension benefitsthey have earned but requires them to pay more toward theirpensions to keep up the same level of benefits.

If San Jose's employees do not pay more, future pensionbenefits are reduced, a plan they are challenging in statecourt.

The statewide measure filed by Reed with the state attorneygeneral's office would leave retirement benefits already earnedby public employees intact but open the door to benefits fortheir future service to be modified.

Dave Low, chairman of Californians for Retirement Security,which represents active and retired public employees, said themeasure "breaks the promise of a secure retirement made tomillions of Californians, many of whom are ineligible for SocialSecurity and have an average pension of $26,000 per year."

"It will allow public employers to unilaterally cut theretirement benefits promised to current teachers, firefighters,police officers and school bus drivers," Low said.

If Reed's measure makes it on the ballot, it will "energize"the same coalition that rallied to knock off an initiative lastyear that would have barred unions from using money deductedfrom members' paychecks for political purposes, Low added.

The California Public Employees' Retirement System releaseda statement saying "Changes to pension benefit levels should bedetermined by the employer and the employees, and not at theballot box."

The pension fund, known as Calpers, also said Reed's measureruns afoul of state law.

"The courts have clearly established that California publicemployees have a vested right to the level of benefits promisedto them when they are first employed," Calpers said. "Thisprevents not only a reduction in the benefits that have alreadybeen earned, but it also prevents a reduction in the benefitsthat an employee has been promised for their future service."

Calpers said it will "continue to support and defend ourmembers' vested rights, in accordance with the laws of the landand our obligations under the federal and state constitutions."

Attorneys for Calpers have stood ready to help the bankruptcity of Stockton, California, beat back attempts by some of itscreditors to block its plans for maintaining pension payments.

By contrast, Calpers challenged San Bernardino, California'sbid for bankruptcy protection. San Bernardino for a yearsuspended its payments to Calpers after declaring bankruptcy.

San Bernardino Mayor Patrick Morris, also a Democrat, issupporting Reed's measure. In his state of the city speech lastweek, Morris said San Bernardino's pension spending had reachedan "unsustainable level" and has been "draining" the city'sgeneral fund of money needed for key services.

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