Neighborhood Group Supports San Jose Councilman’s Pension Plan for Nov. 2 Ballot by Stephen Baxter, Mercury News, July 29, 2010

In the wake of a record budget deficit and fewer services for residents, San Jose City Councilman Pierluigi Oliverio is trying to trim the city's expenses.

Oliverio proposed a pension reform plan in July that he hopes will be placed on the Nov. 2 ballot, and the idea is gaining traction with some residents. If the city council agrees on Aug. 3, a measure would be placed on the ballot that would essentially erase city charter sections that define city employees' pension contributions and entitlements.

If new union agreements follow the charter change, it could eliminate hundreds of millions of dollars from the city's books.

On July 12, the board of the Almaden Valley Community Association unanimously voted in favor of the proposal. The Shasta Hanchett Neighborhood Association has not taken a formal position on it, but its president, Helen Chapman, said in late July that the city should have more flexibility in union negotiations.

A call to the Willow Glen Neighborhood Association was not immediately returned.

The city charter states that police and firefighters who are 55 years old and have completed 20 years of service are entitled to at least 50 percent of their final compensation on a monthly basis until they die.

Employees who are not police and firefighters must complete 25 years of service and reach age 55 to receive those minimum benefits, or they must reach age 70 with any length of service.

To help pay for that perk, the employee contributes $3 for every $8 that the city contributes. Oliverio said that a typical private sector match on a 401(k) is 3 percent. City employees effectively get a match of more than 250 percent.

Those costs translated to $200 million in the 2010-11 fiscal year and are forecast to be more than $240 million.

San Jose's library system—whose branches are now closed on Sundays and Mondays—has a budget of $124 million, by comparison.

"San Jose voters should have the right to vote [on whether] they want to continue to fund a multimillion-dollar pension system or have the millions go back to services," Oliverio said in a statement.

The measure's language has not been decided, but it would essentially remove words in the city charter that dictate pension rules. The new rules would apply only to new city employees. Current employees would keep what they were offered originally.

Jerry Mungai, president of AVCA, said the city's benefit plans have not kept pace with economic downturn.

"These are dollars that could be used to improve our parks, roads and libraries—or even hire additional safety officers," Mungai said in a statement.

On July 19, the South Bay AFL-CIO Labor Council shot back.

Its leaders released a statement that warned that a city charter revision would replace the current system with a "highly politicized process that guarantees nothing but financial insecurity for the city."

Contrary to the labor council's stance, Oliverio said he was spurred to change the charter partly because other union leaders suggested pension changes during recent negotiations. The charter did not allow those changes.

If the measure appears on the November ballot and is approved by voters, Oliverio said, it would free city and labor negotiators to negotiate pension rules for all city employees hired after Jan. 1, 2011.

Another bone of contention for Oliverio is that city employees in the system are guaranteed an 8 percent net return on their pension- related investments. If the stock market falters, taxpayers foot the difference—to the tune of $52 million in the city's last fiscal year.