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Over the past decade, the City of San José has seen the cost of providing employee retirement benefits triple - from $73 million in FY 2001-02 to $245 million this year. Retirement contributions now take up more than 20% of the General Fund, and without significant reform, these skyrocketing costs will destroy the City's ability to provide basic services to our citizens.

Under Mayor Reed's leadership, the City Council has been pursuing a set of retirement reforms to bring the City's unsustainable retirement costs under control.

Learn more on Mayor Reed's separate Retirement Reform webpage.

In November 2010, San José voters approved a measure authored by Mayor Reed (Measure V) to place some common-sense limits on outside arbitrators to keep them from spending money that the City doesn't have.

Binding arbitration is currently used whenever the City and its police or fire union have an unresolved dispute over wages, hours or working conditions. While binding arbitration can be an equitable way to resolve contract disputes, past decisions made by outside arbitrators (or under the threat of binding arbitration) have had serious consequences on the city's long-term fiscal health. Learn how some of the decisions made by outside arbitrators have contributed to the city’s unsustainable employee costs and current pension problems.

Measure V reformed the binding arbitration process to ensure that the City's financial condition and its ability to pay for compensation are the primary factors that arbitrators must consider when issuing its rulings. In particular, outside arbitrators are now PROHIBITED from:

1. Increasing pay and benefits by more than the rate of growth in general revenues (averaged over the previous 5 fiscal years).
2. Retroactively increasing or decreasing benefits.
3. Creating a new unfunded liability that the City is obligated to pay.
4. Interfering with the discretion of the Police or Fire Chiefs to make operational or staffing decisions.

These common-sense limits will help ensure that outside arbitrators – who are not accountable to the public – do not increase employee compensation beyond what the City can afford to pay.

Read more about Measure V
Read the full text of the ballot measure

In February 2010, the City Council adopted a proposal from Mayor Reed and Councilmembers Constant, Herrera, Kalra and Liccardo that reformed the City of San José's retirement boards by:

1. Expanding the amount of expertise on the board; and
2. Ensuring that a majority of the board are independent members.

San José's two retirement boards make numerous decisions involving actuarial assumptions and investments that total $3.5 billion. These decisions are critical because when the retirement funds’ investments do not meet actuarial projections, taxpayers are on the hook for covering 100% of the resulting “unfunded liability.” Read more about the city’s retirement systems and pension problems.

The board restructuring approved by the City Council replaced a majority of the board positions with independent public representatives that possess financial expertise. The change is designed to promote sound investment decisions and minimize investment losses that leave taxpayers on the hook. The reform also reduces the potential for conflicts of interest, allowing board members to focus freely on administering the retirement systems in the best interests of the members and beneficiaries.

Learn more about the Retirement Boards Restructuring approved by the City Council
Read more about the qualifications for the boards' new public members