Mayor Chuck Reed
City of San Jose

A debate is raging in San Jose over its pension system, funding and reform. That debate, driven by the proposals championed by Mayor Chuck Reed, has ignited the passions and dialogue of interested groups on both sides of the labor issue. The debate has been at times testy, divisive and perhaps controversial, but there is no denying that the conversation is ongoing and reform is likely forthcoming.

Chuck Reed has not shied away from the fray, and his leadership has brought San Jose to the very forefront of the pension debate.

“Without reform, skyrocketing retirement costs will destroy our ability to protect the public and the quality of life in San Jose,” said Mayor Reed in a statement to PublicCEO. “We’ve laid off police officers, firefighters, librarians, and other city workers. We have libraries, community centers, and a police substation that are closed. We have a half-billion dollar backlog for road repairs. We’ve had ten straight years of budget shortfalls, and without reform, we’re headed into service-level insolvency.”

The Mayor decided to move forward with a platform of fiscal reform, which included declaring a fiscal emergency and availing the city of authority granted to it by its charter. Under the Mayor’s proposal, the City would increase retirement ages for all employees and cap the rate at which they earned their retirement benefits. For example, public safety employees would have had their retirement age increase to 60, while all other employees moved to a system that would pay benefits at 65.

Some of those powers, which included the ability to reduce the future pension formula for current employees, outraged some in the community.

“Our employees are dedicated, hard-working people and I wish there were better alternatives to these changes,” said Reed. “It’s important to understand that reform is necessary to protect the solvency of our retirement funds. If we don’t make significant changes, our employees and retirees won’t have security in their senior years.

“I realized we need[ed] to take some extraordinary action on February 14,” said Mayor Reed. “The staff told me that the annual cost of the retirement benefits could hit $650 million in 5 years from what we pay this year, $155 million.”

In 2000, the City paid only $63 million for its pension contributions and employed 6,753 people. The total number of employees could drop to just 1,600 by 2016 and pension costs could increase by more than 1,000%. That payroll reduction would mean the entire City’s staff would be 25% smaller than the city’s current 2,400 public safety employees.

As Reed moved forward with his proposal to drastically reform the pension system, he has also continued the conversation at the negotiation table with labor. And as a result of those conversations and changes to economic conditions in the city, the original proposal has been modified several times. That blend of determination and flexibility has helped the process remain inclusive and open.

Despite the modifications, many central and original tenants of the plan remain intact:

The City has the right to suspend cost of living adjustments during fiscal emergencies;
a public vote would be required to enhance retirement benefits;
and cap the City’s contribution to employee pensions; and
a blend of defined contribution, social security, and defined benefit plans.

During the past several years, pensions have emerged as a central theme in the public discourse regarding how and how much money government spends. Mayor Chuck Reed’s leadership has set him apart from his colleagues at every level as a consistent and courageous public elected official.

“I want to thank PublicCEO for recognizing the hard work that has been going on in the City of San Jose over the past five years to bring about common-sense fiscal reform,” said Reed. “This honor doesn’t belong to me alone, but is shared with the majority of the City Council who recognize that significant reform is necessary to protect the long-term health of our retirement systems and to restore core services to our community.”

For that reason and so many more, PublicCEO is proud to present Mayor Chuck Reed with the 2011 PublicCEO Elected Official of the Year.