Reed indeed has taken a gamble. Given the obstacles the Mayor faces, Mathews could well be right about the outcome. However, Reed’s is a bold move and, under the circumstances, worthy of consideration. If it pays off not only would he succeed in putting his city’s fiscal house in order, he may have etched a formula for other communities to follow. As the New York Times noted, Reed’s approach “may become a test-case with national implications.”
Reed is looking toward closing a $115 million budget deficit in San Jose. He warns that the city will have to lay off public safety personnel and cut even deeper into other budget items to meet its growing pension and public employee benefit obligations if changes are not made.
The problem, as Mathews points out in his column, is that Reed will attempt to take on the issue of “vested rights,” in which an employee cannot lose any promised benefits. Reed’s idea would not take away anything that an employee has earned, but would allow changes going into the future.
As Mathews notes, such an action runs up against legal decisions that will bring on new lawsuits and cost the city plenty to defend the mayor’s position.
Yet, the city is paying a price for its past pension and benefit package decisions – and so are the taxpayers.
Previously on this site, I wrote that Jeff Chang, whose legal practice deals with pensions for government and business, said that changes could be made to the benefits of current employees to ease the burden on governments. Reviewing landmark California court decisions on pension issues, Chang said that while nothing workers already earned can be taken away from them, pension formulas could be changed going forward.
The legal question is not settled.
Reed is attempting to control a budget crisis before more drastic action is needed. One such action would be declaring bankruptcy. However, public unions are attempting to cut off that option by backing AB 506 by Assemblyman Bob Wieckowski to make it more difficult for a city to declare bankruptcy to fix a budget problem.
With the squeeze put on by the public unions in the bankruptcy arena, it is not unwise for Reed to get a ruling from the courts on how far his power might extend under a declared fiscal state of emergency.
Reed’s position is not as radical as his opponents claim. Even in the liberal bastion of Massachusetts, the Senate voted a couple of weeks ago “to curb the collective bargaining rights of police officers, teachers and other municipal employees, making it likely the overwhelming Democratic state will limit union power in an effort to ease budget woes,” according to the Boston Globe.
Some observers believe that the mayor’s action will be equivalent to Reed’s Last Stand.
The odds may be steep, but the importance of the fight is clear. And Reed’s Bold Stand has the advantage of holding the political high ground in the battle to preserve his city’s fiscal health.