For the past six months, San Jose has been trying to reach an agreement with 11 of its employee unions to reduce the city’s exposure to its pension debt. Along the way, on a parallel track, the city has been preparing for a 2012 ballot measure that would overhaul the pension system through the ballot box.

On Wednesday, the city council voted 6-5 to place the ballot measure on the June 2012 ballot. Although the council also instructed staff to reach out to the unions to ensure that negotiations continue, the vote will likely serve as a stumbling block to further constructive conversation.

In an interview with the San Jose Mercury News, the president of the police officers union, Jim Unland, said that the vote shows that “talk is for naught and it’s a waste of time.”

But Mayor Reed, who has been advocating for the ballot measure since May of 2010 to move forward with addressing the pension debt, scored a big victory with the approval of the ballot measure.

However, according to a statement issued by the city the day before the vote, the hope was that even after the measure was approved, that unions would wave their impasse procedures and the talks would continue.

If those talks produce a solution or serious reform, changes in the ballot language could be made before it is transmitted to the registrar of voters.

The most recent version of the ballot measure includes the following reforms:

  • Placing new employees into a lower-cost, “hybrid” retirement plan
  • Giving current employees the option to either: a) keep their current retirement plan by paying for a larger share of the cost, or b) opt-in to a lower-cost plan (going forward)
  • Giving the City Council the ability to temporarily suspend cost-of-living increases for retirees during a fiscal and service level emergency
  • Reforming disability retirement rules to prevent abuses
  • Requiring voter approval to enhance retirement benefits in the future

The ballot measure would NOT reduce payments to retirees or cut accrued benefits that employees have earned for past years of service.

One change that has already happened since the Mayor began his push for reform in 2010 is that the size of the 2012 pension debt unexpectedly dropped. That drop prompted Mayor Reed to defer his request for the declaration of a fiscal emergency.

Despite the drop, the city’s current retirement costs are 3 times larger than 10 years ago and now consume more than 20% of the General Fund.

According to the city’s statement.

“As a result, significant retirement reforms will be necessary to close next year’s shortfall without additional service cuts and to put the City on a path to restoring police and fire department staffing, library and community center hours, street maintenance and other essential services to acceptable levels”.