A city of San Jose request to repeal a pension reform approved by voters in 2012 was granted by a superior court in March, allowing a more generous plan negotiated with unions to attract police to a long-depleted force now working mandatory overtime.
Superior Court Judge Beth McGowen ruled that Measure B, approved by 69 percent of voters, is invalid because the city council resolution that placed the measure on the ballot is “null and void due to a procedural defect in bargaining.”
Then last week at the request of opponents, who want voter approval of any changes in Measure B, an appeals court put the lower court action on hold, pending a review of arguments in the case.
The intervention was filed by Pete Constant, a former San Jose police officer and city councilman, and the Silicon Valley Taxpayers Association, backed by Charles Munger Jr., a wealthy Republican campaign donor.
“I and Charles have committed to not giving up until we have exhausted every option,” Constant said in an interview before the 6th District Court of Appeal granted a temporary stay of McGowen’s ruling.
San Jose is another example of how the need to be competitive in the job market for police is an obstacle to — or safeguard against, depending on your view — cost-cutting pension reform. (See previous post: “Why bankrupt San Bernardino didn’t cut pensions.”)
In the view of some critics, a CalPERS-sponsored bill, SB 400 in 1999, gave the Highway Patrol a major pension increase that became the standard for local police and firefighters and a major factor in “unsustainable” pension costs.
The battle over the San Jose reform has been heated. The police union president at the time, Jim Unland, reportedly urged a class of police recruits to quit to aid the campaign against Measure B advanced by the mayor then, Chuck Reed.
A key part of the measure would have given current workers the option of paying more to continue earning the same pension (up to 16 percent of pay) or earn a smaller pension for future work.
A superior court upheld most of Measure B, but overturned the current worker option as a violation of “vested rights.” Under state court decisions known as the “California rule,” the pension offered at hire can’t be cut unless offset by a new benefit.
So, most pension reforms are limited to new hires. But the watchdog Little Hoover Commission and others argue that to control costs, governments need the ability, like private-sector pensions, to cut pensions earned in the future by current workers.
Whether San Jose would appeal the Measure B “vested rights” ruling and get a high court review of the “California rule” decisions, a key one in 1955, seemed to be an issue in the race to succeed the termed-out Reed as mayor in November 2014.
Local, state and national public employee unions reportedly spent $800,000 to defeat Sam Liccardo, a councilman and Reed ally, warning that pension cuts were causing the city to lose police officers, endangering public safety.
Liccardo narrowly defeated a county supervisor, Dave Cortese, who advocated settling union lawsuits against Measure B. Last August, Mayor Liccardo announced a settlement with police and fire unions, followed in December by other unions.
The settlement of nine lawsuits included dropping an appeal of the “vested rights” ruling. The agreement expected to save the city $3 billion over 30 years was endorsed by Reed.
Liccardo and Reed said in a San Mercury News article that pursuing the attempt to cut the cost of pensions earned by current workers in the future would be a “long and perilous” road that could jeopardize savings and cause longtime employees to resign.
Last month, the San Jose city manager, Norberto Duenas, said in a court filing that “Measure B, though well-intended, had negative consequences for the City,” including recruitment and retention of police resulting in a recent mandatory overtime plan.
“The settlement framework negotiated by the parties in July is a key component to the City’s attempt to stabilize hiring and retention in the Police Department and delays in its implementation will jeopardize our ability to recruit and retain police officers,” Duenas said.
The police force lost several hundred members in the budget crunch that led to Measure B, and losses have continued since then. Last week, said the city, the number of “actual street ready sworn” was 894 and “actual full duty sworn” 827.
A recent police academy graduated nine, and the current academy has seven. So far this year, there have been 10 resignations and 15 retirements. Under mandatory overtime, officers that have worked a full10-hour shift are held over into the next shift.
In the move opposed by Constant and others, the city used a “quo warranto” court process to repeal Measure B based on a suit filed by the police union in April 2013, which alleged that defective bargaining on the measure violated state law.
The city and the police and firefighter unions agreed they reached impasse on Oct. 31, 2011, after five different city proposals. When mediation in November failed, the city made two more proposals, placing the last one on the ballot without negotiating.
“Continued modification of the proposed ballot language after impasse — including concessions made by the City — created a further obligation to meet and confer before placing Measure B on the ballot,” Judge McGowen said in her ruling.
Similar rulings that the city failed to bargain in good faith have been made by the state Public Employment Relations Board. If the settlement is completed as envisioned, the unions are expected to withdraw their complaints to the powerful board.
Though not asking voters to repeal Measure B or approve its replacement, the city does plan to put a measure on the November to protect taxpayers: no retirement benefit increase without voter approval, no retroactive benefit increases, and actuarial safeguards.
The ballot measure for November was posted on the city website last week after bargaining with unions was completed. One provision would “approve the continuation of current pension benefits for employees.”
That’s aimed at a statewide initiative proposed by Reed and others that could give new hires a 401(k)-style plan unless voters approve a pension. The group dropped a drive to put the initiative on the ballot this year, but plans to try again in 2018.
Meanwhile, to advocate for fair and sustainable public pensions, Reed, Utah pension reformer Dan Liljenquist, former New York Lt. Gov. Richard Ravitch and others have formed a new national group, Retirement Security Initiative.
Constant, an ally of Reed and Liccardo while on the San Jose city council, has been working with a Reason Foundation project that helped develop a pension reform on the Arizona state ballot Tuesday, Proposition 124.
Last week, Constant presented a Reason analysis of Brea’s CalPERS pensions to a group in the Orange County city, Brea First. He also has talked to California legislators about forming a pension stakeholder group like one that led to broad support of the Arizona measure, including police and firefighter groups.
“We will see if that happens,” Constant said. “Time will tell. California is bigger than an aircraft carrier, and it’s going to take a long time to turn around.”
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