Officials Across U.S. Await Decision in San Jose Pension Reform Case
Government officials and municipal bankruptcy experts across the U.S. are awaiting a judge's decision on whether to allow the city of San Jose to reduce pensions and retiree health benefits for public workers to help cut costs, the New York Times reports.
San Jose currently spends about one-fifth of its $1.1 billion general fund on pensions and retiree health care costs. However, such costs are increasing for the city, according to the Times.
Details of Plan
In 2012, Mayor Chuck Reed (D) drafted a plan to overhaul pension benefits for current and future public employees. The plan was approved that year by nearly 70% of voters.
- Puts new city employees into less comprehensive pension and health benefit plans; and
- Alters pension benefits for existing workers, allowing them to choose fewer benefits or pay higher out-of-pocket costs (Lyman/Williams Walsh, New York Times, 9/23).
Opposition to Plan
During a July hearing in a lawsuit opposing the pension overhaul, San Jose city employee unions -- led by the city's police union -- argued that the plan violates the rights of workers and is at odds with state law (California Healthline, 7/24). The unions argued that state law entitles employees to whatever pension deal was in place when they were hired.
However, state officials say the plan allows the city to cut future pensions without altering benefits that employees already have accrued.
A state court is expected to rule on the case later this year or early in 2014. If the pension overhaul is upheld, unions still could appeal the decision (New York Times, 9/23).
The lawsuit has wider implications because other local governments are considering changing benefits promised to current and past employees (California Healthline, 7/24).
Meanwhile, Reed said he is considering introducing a statewide initiative for the November 2014 ballot that would grant California city officials greater authority to change pension and health care benefits.
He said he will decide by early October whether to release the initiative (New York Times, 9/23).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.