How San Jose Took on the Unions and Saved Millions Through Pension Reform

"If a government can’t provide the core basic services, it’s failed in it’s mission," says Pete Constant, a former member of the San Jose City Council who advocated for sweeping pension reform. "Our city had been in many years of budget deficits and there were many more coming in the future. And I just thought the financial decisions had been terribly made."

Constant became involved in city politics after an injury ended his 14-year career with the San Jose Police Department. Once in office, he found that San Jose’s pension liabilities were rapidly devouring the city budget. "In a 10 year period from the year 2001 to the year 2011, the city of San Jose’s pension costs rose from approximately $72 million a year to $245 million dollars a year," Constant explained. "We really had just one area to look at."

The financial situation in San Jose became so dire that officials had to slash city employee salaries and shut down brand new public facilities—including a police subdivision and four libraries—because they did not have the money to staff and operate the buildings. But these cuts weren’t enough to get San Jose’s massive debt problem under control, so members of the city council began looking at pension reform measures to contain rising costs.

The result of these efforts was Measure B, which reduced retirement benefits for new city employees and required current employees to either contribute more of their paychecks toward their retirement benefits or agree to receive reduced benefits in the future.

The 2012 ballot measure passed with 69 percent of the vote, but was immediately met with legal challenges from labor groups who claimed the law violated previous rulings that prohibit the reduction of active government workers’ benefits. In 2013, a Santa Clara Superior Court judge struck down some provisions of the reform measure. Yet enough of the law was left intact to realize significant savings for the city, Constant says.

"In just implementing the new tier for new employees the city is already saving over $20 million per year," he says. "We’ve been able to open every one of those closed libraries. We’ve been able to start repairing our streets. We’ve been able to do a number of things that we weren’t able to do just two short years ago."

San Jose’s experience with pension reform offers other financially stressed cities a model for change. But before other municipalities tackle reshaping retirement benefits, Constant advises them to educate themselves about the problem to better communicate with constituents. "We had to do a lot of education," Constant says. "But once we were able to bring it down to an understandable level and talk to people, the people really began to get it."

About 10 minutes.

Produced by Alexis Garcia. Camera by Alex Manning and Paul Detrick. Music by Podington Bear.

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