Lower Pension Costs Could Slash Budget Deficit; Reform Plan Still in Play

An unexpected drop in pensions costs for San Jose police officers and firefighters could slash the projected $80 million deficit for thebudget to $25 million, which may keep community centers and libraries open next year and avoid cutting public safety officers.

Mayor Chuck Reed, City Manager Deb Figone

However, Mayor Chuck Reed and several council members caution that the good news doesn’t change the critical need for long-term retirement reform, and they propose putting a cost-savings measure on the ballot in the June 5.

The San Jose City Council was poised to vote on Tuesday, December 6, to take action on two unprecedented measures: Declaring a fiscal service-level emergency and asking voters’ approval on March 6 to change employee retirement benefits agreed to in contract negotiations.

But on Thursday, the Police and Fire Department Retirement Board released information in a study conducted by Cheiron, the board’s actuary, that the costs could be significantly lower than expected, in part, because of a big drop in the number of police officers and firefighters caused by layoffs and the resulting decrease in payroll costs. More exact figures will be available in January.

Delaying the ballot measure will give the city time to get IRS approval for a proposed “opt in” pension plan for current employees and save the $1 million cost of a special election.

“However, the projections do not erase next year’s shortfall or the need for serious retirement reforms. Securing voter approval of the proposed reforms in June would still generate immediate savings that may allow the city to avoid service reductions in July,” the mayor, Vice Mayor Madison Nguyen and Councilmembers Pete Constant, Rose Herrera and Sam Liccardo said in a memo released on Friday, December 2.

In stating its case for a fiscal service-level emergency, San Jose City Manager Deb Figone painted a grim picture of life in San Jose if thebudget needed to be balanced by trimming more of the city’s 5,400-member workforce, which has been cut from 7,000 in recent years. A November 22, memo predicted:

  • Police officers and firefighters’ response times to life-threatening crimes and emergencies would be increased by minutes.


  • Only six or eight of the 18 branch libraries operating this year would remain open, and four new libraries would continue to be closed. After, only the main King Library would be open.
  • All city recreation programs would be cut, and all 54 community centers closed, including the 43 currently run by private operators unless they could pay the building overhead. All park maintenance services would be outsourced.


While some of the 11 city employee unions have offered reform plans and reductions, Mayor Chuck Reed maintains they don’t add up to enough savings. Unions have fought against a ballot measure, insisting that effective changes can only be made at the bargaining table.

The retirement reforms included in the revised ballot measure would not cut retirement benefit accruals that existing employees have already earned for past years of service, or cut current payments to retirees, a December 1 memo states. The reforms would:

  • Require existing employees to pay a larger share of the cost of their benefits
  • Allow existing employees to choose lower cost benefits
  • Provide a hybrid retirement plan for new employees with a cap on the City’s cost
  • Temporarily suspend future cost of living increases for retirees in the event of an emergency
  • Reform disability retirement rules to prevent abuses
  • Require voter approval of future increases in retirement benefits.