I was recently approached in my district by a married couple who told me that they hold “very liberal” perspectives on political matters, with the exception of pensions. When it comes to that topic, they said, they are in line with Rush Limbaugh.
It is evident to me that whatever degree of pension reform is put on the ballot—and, yes, pension reform for current employees must go to the ballot since it would require a change to the city charter—will pass. This afternoon we are having a study session on a proposal from five out of the 11 unions that offered a concession on current employee pensions moving forward. Included in the proposal is retaining the pension system for future city employees, although at a lower rate. I signed on to a memo requesting that this discussion be conducted as a public meeting. For those keeping track, I believe all union negotiations should be public.
Whatever does go on the ballot will offer some measure of savings to seal the hole in the budget deficit. And it could possibly return diminished city services to residents over time. I say possibly because the existing unfunded pension liability could increase more than forecast due to risk and uncertainty. The unfunded pension liability does not vanish if the retirement board transfers assets into CalPERS, as the liability will always be allocated to the city of San Jose and inevitably with San Jose residents.
However, whatever savings can be achieved from pension reform will not net out as forecast. For example, we know that reducing the 3 percent compounding automatic escalators (COLA) will achieve “X” amount of savings. In my view it will be necessary to reallocate a portion of the savings to increase salaries.
The one-size-fits-all concept of compensation for job roles in government is antiquated. Not every job is equal and not every job has the same amount of qualified applicants. Moving past pension reform, I believe the city of San Jose should allocate more dollars towards higher salaries for certain positions. Compensation going forward needs to be based more on salary than a retirement benefit, because a retirement system can put shackles on the younger generation.
Some city positions have thousands of applicants while others have single digits. Therefore, after pension reform is achieved, it is imperative that salaries are priced so the city can retain and recruit key positions. Ideally, increased salaries are based on performance and not just the position, but in no way should increased salaries be given to entire bargaining units that overlap different city departments.
What are those key positions? We may not know for certain until we get there, however, here are some that I think should be considered:
Police — The only enforcement of the Social Contract, enough said.
Police Dispatcher — 911 calls require a unique person to disseminate and relay accurate data to the field.
Other key positions might be a city planner with a unique skill set, a chemist for the water pollution control plant, an attorney with litigation experience, an award-winning auditor, an information technology person who can move organizations off of legacy systems and into the cloud, so residents can access information 24/7, etc …
Regarding retention, it might require pulling back the 10 percent ongoing pay decrease, but only for certain positions where retention may become an issue. For example, I would consider rolling back half the 10 percent pay cut for police and use the other half to hire additional officers. Going forward, surplus dollar amounts above a baseline budget should go as a package to police and let the membership vote up or down whether the money should be allocated to salary increases or hiring officers.
Salaries allow for greater flexibility during revenue downturns, but ratcheting down a pension benefit is herculean and, as we have seen, can take years to consider. With a higher salary, the individual can choose to save or spend. It is his or her choice.
The city will still have to make structural changes so it can afford to allocate a portion of pension savings to salaries of key positions. We may achieve further savings through consolidation of departments and outsourcing non-key personnel while still delivering that same service to residents for less. It’s not realistic for anyone to think we can do everything after pension reform is done. However, the impending pension reform simply allows for the proper allocation of dollars to what is most important.