San Jose Mayor Declares Budgetary Martial Law
Chuck Reed's hard-line approach could have national implications for employee and retiree benefits
The finances of cities, counties and states are under siege. Chuck Reed, an old military man who is now mayor of San Jose, has decided to go nuclear.
While leaders of other struggling jurisdictions negotiate with public employee unions for relief, or flirt with bankruptcy filings, or propose laws to limit employees’ collective-bargaining rights, Reed has declared a state of fiscal emergency in his sprawling city of nearly 1 million people. The City Council is expected to make the declaration official at a meeting on Tuesday, imposing sort of the government-finance version of martial law.
In theory, at least, a state of emergency will enable Reed, a popular Democrat, to amend contracts and benefits packages of the city’s employees and retirees. Most significantly, in what may become a test-case with national implications, Reed is asserting that public employees have no “vested rights” to the specific terms of their pension plans and benefits going forward. (Already-accrued benefits would not be affected.)
The city’s unions are certain to fight him in court. And there’s a good deal of case law on their side. “No jurisdiction in California has ever, ever succeeded” in stripping away a public employee’s vested rights using a fiscal emergency as justification, said Robert Bezemek, an Oakland labor lawyer.
But Reed, a Stanford-trained lawyer himself, is confident that any judge hearing a union challenge will be persuaded that the direness of San Jose’s financial situation justifies his actions. And Amy B. Monahan, a law professor at the University of Minnesota who is an authority on pension law, said any decision in his favor would be closely watched around the country. “It’s highly relevant to what a lot of other cities and states are grappling with right now,” Professor Monahan explained.
Reed, 62, is an unlikely revolutionary: he is a former Air Force officer, Princeton man, father of a much-decorated fighter-pilot daughter and has been married for more than 40 years. Elected to a second and final term last June with 77 percent of the vote, Reed said he had no further political ambitions and would return to his private law practice. He knows he is proposing a drastic assault on what has been contractually promised to public employees.
h. brown
The first urban firefighters,
The first urban firefighters were slaves. In Rome, I believe. When a building caught fire the fire companies would arrive and stand by while the guy who owned the fire brigade negotiated how much the guy whose house was on fire about how much he wanted for his house. As the fire progressed, the offering price went down. Once a deal was struck, the slaves went to work and they worked very hard because if they didn't, they were killed.
When I was a firefighter in the early 70's I learned that and that 70% of U.S. firefighters were still volunteers. Mostly rural but not all. Kinda like the Romans, you pay a yearly fee to the department or they let your house burn down. That kind of thing still happens.
To keep a stock of bodies for the volunteer apparatus many departments put a beer hall next to the fire station and brew was/is free to volunteers. Recall the Steve Martin movie in which he's the chief of a volunteer department that only has one paid employee (he's the 'engineer' - designated driver who works pumps).
To replace the cops is easier. You just replace the paid officers with Patrol Specials as the regulars retire.
Muni? Bring back the jitneys with a limit of one permit per driver. They worked fine until the Muni union drove them out of business by making them carry budget busting insurance.
That's a billion dollars a year right there.
Other solutions are to bring the 100,000 troops home from Afghanistan and spread them around American cities. Why should we pay twice for our security? We could use 5,000 troops in SF to patrol the streets and fight fires and drive buses.
Adachi for Mayor!
Gonzalez for Mayor!
Avalos for Mayor!
Go Giants!
h.
Tom Ontis
In almost all the comments that municipal representatives are making fiscal moves, it all comes down to the the pension system of public employees. It simply is not true. Three years ago, we had a fiscal emergency in this country and the economy went down the toilet and is still recovering. The blame lies with the people on Wall
Street and in the banking industry that have no stake in what takes place of Wall Street. The Feds, BEGINNING WITH GEORGE BUSH, SO THIS NOT STRICTLY BARACK OBAMA'S PROBLEM, which the righties like to claim, bailed them out, with little or no control as to how the money would be used. The spirit of the discussions of the law, was that money would be used to get the homeowner loan programs going again, but the banks just clamped down and made it harder to get loans. We here those horror stories all the time.
Unfortunately 'public employee pension' seems to be a red herring these days. For all the ex-fire chiefs, ex-police chiefs, ex politcians getting six figure pensions, there are thousands who are getting around $1K per month. A friend worked for the State for 29 years and gets a pension of less thatn $1,400 per month. So quit blaming the rank and file employees. The problem, in the long term, both past and future, lies with lobbyists and their ability to spin the client's stories and come up with the best
for their clents, which just happen to be the well heeled.
Seej Cane
Speaking of lying, the average pension drawn from career retirees these days in counties like SF, Santa Clara and Contra Costa is $90,000 a year with fixed cola increases- to be collected for about 30 years...If pensions were as low as you claim, we wouldn't have any problems...
Tom Ontis
I do not lie, my buddy makes what he makes. He is in Sacramento County. Who is the liar?!
Gordon
We are way past the blame game, but that is what we keep hearing from the unions. Just like the private sector, we need to reorganize the whole show, and that means big cuts in payroll, benefits and pensions, because that is where all the money is going. Do government workers have any idea how many private sector employees have been effected by a loss of retirement funds? There is nothing so special about a government worker that they deserve better pay or benefits than what the rest of us get.
In other words, cry all you want, but this thing will get fixed one way or another, and the way the unions are acting right now they will not be a part of the solution...
voltairesmistress
Mayor Reed: "Five years from now, when those costs most likely will climb to $650 million if nothing is changed, civic life for San Jose’s residents will be unrecognizable, he predicts. After making its pension payments, the city will be unable to afford to offer almost any services and it will be able to afford to employ only 1,600 of its 4,200 employees."
Tom Ontis: "Three years ago, we had a fiscal emergency in this country and the economy went down the toilet and is still recovering. The blame lies with the people on Wall
Street and in the banking industry . . "
Clearly there is a disconnect between mayor and union members, and a profound disbelief on the part of San Jose's municipal workers and citizens that the city's fiscal problems run deeper than the recent Wall Street meltdown.
I don't pretend to know the truth for certain, but I tend to believe Mayor Reed's version -- that the problem of public pensions has been that their managers have relied on overly optimistic market predictions; that politicians have bought labor peace by promising good retirement and health benefits; and that the latest Wall Street meltdown exposed a corrupt and unsustainable financial system, but did not cause the long term pension problems.
Tom Ontis is also right that Wall Street is to blame for the latest fiasco. That said, the problem goes deeper and promises about pensions and benefits have to be reevaluated.
Mayors like Reed should not ignore their disbelievers. They have to keep working to educate their municipal union officials and employees. We all have to come to grips with a complex set of truths about the need to change pension promises, as well as the need to fundamentally reform financial practices. The power of Goldman Sachs et al is proven: they avoid meaningful reform by filling key positions in government and buying the acquiescence of Congress.
Seej Cane
Voltiare-
Good post.
..."that the problem of public pensions has been that their managers have relied on overly optimistic market predictions; that politicians have bought labor peace by promising good retirement and health benefits; and that the latest Wall Street meltdown exposed a corrupt and unsustainable financial system, but did not cause the long term pension problems."
This is exactly correct. Please note the San Francisco Civil Grand Jury reported that the SF pension system was unsustainable BEFORE the meltdown in late 2008. The website Pension Tsunami was launched in 2005 to warn of the pending pension disaster in the state of California. The media just ignored the warnings as did our elected officials.
It is a pension system built on a house of cards- 8% investment returns forever so that public officials can blame "Wall Street" when those returns inevitably don't happen. I don't think "Wall Street" has anything to do with the City's $4.5 billion unfunded health care liability - more unsustainable promises.
"...Mayors like Reed should not ignore their disbelievers. They have to keep working to educate their municipal union officials and employees..."
Just think this is a bit naive. Union officials know exactly what's going on and are primarily motivated by greed- no crime in that. They're expert at politics and organization - it is how we got into this mess in the first place. They will do everything in their significant power to make anyone else foot the bills but themselves and will do minimalist reforms (see Lee plan tomorrow) to placate the public; and leave the taxpayer, in the end, holding the bag.