To Cut or Not to Cut: Urban Pension Reform

On Wednesday, the California cities of San Jose and San Diego both overwhelmingly voted to cut pension benefits for public employees. As the pension reform issue spreads around the country, it has largely remained surprisingly nonpartisan.

While the survival of Wisconsin Gov. Scott Walker dominated the news Wednesday night, a possibly more interesting election was silently taking place in the Californian cities of San Jose and San Diego. In local referenda, residents of both cities overwhelmingly voted to cut pension benefits for public employees — cuts that will affect not only current city workers, but future ones as well.

No other cities in the country has ever taken such a drastic step, due to its complicated legality. Immediately after the referenda’s passage, unions began preparing for litigation, claiming that their passage violated state law.

The vote came as cities nationwide are facing budget crises, requiring heavy-duty belt tightening. San Diegans saw pension payments rise from $43 million in 1999 to nearly $231 million at present. In San Jose, the nation’s 10th largest city, pension payments in 2001 were $73 million. Fast-forward eleven years: Pension payments had jumped to $245 million, or roughly 30 percent of the city budget. With rising costs, both cities were forced to close libraries, lay off police and temporarily close firehouses. It became a choice between cutting services for the entire city or maintaining the same level of benefits for public workers.

It might seem that the decision to cut pensions is related to Tea Party conservatism, but what is surprising is that these measures are actually receiving quite a bit of Democratic support. While Mayor Jerry Sanders of San Diego is a Republican, Mayor Chuck Reed of San Jose is a Democrat. In fact, across the country’s various cities, both Democrats and Republicans have come together to tackle pension reform.

In a recent roundtable discussion with Charlie Rose, mayors from across the country, all Democratic, sat down and discussed the many challenges of urban governance. One issue that the mayors of Chicago, Louisville, Baltimore and Jacksonville all agreed upon was the need for pension reform.

While union representatives are calling these reforms political attacks on organized labor, the issue transcends politics for many mayors. Baltimore Mayor Stephanie Rawlings-Blake said that city workers “deserve a respectable retirement, but they deserve the truth as well.” The main problem, she said, was ensuring that “a pension would be there [in the future].” By asking employees to give more years of work, or contributing to their own pension, the city would be able to ensure that the pension would actually exist for them in the long run. For many cities across the U.S., “the can had been kicked down the road” for too long.

Baltimore Mayor Stephanie Rawlings-Blake thinks city workers “deserve the truth” on pensions. Credit: Edward Kimmel on Flickr

“The workers have done everything asked of them,” said Chicago Mayor Rahm Emanuel, adding, “the taxpayers have done what they have been asked of…the people in the responsible position have acted irresponsibly.” Emanuel makes it clear that it’s now time to clean up the mess. According to Emanuel, if Chicago does not reform its pension, property taxes will have to rise 150 percent. He concluded that, “actually we are going to honor you [the workers] by giving you a system that you know…will be there.”

In another Charlie Rose roundtable last year, New York City Mayor Michael Bloomberg, an independent, points out that public sector benefits are usually much better than their private sector pensions. For Bloomberg, “the problem isn’t so much the unions, whose job it is to ask as much as they can…it is government and the public that has given them things we cannot afford.”

According to Atlanta Mayor Kasim Reed, a Democrat, we already have the solutions to pension reform. The problem, he believes, is a “will problem.” In a recent Forefront story, Thomas Wheatley writes that the need to invest in critical services and Atlanta’s inner core is key to maintaining the city’s competitiveness, and thus its survival. Reed argues that such desperately needed investments cannot be made if upwards of 30 percent of the city’s budget is devoted to paying pension benefits.

As the pension issue engulfs the entire country, more and more cities are going to have to sit down with workers and residents alike to figure out how to move forward. While difficult, the process is representative of the fact that urban governance is usually too preoccupied with real issues to care about partisan ideologies. Both Democrats and Republicans will have work past dogma, and as Reed puts it: “Mayors…are going to be the ones that lead the way.”

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Tags: governancemayorsmichael bloombergsan diegorahm emanuelsan josepensionskasim reedstephanie rawlings-blake

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