Pension Reform

By Ed Mendel
Monday, December 30, 2013

A superior court ruling announced last week overturned key parts of a voter-approved San Jose pension reform: an attempt to cut employer costs for pensions earned by current workers in the future.

As the city struggled with large deficits during the last decade, the court was told, annual retirement costs more than tripled to $245 million while basic services were cut and the number of police and firefighters dropped.

Mayor Chuck Reed and other Measure B backers argued that cutting the cost of pensions earned by current workers in the future, while protecting amounts already earned, is needed to get significant savings.

But a series of state court rulings are widely believed to mean that the pension offered current workers on the date of hire becomes a vested right, protected by contract law, that can only be cut if offset by a new benefit of comparable value.

Santa Clara County Superior Court Judge Patricia Lucas said in her ruling the question before her court is “one of law, not of policy,” referring to a state Supreme Court response to city and county briefs on an Orange County attempt to cut retirement costs.

“The legal question is whether and to what extent Measure B violates vested rights,” Lucas said of the union lawsuits challenging the measure approved by 70 percent of San Jose voters in June last year.

San Jose attorneys argued that two provisions in the city charter, which allow the city to “amend” or “repeal” retirement plans at any time, prevent the creation of vested rights for employees in the two city-run pension systems.

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