Bad news for teachers and other public-sector employees: America is more than ready to cut your pensions and benefits. While most politicos had been focusing this week on the Wisconsin recall, an election 2,100 miles away in San Jose, Calif., may be a bigger harbinger of the kind of austerity voters are developing a taste for.
In this city of about a million residents an hour south of San Francisco, voters on Tuesday approved arguably the country’s boldest pension cuts. San Jose’s Democratic mayor, Chuck Reed, has been grappling with ballooning pension costs that have increased from $73 million to $245 million in the last decade. Retirement costs already consume more than 20% of the city’s general fund, which helps explain why Reed was pushing San Jose to pass Measure B, which would give voters the power to approve increases in pension benefits and give the city the power to suspend automatic 3% annual raises during a fiscal crisis. The measure would also make workers contribute half the cost of their pensions; employees currently pay $3 for every $8 the city contributes, and the city is financially responsible for any shortfalls. Also included are provisions to curb the abuse of disability benefits. It’s a tough package — and will certainly be challenged in court because it changes benefits not only for future workers, something everyone agrees is legal, but for current ones as well. Nonetheless, voters passed it by a stunning margin of 69.5% in favor, 30.4% opposed. A pension reform measure also passed in San Diego.