Hello, blog readers. I know it’s been a while since my last post, but I hope you’ll excuse the delay. So much has happened recently that every time I started writing a new entry, a new development would lead me to change what I was writing.
So here’s the latest. On March 11th, Mayor Reed released his budget message. For those of you who are unfamiliar with the budget process, the process begins with the issuance of the Mayor’s budget message, which outlines the current fiscal situation in San Jose and offers the Mayor’s “guiding principals” for balancing the budget. This year’s budget message outlined the significant fiscal challenges that San Jose currently faces: the current $105 million budget gap, the projected cumulative budget shortfall of $183 million over the next five years, and the potential impact of Governor Brown’s plan to eliminate Redevelopment Agencies. The budget message also set forth the Mayor’s recommendations for resolving the budget gap, focusing primarily on reducing compensation for city employees and retirement and pension reform.
The City Council had an opportunity to vote on the Mayor’s budget message this past Tuesday, March 22nd. The message was approved unanimously by the Council, which means that the City Manager now has the task of presenting a detailed proposed budget following the general guidelines set forth in the Mayor’s message. The City Manager will present a preliminary budget proposal in early May, and the City Council will vote on the final 2011-2012 budget in June.
This council meeting was a very important one, as it allowed the Council and the public to voice their opinions and concerns regarding the budget message—in essence, it’s our chance to “kick the tires” of the Mayor’s plan. I had a few issues that I raised during the meeting. For example, the budget message expressed the Mayor’s desire to raise the retirement age for city employees. While on the surface it may seem that this would save money, I questioned whether raising the retirement age might not actually lead to increased disability and workers compensation costs, especially for public safety (police and fire) workers. Studies show that raising the retirement age (for all workers, not just public safety workers) increases the number of people applying for and receiving disability, and public safety employees are more than three times more likely than non public-safety workers to suffer a permanent disability. Studies also show that the cost of processing disability claims is generally higher than the cost of processing retirement claims. Given these statistics, I questioned the assumption that raising the retirement age would lead to cost savings, and suggested that we should study this further to make sure we aren’t exposing ourselves to additional costs.
I also had questions regarding the Mayor’s plan for economic development. The Mayor’s budget message did not really discuss plans for revenue generation, other than lowering the development fees and taxes that businesses have to pay for expanding or relocating in San Jose. I expressed my belief that we need to be more creative in thinking of ways to attract new businesses and revenue to San Jose.
Despite my concerns, I voted to approve the Mayor’s budget message. I believe that my concerns with the budget message can and will be examined further during the upcoming budget process, and I believe that the overall directive of the budget message is appropriate.
Tuesday’s council meeting was also significant because the Council, by a vote of 9-2 (Liccardo and Oliverio voted against it), approved the terms of the contract with Local 230, the union representing San Jose’s firefighters. Not only did the firefighters agree to a 10% reduction in compensation, they also agreed to contribute more to their health care and to reduce the number of firefighters per truck. They also put pension reform on the table, demonstrating their willingness to embrace serious reform. However, at the City’s request, Local 230 agreed to put the discussions regarding pension reform on hold in order to give the City more time to prepare for future, more comprehensive discussions.
Two days later, three more employee unions representing over 600 employees also agreed to new contracts with significant concessions. The Association of Engineers and Architects, the Association of Maintenance Supervisory Personnel, and the City Association of Management Personnel each agreed to deals involving a 10% pay cut and other reforms regarding workers’ compensation and vacation benefits.
Despite these recent deals, we still face a steep challenge. Concessions from all city employees will not be enough to balance the budget, and everyone knows it. Significant pension and retirement reform must be achieved, and our employees know this too. Despite this, I am buoyed by the fact that this year, unlike last year, we are working with our employees in trying to fashion a remedy for our budget crisis. Many of you know that I was often frustrated with the way city employees were portrayed as the cause of the budget crisis last year. I repeatedly stated that in order to resolve the budget gap, we need to work with our employees, not ostracize them. I believe that the progress made so far this year is clear proof that working cooperatively with our employees produces a better result than working antagonistically. It is also clear proof that our employees are willing to share in the sacrifice in order to reduce the deficit.
I will continue to provide updates as the process continues. I also want everyone to know that on Wednesday, April 6, we will be holding the District 2 Budget Meeting. The meeting will take place at 6:30 p.m. at the Southside Community Center (5585 Cottle Road). I will be there, along with staff from the Mayor’s office, to discuss the 2011-2012 City Budget and, most importantly, to listen to your opinions and feedback. I hope to see you there.
