Oliverio for Supervisor 2018

Independent - Transparent - Fiscally Responsible

Pension Reform Now!

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My memo below will be discussed, next Wednesday, July 28 at 2pm at the Rules Committee which includes Mayor Reed, Vice-Mayor Judy Chirco, Councilmember Nancy Pyle and Councilmember Pete Constant. This is a public meeting.

Recommendation
Direct City Attorney to prepare legally binding ballot language for a ballot measure to be considered at the August 3, 2010 Council meeting for the November 2010 election allowing residents of San Jose to vote on changing the City charter by removing charter language regarding “minimum benefit” and “contributions/ cost sharing” in regards to pensions (Sections 1504 and 1505). Removing this language would allow the flexibility to negotiate a 2nd Tier pension for new employees whose hiring date is after January 1, 2011. This proposal would not change current legally vested benefits for existing employees.
Background:
Public pensions costs are soaring and forcing our City to reduce essential services to residents. In fiscal year (2009-2010) the cost of pensions was $138 million. In fiscal year 2010-2011 the amount jumped to $200 million. (The $62 million increase is double the citywide Library budget).  In fiscal year 2011-2012 that number will grow to $240-250 million ( $240-250 million is approximately the annual Police budget) and could balloon to $350 million by 2015-2016 ($350 million is double the citywide Fire Department budget or more than the annual property tax and sales tax revenues)

The average private sector employer match is 3% for a 401K in the USA. In comparison, the City of San Jose as an employer matches at an 8 to 3 ratio or 250%.  Individuals with retirement plans like a 401k, IRA and SEP IRA bear 100% of the investment risk.  However San Jose employees do not have this risk and are guaranteed a net return of approximately 8% which means the gross return must hit 9%.  The average combined return on the retirement funds for the last 10 years has only been 4.4% thus the taxpayer makes up the difference; this fiscal year alone it was $52 million.  Therefore, since the taxpayers are responsible for paying the difference in pensions, I believe that residents should have the right to vote on whether or not they want to continue to pay sums such as $52 million in a single fiscal year.

It is imperative that the 2nd Tier pension be put on the 2010 ballot for the following reasons:

1). The City should give voters the opportunity to vote on the pension system.  To not allow the voters the chance to vote on this issue is undemocratic.  Some may say that we should just handle this “in house” and create a committee to look into alternatives and/or have closed meetings with the unions to try and negotiate an agreement.  Closed door meetings would not be transparent and we do not know how many years it will take to negotiate or if a consensus of any kind can be reached by a committee or negotiations. Additionally, any recommendation that may come out of negotiations or a recommendation by a committee would need to be voted on in a citywide election anyway.  We need to take advantage of the November 2010 election to know whether or not the residents of San Jose support a 2nd Tier retirement system for NEW employees.  Delay will result in missing out on the numerous “Baby Boomer” retirements that will take place and be filled by new employees.

2). A 2nd Tier provides flexible options.  The 2nd Tier may have a 1 to 1 match instead of 8-3 or it may have a 1 to 2 instead of 8-3 or it may be simply a new system like a 401K with a generous match from taxpayers of some reasonable percentage.  Actuarial studies must be completed and presented prior to making a final decision.  Retirement contributions from new employees and the city shall be put in an escrow account until a new 2nd Tier pension plan has been selected.

3). Reforming the pension system now will allow the city to balance the structural budget deficit and over time hire additional police officers, extend libraries hours and pave more roads in San Jose. If this is not addressed the rapid growth of the pensions will force our city to make additional cuts to essential city services or layoff more employees. Delay of pension reform may force our City into bankruptcy and raise taxes significantly. Even with higher taxes the new revenue is unlikely to keep pace with pension growth. This proposal maintains the benefits for retired and existing employees.

If the City Charter is not changed to allow the option for 2nd Tier system, the City will face continued severe financial duress.The current pension system is absolutely unsustainable and threatens the quality of life for San Joseans.  Let the voters vote!

Time to Outsource Police?

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From time to time I have talked about outsourcing certain city services to save money—so the city can use the money saved on core services we provide to the community. When I first introduced a pilot program for outsourcing park maintenance at the Rose Garden Park in 2007, the council (except for Mayor Reed) shrugged off my idea.  Now, the topic of how to provide services to San Jose residents with limited revenue is being discussed. For example, the city was able to open some of the pools that were due to be closed because the city outsourced to private organizations which are less costly.

The City of San Jose and other cities have declining revenues and structural deficits. Most residents now understand that not every service from a city must be done by a person earning an unsustainable pension.

Last week on San Jose Inside, an anonymous blogger using the handle “Just a Lowly Police Officer” raised the question of outsourcing police to private security guards. First, I must say what a sad choice of a handle. I am thinking he/she was attempting to be sarcastic, but who knows? How can this person expect us to respect their vocation if they do not respect it? None of the many people I know that serve as San Jose police officers are lowly. By contrast they are all good people with integrity.

Actually, I have been asked this same question about outsourcing police services in person. People have asked “why don’t you outsource the police?”  My response is one of astonishment, because I think it shows a brutish lack of understanding. I ask them, “Are you serious? Do you really think that someone we recruit, background, vet, train, test and issue a gun to so they can protect and serve as a police officer is the same as a janitor? Do you really think that is the same level of qualification? The same level of risk? The same level of expertise?”  The answer to these questions is simply “no.” Even the notion is ridiculous. At this point the person who asks me the question realizes they asked a foolish question and they move on.

It’s time to wake up, as we have reached a new level of fiscal austerity and there is no monetary candy falling from the sky. We have to make tough choices. So you can sit on the sidelines and whine about times of budget surplus or wake up to our current fiscal environment.

I do however support replacing desk jobs at the police station with civilians to allow more police on the street, as recommended in our city auditors report:http://www.sanjoseca.gov/auditor/AuditReports/1002/1002.pdf

I will be hosting the 4th Annual Safety Fair & Movie Night at our beautiful San Jose Municipal Rose Garden on Sept. 10 at 7pm. It will be an opportunity to show off the Rose Garden as the results will have been announced on San Jose’s ranking as America’s Best Rose Garden contest. It is also an opportunity to do something for Trace Elementary and help with raising money to fund school supplies for the 16 classrooms, library and theater that burned down.

Please consider attending and picnicking as we watch the fun family animated movie How to Train your Dragon. Voluntary contributions will accepted and there is no limit to what you can donate. Checks should be made out to Trace PTO (Parent Teacher Organization); cash donations will be accepted as well.

Prioritizing Services That Touch Residents

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Hope your Fourth of July holiday was fantastic. On June 29, prior to the holiday the Council made the final vote for a balanced budget. More than 20 people spoke at the Council meeting and all but one advocated that the Council not outsource janitorial services but rather keep the janitorial staff employed, since they provide an incredibly valuable service. You would have thought janitorial was listed in the city charter by the speakers’ comments.

All but one of the speakers advocating for the janitors were affiliated with a labor union or religious congregation. The religious leaders ranged from Methodist to Lutheran to Jewish to Presbyterian. I understand the brotherhood and sisterhood concept of labor unions uniting to advocate for spending taxpayer money to help another union member. I also understand the calls for social justice from the clergy. However I wonder if the janitor at the church or temple makes approximately $55K a year plus a 250 percent pension match and free lifetime medical (minus co-payments) for themselves plus spouse/partner. My guess is no.

The Council was called, “shameful” and criticized for “picking on the most vulnerable.” There were undertones of racism, since the majority of janitors are not caucasian.

The notion that janitors make the least amount of money is incorrect, as I have stated for months. A recreation leader in our parks and community centers makes in salary only $38,001 and a senior recreation leader makes $54,496. A library clerk makes $50,897 in salary only while a senior janitor makes $54,787 in salary only.

So since all three of these positions come from the same pot of money and around the same dollar amount, then it is a trade-off. If the Council chose to not lay off and outsource the janitors we would have to make those same cuts elsewhere to lay off staff that work in our community centers, or lay off staff that work in our libraries.

I chose and will choose to keep services that actually touch the million-plus residents of San Jose over services that do not add value for our residents. The ability to have a community center or library open is more valuable to our residents then who cleans City Hall.  The new janitorial staff will be paid like janitors at Cisco and Apple but possibly more with the city of San Jose’s living wage requirement.

A big thanks you to the Alameda Business Association and Larry Clark for another great Rose, White & Blue Parade on Sunday! Congratulations to Cleveland Ave for winning 1st prize in the parade (three years in a row) for their creative float.

Finally, as an observer early this morning it was quite a sight to see six out of 35 stations working on suppressing the fire at Trace Elementary. Thank you to our Fire Department—fortunately there were no major injuries.

Final-Final

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The final-final vote for the budget is tomorrow, to enact appropriations. Much work goes on behind the scenes with our budget office. Each time a change is made it is an arduous effort to balance the books and calculate the impact on the budget.

If there is a compensation cut in a private sector, it is simply a reduction off the top of base pay — that is easy to calculate. However, when we have unique requests from labor unions that require municipal code changes or legal interpretations of the city charter, it gets complicated.

Quickly, there is a ripple effect that creates work for the budget office, finance department, City Attorney, retirement department and office of employee relations.

This is why I believe labor negotiations as public meetings would be best, because information can be shared early on and we’ll know the ramifications of different options.

Part of the pain of the budget office is that our city uses 20-year-old financial software. When you are dealing with a $3 billion budget with many different types of funds and unique requests, much of the process becomes manual. This is time consuming and increases the chances of error.

Installing new financial software is no easy task and is at least a $10-15 million line item (Interestingly, $14.3 million is the projected payout this year for accrued sick leave).

When we talk about core services, we may think of sewers and streets. Nonetheless, there is the need to make things work on the back end.

Considering San Jose’s structural deficit, it will be quite a challenge to figure out how to pay for this financial system. Open source software can be looked at as an alternative, but we are talking about managing a complex multibillion dollar budget. So, I am inclined to choose a solution that has a track record.

There are so many needs in San Jose that competing for limited funds and resources has become a trading game. Some will say that public safety, for example, is so important we should spend the reserves to avoid cuts. I acknowledge this argument. I’m open to draining the reserves and then — when the State of California takes more money from cities or the tax revenues dip — we simply start laying off people with a two week notice.

However, it is not a choice I would make. Why spend all the reserves while we still fund charities with $10 million in Healthy Neighborhoods Venture Funds (HNVF)? I mean, if public safety is really so important and people are saying that “people will die” because of the budget cuts this year, why continue to do things that are discretionary with general fund dollars?

The HNVF money is not legally restricted like RDA funds or capital funds. All it takes is six votes to redirect this money.

I am not sure why city employees do not support the HNVF money, to be used for themselves and their colleagues. I think that our employees are worth keeping and worth using the HNVF money to keep them employed.

This might be another disconnect between the city employees and the larger labor union movement that supports the HNVF status quo over their own membership’s employment. We cannot be everything to everyone during tough fiscal times.

Some say we are heading into another financial storm. The Federal Reserve and the federal government still have the foot on the gas. But, the economy is sputtering. We had terrible housing numbers last week, and a weakened consumer spending outlook, thus revising GDP growth down last quarter.

Sovereign debt in Europe and Japan continues to be a worry. Japan is going to limit bond spending which seems like the lifeblood of government. The Fed is saying that they may have no rate hikes utill 2012, in an effort to spur activity as financial conditions have become more volatile as the banking sector in Europe is having issues. Cries for austerity abound regarding our huge national debt, so it is unlikely we’ll get more federal stimulus dollars. The Fed stopped buying more mortgage-backed securities last quarter.

The USA may have Japan-disease, where we have a lost decade of slow growth plus high unemployment. After the early ‘80s recession, the economy in the USA grew at 7 percent and 9 percent five quarters in a row. Last quarter, the economy grew at 2.7 percent barely, which barely kept pace with new entrants into the job market. The government sector is leveraging to the hilt, but the private sector is deleveraging even with ultra-low rates.

Most of the tools have been used by the Fed to boost the economy, and there are not many bullets if there is a double dip recession.

To read more about the “Broken State of America,” check out the cover article of Time magazine this week:
http://www.time.com/time/nation/article/0,8599,1997284,00.html

So, considering all of these macroeconomic factors, would you spend down the reserves (which is a total of 2.5 weeks of payroll) the City of San Jose has on hand? Would you personally spend your own savings down to zero if you had other alternatives?

Come out and enjoy the Rose, White and Blue Parade on July 4th. Sponsored in part by the San Jose Redevelopment Agency and The Alameda Business Association.
http://www.rosewhiteblueparade.com/index.htm

Drama and Trauma

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The two city council meetings held last week regarding the budget and labor negotiations demonstrated the need to make all labor negotiations public. If you are interested, you can click on this link and see for yourself the drama and trauma that took place that still does not have closure. This week’s meeting, June 22, will hopefully close this chapter.

I am and have been a proponent of conducting labor negotiations as a public meeting. Unfortunately, when the vote was taken last year to open up labor talks, the vote was a 9-2 against changing the process with only Councilmember Constant and I voting in favor. The process that exists is broken or to say the least, it is severely flawed. The current process of labor negotiations as private meetings hurts those it is meant to help: the employees and taxpayers.

Employees have no choice but to join their respective labor union and are dependent upon having someone else represent them at the bargaining table. It is up to those labor union representatives to inform their membership about the status and timely updates can be a challenge to a large unions. At the same time, Councilmembers are informed by the Office of Employee Relations (OER). However, councilmembers cannot really update residents of what is happening with labor negotiations and their tax dollars since these meetings are private instead of public. In addition the Council only gets one side of the story.

At both Council meetings last week, we saw the drama unfold of broken promises, innuendo, conspiracy theory, stories of personal financial hardship, co-opting of religious clergy and the reading of prepared statements. Behind the smokescreen of this drama were the real people feeling the pain and getting hurt, the employees and residents of San Jose. Both of these groups had to undergo the trauma of being tossed around in public with no one being able to share the full story.  As I said at the meeting, 99 percent of city employees do a great job and are real people not faceless bureaucrats.

These city employees protect our safety, our property, our water, our young people, etc.  However when you interject labor unions and secret meetings then it can lead to demonizing city employees when this is not fair. The blame should be on the current process which is maintained by both the labor unions and the city of San Jose management.

The taxpayer ultimately has the most at stake since they are the single largest group in San Jose yet they are the least powerful. The taxpayer has a right to know early on how much we have and what we can afford. Only through this dialogue can there be the opportunity for everyone to be on the same page and understand that if we as a city want more services or the same services we might have to pay more for it. On the other hand, if everyone is on the same page then structural change can be demanded so services are delivered more efficiently.

I am hopeful that the June 22 meeting is peaceful and we accomplish our duties civilly.

On a happier note, I am hosting the raising of the Rainbow flag at City Hall at 1PM, Tuesday, June 22 in celebration of the accomplishments and contributions of the Lesbian Gay Bisexual Transgender (LBGT) community in San Jose.

Support Our Mayor

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It is the City of San Jose’s process that City Manager Debra Figone puts forth a budget proposal in May. Then, after that is released, councilmembers make their budget proposals to Mayor Chuck Reed.

When the Councilmembers make written suggestions of their “budget wants,” they also need to include what funding source within the city will be affected (some written suggestions from councilmembers are done in collaboration with labor unions).

Then, the Mayor takes into consideration the City Manager’s budget proposal and the Councilmember’s suggestions, and comes up with a final budget.  Of course, a mayor could put together their own budget without this input, but it is customary that the mayor takes other perspectives into consideration.

As a result, Mayor Reed’s budget message was released on Friday.

Every San Jose mayor must put forth a balanced budget to be voted on by the City Council.  The mayor is one of 11 votes. So, just like any agenda item that comes before the Council, six votes are needed to pass or deny the item at hand.

Mayor Reed’s current budget proposal does some delicate balancing of top priorities using the limited funds we have.  For some, there may be nothing to like because it is such a thin budget. However, what are the alternatives?  There is no other proposal that has this level of detail, accuracy or is this candid with the challenges we face as a city.

We know both from scientific surveys done by the city and by my non-scientific web surveys that San Jose residents want to see concessions from city employees rather then cutting services.
There has been a lot of talk about 10 percent concessions.

Anything less than a 10 percent concession will result in more layoffs and therefore more service cuts to residents.  Where we end up is a mystery. Still, there is little time left. What is done or not done prior to passing the current budget may implode any chance for future revenue opportunities in November.

The council may vote to drain all of the reserves and punt a portion of the problem down a short road. I do not support that option.

San Jose has some the smallest reserves when compared to other California cities. San Jose has a 3 percent reserve that only covers 2.5 weeks of payroll. Los Angeles has a 5 percent reserve, San Diego and Anaheim have a 7 percent reserve, and Long Beach has a 10 percent reserve.

I invite everyone to read Mayor Reed’s budget message if you have a stake in San Jose. It is imperative for people to understand the challenges before all of us.

Here is a link to the Mayor’s official budget message.

Here is a link to my “Budget Trade-Offs” survey which includes with over 1,000 participants.

Here is a link to my written budget proposal to the Mayor. It suggests reducing items not in the city charter and instead funding core services like police and libraries.

If people support the Mayor, I ask them to please send an email to the entire San Jose city council by clicking on this link.

The public hearing on this budget is June 14 at 7pm, and will go until late. The vote on the Mayor’s budget is June 15 at approximately 3pm.