by Olivia Sandbothe | June 23, 2014
San Jose, California, Mayor Chuck Reed staked much of his political career on a promise to cut retirement benefits for public service workers. So it’s no surprise that he’s at it again, even after a judge ruled that his plan to slash city workers’ pensions is unconstitutional.
Last year AFSCME Local 101 and other San Jose unions successfully sued to prevent a plan that would have cut costs by dipping into retirement benefits. Last week the City Council announced it intends to appeal the December court ruling. Mayor Reed says that he wants the case to be heard before the California Supreme Court, so that an anti-worker ruling could be applied as a precedent to justify raiding pensions statewide.
If San Jose is having trouble paying its retirees, it’s not the fault of city workers. Under Mayor Reed, the city shifted its pension portfolio from secure stocks and bonds to high-risk hedge funds and alternatives. As a result, the city’s pension fund is one of the worst-performing in the nation. Meanwhile, the city pays steep fees to the hedge fund managers that oversee the investments. One report estimates that San Jose could have saved twice the amount that Reed plans to cut from retirees’ pensions simply by sticking with traditional investments.
Approximately 1,000 AFSCME members’ pensions hang in the balance as the case goes to appeal. In one of the wealthiest areas in America, where the city recently spent $500 million to build a new City Hall, middle-class workers shouldn’t have to worry that their modest retirement savings will be slashed in the name of balanced budgets.