San Diego, San Jose voters approve public pension plan changes

Voters in San Diego and San Jose, Calif., approved measures to curb municipal employee pension costs even as a similar plan languishes in the state Legislature.

In San Diego, a proposal to put new employees except police into a 401(k)-style retirement plan rather than the defined benefit plan won with 66% of the vote, according to the San Diego County Registrar of Voters website.

“San Diego tonight has set an example for cities across America that are looking for ways to rein in rising pension costs,” Mayor Jerry Sanders said late Tuesday in a statement. “Public employees should have no better retirement benefits than the taxpayers they serve.”

In San Jose, a proposal to allow current employees to choose whether to pay more to keep their existing retirement plan, or switch to a plan with reduced benefits and a higher retirement age, won with almost 70% of the vote.

“It’s a big win for the taxpayers of San Jose because we’ll be able to restore services,” Mayor Chuck Reed said in a telephone interview. “It’s also a big win for the employees of San Jose because we’re going to be able to make sure they get paid what they’ve earned when they retire.”

The votes might inspire other cities to adopt their own retirement system changes more than seven months after California Gov. Jerry Brown outlined his plan to rein in pension costs statewide, said Max Neiman, a senior resident scholar at the Institute of Governmental Studies at the University of California, Berkeley.

“The Legislature has not seemed to move one inch on pension reform,” Mr. Neiman said by telephone before the vote. “That raises a legitimate issue in the public’s mind. It seems to be they’re playing with fire by not doing so.”

“While we respect the decision of San Diego and San Jose voters, these measures will have perilous long-term consequences for workers, the economy and the public,” Dave Low, chairman of the labor-backed Californians for Retirement Security, which represents more than 1.5 million public employees and retirees, said Tuesday in a statement.

In San Diego, officials budgeted $233.6 million for retiree benefits this year, up from $87 million in 2004, according to budget documents. The city’s share of retirement costs would have grown by $100 million over 10 years without the proposed changes in the ballot measure.

In San Jose, annual retirement costs increased to $245 million from $73 million in the past decade, according to ballot measure supporters. Pensions now account for more than 50% of city payroll, and more than 20% of the city’s general fund, backers said.

The votes might force the hand of state legislators who have yet to act on Mr. Brown’s proposal to raise the retirement age to 67 from 55 for most public employees and place new workers in a hybrid pension plan, said Marcia Fritz, president of the California Foundation for Fiscal Responsibility, which advocates for reducing pension benefits.

“If we win in San Jose, being a heavily Democratic area, it’s going to be very difficult for the Legislature to ignore us,” Ms. Fritz said by telephone before the vote. “If they don’t act, we’re going to go into the local cities.”

Arleen Jacobius and Rob Kozlowski contributed to this story.