San
Jose Mayor Chuck Reed, declaring his city is facing a state of fiscal
emergency, seeks powers to act quickly to solve the problem by amending pension
and public sector benefit packages. Some, such as Fox and Hounds blogger Joe Mathews
on another site, called Reed’s position a "kamikaze
maneuver, certain only to hurt himself and the city."
Reed
indeed has taken a gamble. Given the obstacles the Mayor faces, Mathews could
well be right about the outcome. However, Reed’s is a bold move and, under the
circumstances, worthy of consideration. If it pays off not only would he
succeed in putting his city’s fiscal house in order, he may have etched a
formula for other communities to follow. As the New York Times
noted, Reed’s approach "may become a test-case with national implications."
Reed
is looking toward closing a $115 million budget deficit in San Jose. He warns
that the city will have to lay off public safety personnel and cut even deeper
into other budget items to meet its growing pension and public employee benefit
obligations if changes are not made.
The
problem, as Mathews points out in his column, is that Reed will attempt to take
on the issue of "vested rights," in which an employee cannot lose any promised
benefits. Reed’s idea would not take away anything that an employee has earned,
but would allow changes going into the future.
As
Mathews notes, such an action runs up against legal decisions that will bring
on new lawsuits and cost the city plenty to defend the mayor’s position.
Yet,
the city is paying a price for its past pension and benefit package decisions –
and so are the taxpayers.
Previously
on this site, I wrote that Jeff Chang, whose legal practice deals with
pensions for government and business, said that changes could be made to the
benefits of current employees to ease the burden on governments. Reviewing
landmark California court decisions on pension issues, Chang said that while
nothing workers already earned can be taken away from them, pension formulas
could be changed going forward.
The legal question
is not settled.
Reed
is attempting to control a budget crisis before more drastic action is
needed. One such action would be
declaring bankruptcy. However, public unions are attempting
to cut off that option by backing AB 506 by Assemblyman Bob Wieckowski to
make it more difficult for a city to declare bankruptcy to fix a budget
problem.
With
the squeeze put on by the public unions in the bankruptcy arena, it is not
unwise for Reed to get a ruling from the courts on how far his power might
extend under a declared fiscal state of emergency.
Reed’s
position is not as radical as his opponents claim. Even in the liberal bastion
of Massachusetts, the Senate voted a couple of weeks ago "to curb
the collective bargaining rights of police officers, teachers and other
municipal employees, making it likely the overwhelming Democratic state will
limit union power in an effort to ease budget woes," according to the Boston
Globe.
Some observers believe that the mayor’s action will be
equivalent to Reed’s Last Stand.
The odds may be steep, but the importance of the fight is
clear. And Reed’s Bold Stand has the advantage of holding the political high
ground in the battle to preserve his city’s fiscal health.