A battle in San Jose over pension sweeteners for city employees illustrates the way that politicians have granted some pension benefits without thinking through the consequence of their actions. Facing a whopping $115 million budget shortfall and $3 billion underfunding in its pension system, the city is obligated to pay pension 'bonus' checks this year to retirees worth $6 million, its unions argue.
The bonus, amounting to an extra 13th check equivalent to an additional month's pension payment, dates back to a 1986 deal in which the city agreed to pay the additional checks in any year in which the investment returns on city pension funds exceeded the funds' projected investment returns. The extra benefit was designed to kick in regardless of whether the city is running a deficit or whether its pension system is well funded.
Last year was a particularly good one for the market, with the S&P increasing 11 percent. So even though those gains didn't begin to make up for years of losses in the market which have left the pension funds severely underfunded, the city's retired employees are looking for their additional pension checks.
City officials argue they can't afford them. They project cutting 400 jobs this year, including 195 cops and 64 firefighters, as well as cutting library hours and maintenance of parks. San Jose has already eliminated more than 500 jobs over the past five years as it deals with an extended budget crunch.
Last year was a particularly good one for the market, with the S&P increasing 11 percent. So even though those gains didn't begin to make up for years of losses in the market which have left the pension funds severely underfunded, the city's retired employees are looking for their additional pension checks.
City officials argue they can't afford them. They project cutting 400 jobs this year, including 195 cops and 64 firefighters, as well as cutting library hours and maintenance of parks. San Jose has already eliminated more than 500 jobs over the past five years as it deals with an extended budget crunch.
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