Despite its wealthy Silicon Valley population, the city of San Jose, California, is broke and is having to slash city services, from fixing potholes to running libraries. This is because the city has to devote 25% of its revenue to pay pensions for retired city workers, which, thanks to union negotiators, is as much as 90% of their salaries.
Something like this is happening in lots of cities and may herald a national crisis to come.
From Michael A. Fletcher, In San Jose, generous pensions for city workers come at expense of nearly all else – The Washington Post:
Here in the wealthy heart of Silicon Valley, the roads are pocked with potholes, the libraries are closed three days a week and a slew of city recreation centers have been handed over to nonprofit groups. Taxes have gone up even as city services are in decline, and Mayor Chuck Reed is worried.
The source of Reed’s troubles: gold-plated pensions that guarantee retired city workers as much as 90 percent of their former salaries. Retirement costs are eating up nearly a quarter of the city’s budget, forcing Reed (D) to skimp on everything else.
“This is one of the dichotomies of California: I am cutting services to my low- and moderate-income people . . . to pay really generous benefits for public employees who make a good living and have an even better retirement,” he said in an interview in his office overlooking downtown.
In San Jose and across the nation, state and local officials are increasingly confronting a vision of startling injustice: Poor and middle-class taxpayers — who often have no retirement savings — are paying higher taxes so public employees can retire in relative comfort.
In many places, the problem is proving difficult to address because public-sector pensions have strong legal protections and, union officials argue, the benefits are hardly lavish. But the strain on government budgets is undeniable, and California officials are taking the first steps toward a great leveling between retirement’s haves and have-nots.
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