San Jose audit calls city pensions unsustainable

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San Jose Mayor Chuck Reed said Thursday that a new pension system audit confirms that generous retirement benefit increases and market losses pose a potential financial catastrophe that threatens to devour the city's operating funds and deplete services, from public safety to parks and libraries.

The city audit, released late Wednesday, showed the value of the city's $3.8 billion pension system is about $2 billion short of covering estimated costs for retirement benefits promised to retirees and employees, which are driven up by early retirement age and annual pension raises. The city also faces a $1.4 billion shortfall for retiree medical and dental care.

The result has been a rapid increase in city costs to cover those obligations, the audit said. San Jose's employee retirement bill has tripled from just 6 percent of the city's operating costs in 2000 to 17 percent this year. In four years, it will consume a quarter of the budget, said the audit, which a city pension-reform task force will discuss Wednesday.

"The current system is unsustainable," Reed said. "The impact of rising pension costs has meant that San Jose can't hire more firefighters, police officers, librarians, gang intervention workers. These out-of-control costs are why we can't keep all of our libraries, community centers and swimming pools open."

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