Reform Pensions 2014

c/o Sutton Law Firm, 150 Post Street San Francisco, CA 94108 Phone: 415-732-7700 Fax: 415-732-7701 Web: www.reformpensions2014.com

The Honorable Darrell Steinberg, Senate President pro Tem The Honorable John Perez, Speaker of the Assembly The Honorable Bob Huff, Senate Republican Leader The Honorable Connie Conway, Assembly Republican Leader California State Capitol Sacramento, CA 95814 October 26, 2013 Dear Legislative Leaders: As you may know, I was one of five California mayors who recently submitted the Pension Reform Act of 2014 to the California Attorney General for preparation of title and summary. I have attached a copy of this initiative for your reference and welcome the opportunity to meet with you to discuss our goals and ways we may be able to work together on this critical issue. As Mayors, we have seen firsthand how the rising cost of public employee retirement benefits has forced cities, counties and other government agencies to cut public services, layoff hardworking employees and defer badly-needed improvements to critical infrastructure. These costs have helped drive some cities into bankruptcy and have pushed even more towards service level insolvency. We are also deeply concerned that huge unfunded liabilities in our states pension funds will jeopardize cities ability to pay out the benefits that our government employees and retirees will be counting on in retirement. Yet, as elected leaders, we do not have the tools we need to address this massive problem. In fact, California case law suggests that governments cannot prospectively modify retirement benefits for current employees in order to make our pension systems more sustainable, even if our employees were open to changes. The irony is that governments can lay off employees and freeze or cut salaries, but its unclear if we can negotiate future changes to retirement benefits. This measure does not seek to blame our employees for our states pension problems. In most cases, unfunded liabilities are the result of elected leaders making promises to their employees they cannot afford to keep. However, the system is simply unsustainable and we believe that it is unfair to our dedicated public servants to continue down this path. Something must be done to protect retirement security and provide essential services to our communities The Pension Reform Act of 2014 would explicitly allow government agencies to prospectively modify retirement benefits for future years of service, while protecting the retirement benefits employees have earned to-date. Nothing in this measure will retroactively change any benefits that employees have accrued for work that has been performed. It is also important to note that this measure requires that prospective benefit changes comply with applicable collective bargaining laws and wait until labor contracts expire. This initiative would simply allow government employers and employees to negotiate changes to pension and retiree health benefits under same rules as other terms of employment.

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Furthermore, this measure does not prescribe a one-size-fits-all solution for all government agencies in the state, nor does it mandate that any government modify its retirement benefits. Instead, it provides each government agency with the flexibility to craft a solution that is appropriate for its particular circumstances. We understand that many public employee groups object to the Pension Reform Act of 2014, but I want to assure you that we are simply looking for a common-sense solution to a complex and serious problem. Its also worth noting that many private sector unions are now considering modifying their pension plans to safeguard their members retirement security and the long-term solvency of their retirement plans. To that end, we are reaching out to you in hopes of finding areas of agreement for restoring the fundamental integrity and stability of government pension systems. Please feel free to contact me at (408) 535-4800 if you are amenable to a meeting. Sincerely,

Chuck Reed Mayor of San Jose cc: Mayor Pat Morris, City of San Bernardino Mayor Miguel Pulido, City of Santa Ana Mayor Tom Tait, City of Anaheim Mayor Bill Kampe, City of Pacific Grove Honorable Members of the California State Assembly and Senate