The overwhelming costs have forced the city to cut library hours, defer road repairs and lay off workers. Alarmed, a large majority of San Jose voters have ratified a plan to cut public worker pensions, but implementation is being held up after a court ruling knocked out several key provisions. Meanwhile, a statewide ballot measure to make it easier for local officials to slash pensions is being pushed by San Jose Mayor Chuck Reed, a Democrat. But it is caught in a legal battle that might prevent it from going before voters until 2016, if at all.
Some say the struggles in San Jose are a harbinger of a larger problem caused by gold-plated pensions.
But a more serious, if less discussed, problem is that 55 percent of California private-sector workers have no retirement coverage at all on the job. Again, cost is the issue. Many employers cannot afford to provide retirement plans. Workers can’t afford to save. And cost-conscious governments — with huge public pension costs in mind -- are leery about filling the void.
President Obama has proposed MyRas, or portable savings accounts targeted to the one-third of Americans who have no access to retirement accounts on the job. The plan is a scaled-down version of other ideas Obama has advocated to bolster retirement security. But given its modest terms, even the plan’s most ardent backers say it is, at best, a beginning.
In 2012, California lawmakers passed more ambitious legislation that would require employers who do not offer alternatives to take part in a state-run plan to help workers save for their golden years. The state would guarantee a minimum level of return backed by insurance should market returns fall below projections. At retirement, it would be converted to an annuity paying benefits for life.
But California Secure Choice remains under study, and there are concerns about its costs. Meanwhile, the problem only festers as a new generation inches toward retirement with little in the bank.