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Latest News - May 2011

May 12, 2011
Rifts Emerge Among San Jose's Unions
Source: Wall Street Journal
By: Bobby White

Some Labor Groups Say City's Proposed Cuts Unfairly Burden Their Members, Even as Other Workers Reach Contract Deals

A push by San Jose officials to cut labor costs as they try to close a $115 million budget gap is exposing unusual tensions among the city's municipal unions.

In January, city officials began negotiations seeking 10% pay cuts from city workers and reductions in pension and other benefits to help close this year's gap and projected deficits for coming years. Five of the city's 11 unions have agreed to cuts, while the city continues to negotiate with the remaining labor groups.

As negotiations continue, cracks are beginning to appear among labor groups that for years had regarded solidarity among the city's 6,000 unionized workers as the lynchpin of their strength.

Yolanda Cruz, president of San Jose's largest union, Local 101 of the American Federation of State, County and Municipal Employees, said the city has used a "one size fits all" approach to negotiating with unions that she called misguided and unfair. She said San Jose's public-safety workers receive higher pay and better retirement benefits than her 3,500 members, which include administrative workers, 911 dispatchers and security guards, and the disparity so far has prevented her union from accepting the city's demands for salary concessions and higher benefit contributions.

After about five years on the job, Local 101 members make an average of about $45,000 a year, compared with a police officer with five years of service who makes an average of $105,000, said an AFSCME spokeswoman.

The average annual pension payout for nonpublic safety workers such as those in Ms. Cruz's union is about $34,000 versus about $70,000 for public-safety employees, according to a report issued last year by San Jose's auditor. The audit said San Jose's pension system is underfunded by about $2 billion. The city has about 1,600 police and fire retirees and about 3,000 non-public-safety retirees.

Tom Saggau, a consultant for the San Jose firefighters union, said the union disagrees with AFSCME's decision to highlight disparities in pay among city workers. He added, though, that he didn't want to disparage any other bargaining unit as it tries to reach a deal with the city.

Mr. Saggau said the firefighters union is doing its part to scale down costs by agreeing to a 10% cut in compensation and benefits. He said firefighters also agreed to strike down minimum staffing requirements for fire trucks, saving the city $4 million to $6 million a year.

"It's unfortunate that other bargaining units would try and pit themselves against fellow workers," said Mr. Saggau. "We see this as a shared sacrifice."

San Jose's police union didn't return phone messages and emails requesting comment.

Carl Carey, director of the public employee division for Operating Engineers Local 3, which represents some 700 employees, said he agrees with Ms. Cruz that the city's "one size fits all" approach ignores wide pay gaps among union employees. Operating Engineers represents workers such as park rangers, mechanics and some machinists. Mr. Carey said some in his membership have bristled at the city's push for across-the-board concessions, complaining lower-income workers will feel the pinch more than their higher-salary counterparts.

"I understand and sympathize with AFSCME's concerns," he said. "You try to do the best for your membership so I can't begrudge other union leaders, but there is no way to get around the fact that this is playing out unevenly."

San Jose faces its 10th consecutive year of a budget shortfall. Not only does the city face rising employee costs and falling tax revenue, but companies that rate municipal credit are tightening their scrutiny of local finances. That combination, officials said, is forcing San Jose to abandon one-time fixes to close the budget gap and instead pursue structural changes to city operations.

San Jose leaders have prescribed steep reductions in services and layoffs to close the $115 million budget deficit for fiscal year ending June 30. The moves follow deep cuts last year, when the city slashed more than 700 positions and laid off 215 employees to close a $118 million gap.

"We've had to make some very difficult decisions and that has upset a lot people," said Pete Constant, a San Jose city council member. "But we have very little recourse. It's either make these changes or eventually we will be insolvent."

Mr. Constant, who is a retired San Jose police officer, said that for nearly 10 years the city plugged budget shortfalls by pulling cash from reserves or shifting budget surpluses among departments. He said rising employee costs has made those steps impractical, with nearly half of last year's shortfall coming from rising pension expenses for the city.

San Jose's structural changes began when Mayor Chuck Reed won election in 2007, pledging to roll back union gains from earlier in the decade. Mr. Reed initiated changes such as ridding San Jose of binding arbitration and overhauling the makeup of the city's pension advisory board.

"Yes, public-safety retirement costs are worse than other unions, but in some sense it's irrelevant to the fact we are in fiscal trouble and need to rein in all costs," said Mr. Reed.

Mr. Reed said the city has petitioned union leaders to offer a sliding scale to members, under which lower-salary members would make lower pension and benefit contributions than higher-salaried members, but negotiators for all the city's unions have rejected the offer. Such a move wouldn't save the city money but could make wage and benefit cuts more palatable for some union members.



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