San Jose has been down this road before. It didn’t end well.
Roughly two decades ago, the San Jose City Council agreed to union contracts with costly pension benefits that plague the city to this day. The labor-backed deal resulted in a devastating reduction of the city’s police force and severe cuts to library hours and parks maintenance work.
The City Council is poised Tuesday to approve another labor-backed deal with city employees that could have equally devastating impacts on the city’s budget. Contract negotiations with firefighters will be held next year and police the following year. It’s hard to imagine firefighters and police, who put their lives on the line on the job every day, agreeing to a smaller raise than that given to San Jose’s administrative workforce.
The end result? This year’s budget won’t be largely impacted. But a back-of-the-envelope projection would add $20 million in annual ongoing costs to the general fund in the third year of the deal. That’s enough, for example, to hire 80 to 100 new police officers at a cost of $200,000 to $250,000 per officer.
San Jose’s police force remains understaffed. Something will have to give. Expect the City Council alternatively to consider a return to fewer library hours, renewed park maintenance cuts and more.
City Manager Jennifer Maguire is expected to unveil the city staff’s projection of the costs of the agreement at Tuesday’s meeting.
That’s right. In August, the City Council reached the tentative deal with unions representing over half of San Jose’s administrative workforce without a full understanding of the long-term budget implications. The contract would provide for a 6% raise the first year, 5% the second year and at least 3.5% the third year. That’s a significant increase above the 3.5% annual increase the city uses for projecting budgets. Every 1% increase costs the city an estimated $6.8 million to the general fund. Unless the city gains added revenue in the years ahead, corresponding cuts will need to be made. Should a recession hit, the impact would be even greater.
Don’t blame Mayor Matt Mahan. He wanted the City Council to stand firm on what was deemed by the city to be its final offer. But councilmembers Peter Ortiz and Omar Torres were among those pushing for a more generous contract.
It isn’t just the general fund that will take a hit if the council, as expected, approves the contract. Expect fees to increase significantly to pay for workers’ raises who work in the city’s fee-based operations, including the airport, wastewater treatment, clean energy and planning and building operations.
The contract agreement will also add to San Jose’s pension obligations. In 2022, pension costs accounted for about 18% of the city’s general fund budget, and the city had only funded $5.9 billion of its $9.5 billion in accrued pension liability, a 62% funded ratio, far worse than most California cities.
San Jose workers deserve a fair contract. But the City Council needs to balance the money it pays workers with basic services needed to help make San Jose a great place to live.