Some won't be so stealthy. Repeal of Proposition 13, which limits residential property tax increases, is now in their sights. It really galls liberals that they can't increase property taxes to the point that retirees are forced out of their paid-for homes.
Recent San Jose actuarial reports show $3.5 billion of city debt for underfunded pension and retiree health benefits -- a shortfall that works out to about $11,000 for every household in the city.
Yet, as Mayor Chuck Reed proposes substantive pension reform, workers and a local television reporter are hyperventilating about irrelevant numbers that distract from the ballooning problem.
If not for major layoffs and salary cuts last year, the shortfall would be much worse. It would also be much larger if the city used more realistic investment earnings assumptions rather than relying on overly optimistic forecasts.
Nevertheless, the calculations show the city's retirement programs combined have only 56 percent of the funds they should. Put another way, the unfunded liability equals about eight years of city payroll.
To understand what's going on here, keep in mind that employees earn additional future retirement benefits for each year that they work along with their salaries.
The city has three problems: First, the amount that should be set aside for those newly earned benefits has increased. Second, even that greater amount isn't enough because the payment calculation relies on those optimistic investment assumptions. Third, past reliance on unrealistic assumptions, retroactive benefit increases and actuarial changes have caught up with the city, leaving it with huge unfunded liabilities for pensions.
As for retiree health benefits, only small amounts have been set aside for future benefits. The resulting debts are treated like mortgages, with annual payments spread over as much as 30 years, thereby passing costs to the next generation.
The city must pay off the entire pension shortfall; workers have no obligation. For retiree health, workers make a small contribution...(Excerpt) Read more at contracostatimes.com ...