Pension Problems

Pensions have started cutting into the funds of other services in San Francisco, San Jose and Oakland. Company leaders may even have to shut certain programs down in order to continue with pension payments. The mayor of San Jose Chuck Reed stated that “pension benefits are wreaking havoc on our budget…. It has become our most pressing issue.”

The problem is the result of two things: pension payout increases that are built into the contracts, and significant losses in pension fund investments as a result of the recent recession. The cities are now being forced to fill in the holes with their general fund finances.

Pension costs are significant in the Bay Area. Years ago, cities like San Francisco approved pension provisions which granted public-safety employees a retirement payment of 90% of their salaries-for life! This was done to attract more workers. This year, San Francisco will need to use $170 million from its general fund for pension payments. That amount is expected to rise to $330 million by 2015 is nothing is done to improve the situation.

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