More Fuzzy Math from Mayor Reed--POA 2nd Tier Cost Email to Recruits is Accurate

JIM UNLAND is president of the San Jose Police Officers Association and a Sergeant in the San Jose Police Department.

From the same Mayor who brought us the $650 million bogus pension cost projectioncomes more. A few days ago, the POA sent an email to academy recruits informing them of the rate adopted by the Police and Fire Retirement Board for the cost of the 2nd tier retirement plan. As the email details, when the recruits graduate in September, they will be paying the same rate that Tier 1 members are paying, 21.16% of gross pay. Click here to see that email.

NBC reporter Damian Trujillo asked the Mayor for comment on our email and received a reply from the Mayor’s office courtesy of Dave Low, Policy Advisor/Deputy PIO for Mayor Reed.

Their response began by stating that our email was filled with "inaccurate and misleading information"…..This from the 650 million dollar man? The POA not only stands by every word in our email to the recruits but we have the video of the P&F Retirement Board Meeting to back it up.

Let’s break down Mayor’s Reeds reply point by point, so we may confirm what most of you already know; this Mayor plays fast and loose with the truth and his staff appears to be ill informed.

  • The City said that the recruits receive a 5% raise when they are sworn in and fault us for focusing "on the impact on take-home pay without recognizing that officers will begin accruing a generous retirement benefit."

 

It’s not a 5% raise. When a recruit graduates from the academy and becomes a Step 1 officer, they go from making $29.95 per hour to making $34.89 per hour.  This equates to a 16.5% raise, but remember these Step 1 officers will have 21.16% taken out of their pay, about a 5% take home pay cut.

Perhaps the Mayor has forgotten take home pay is what we use to pay our bills. It’s a natural thing to focus on.

Generous retirement benefit? Where to begin? Generous compared to Tier 1 employees? 90% vs. 65%, age 50 vs. age 60, disability retirement provided by the plan vs. paying for your own insurance, vested (guaranteed) benefits vs. no vested rights. No, it’s not a generous plan using that comparison.

The State just instituted a 2nd Tier for new-hires in CalPERS. Maybe that’s what the Mayor’s office is referring to. 2.7% (81%+) accrual rate vs. 2% (65% max), pay 50% of normal costs only vs. 50% of all cost (including unfunded liability), disability retirement provided by the plan vs. paying for your own insurance, vested (guaranteed) benefits vs. no vested rights. No, it’s not a generous plan using that comparison either.

They must mean generous if compared to someone who doesn’t receive any retirement benefit plan (pension/401K) or Social Security.  Although, because the 2nd Tier is not vested and the City said it "won’t close the door" on being able to retroactively reduce or eliminate the benefit, we’ll call this one a wash.

  • The City said that recruits taking a pay cut when they become officers “is not a new phenomenon.  The previous class of recruits, who are part of the Tier 1 plan, experienced the same thing.”

 

While this statement is factually accurate, it is disingenuous as it completely ignores the fact that the previous class of recruits are in the Tier 1 plan and are not in the woefully uncompetitive and terribly conceived 2nd Tier plan. Imagine you and a friend pay the same amount for a car. Your friend buys a brand new BMW and you buy a used Yugo. While you both "experienced the same thing" (buying a car for the same amount of money) you will quickly realize you got hosed.

  • The city claims that "it is completely inaccurate for the POA to say that new officers’ costs will be paying Tier I rates for Tier II benefits." They called the rate set by the Board “temporary” and that a new rate is expected by September 5.

 

Take a look at the video from the meeting (the vote to approve the rate occurs at the 38 minute mark).

The board set the rate for the 2nd Tier at the same rate it is for Tier 1 Yes, this is an “interim rate” but the Cheiron representative, Bill Hallmark (the plan’s actuary), made it clear that the 11.65% rate is “in the ballpark” and "is a reasonable rate to use" until they can calculate the final number. Until that is done, and accepted by the Retirement Board, the 11.65% is the rate that will be used. Cheiron felt they could calculate the final rate by sometime in October but the Board is pushing for September.

  • They point out that the cost of retirement benefits have grown, “particularly for retiree healthcare.”  Their solution for lowering the cost for retiree healthcare for new civilian workers was to eliminate the cost for them “by excluding them from retiree healthcare benefits.”  They further point out that they “have had little success negotiating a similar arrangement for new police officers.”

 

This was one of our favorite parts of the Mayor’s response. If the City does not offer the benefit then you won’t get the benefit so you won’t have to pay for the benefit. So by following the Mayor’s line of reasoning, if the Tier 2 members would just forgo receiving a retiree medical plan, they wouldn’t have to pay for it, shaving 9.51% off their cost. After all, who needs healthcare when you’re retired?

Ingenious. We can do better than that though.  If the Tier 2 employees would just forgo any pension at all, think of all the money they would save. They would be destitute in their golden years, but that’s not a concern for the City. But why stop there. If the Tier 2 folks would just agree to volunteer their time and work for free, think of all the money they will save by not having to pay taxes?

Damian Trujillo ran his story the other night; here is a link to it . It is clear from the spin by the City that they are blaming the POA for the bad news and that we are trying to demoralize the recruits. Damian interviewed Councilmember Pete Constant said that it was really disheartening that there is an effort to demoralize the newly hired officers.

It is our job to ensure that the membership stays informed. If the facts surrounding the 2nd Tier demoralize the recruits, don’t blame the messenger, blame those politicians who conceived and enacted it.

According to the story, Constant also conceded that the new officers would pay the same and get less. But that contradicts what the Mayor’s office said "It is completely inaccurate for the POA to say that new officers’ costs will be paying Tier I rates for Tier II benefits."

We will continue to put out factual information to our membership. We are sorry that the news always seems to be bad and that morale at our Department is at an all-time low. For that, blame the policies enacted by the City leaders not the POA.

Please read the Mayor’s full response with yellow highlights added by the POA.

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