San Jose, California, approves budget to hire staff, restore services

SAN FRANCISCO, June 11 Tue Jun 11, 2013 9:16pm EDT

SAN FRANCISCO, June 11 (Reuters) - San Jose's new budget approved on Tuesday allows the largest city in California's Silicon Valley to hire more than 100 new staff and restore some services slashed over the past decade.

The $934 million general fund budget passed by San Jose's city council covers an increase in the city's payroll to 5,651 positions from a current 5,522 and includes $14.3 million for pay raises.

With capital improvement and special purpose funds included, San Jose's overall spending in the next fiscal year will be $2.6 billion, compared with this year's $2.8 billion.

Like many other cities in the most populous U.S. state, San Jose has seen its finances improve, as revenue from property and sales taxes strengthen and from savings from spending cuts.

Over the past 10 years San Jose faced annual budget deficits that prompted its leaders to cut basic city services and more than 2,000 jobs, defer public works projects and carry on a controversial pension reform.

Even with changes in place to restrain pension spending, San Jose's retirement costs will rise to $277 million in its next fiscal year, which would mark an increase of more than $200 million from 10 years earlier, according to Mayor Chuck Reed.

Reductions to payroll and pension contributions in recent years will help San Jose close a $2.6 million general fund deficit for the fiscal year beginning in July, Reed said.

While San Jose's finances are healthier, they could be hammered should the city's pension overhaul fall apart, Reed said.

"They've stabilized and turned positive but there's a great deal of risk," he said, noting San Jose's budget plan sets aside $13.7 million for the following fiscal year's projected shortfall and $20 million in case of a potential setback in court for the city's pension overhaul.

California's third-largest city faces lawsuits over pension reforms approved by voters last year at the urging of Reed, who made tackling pension costs a top priority.

The reforms would cut San Jose's spending on pensions by $68 million over four years, Reed said.

"If we don't get that we will be back to cutting services in order to balance the budget," the mayor said.

A trial consolidating lawsuits over San Jose's pension measure is scheduled to start on July 22 in Santa Clara County Superior Court.

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