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The Associated Press June 6, 2012, 01:47AM ET

San Diego voters approve cuts to city pensions

San Diego voters have overwhelmingly approved a measure to cut retirement benefits for city workers. A similar measure in San Jose holds a commanding lead.

With more than 32 percent of precincts reporting in San Diego, 69 percent voted in favor of Proposition B, while 31 were opposed.

In San Jose, 71 percent were in favor of Measure B and 29 percent were opposed. More than 17 percent of precincts reported.

The votes are being closely watched in California and beyond as more state and local governments struggle with ballooning pension payments.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

Voters were overwhelmingly approving measures to cut retirement benefits for government workers in two major California cities, according to early returns Tuesday in contests being closely watched as states and cities throughout the country struggle with pension obligations.

In San Diego, 69 percent voted in favor of Proposition B while 31 percent were opposed, with nearly 16 percent of precincts reporting.

The margin in San Jose was even wider, with 71 percent in favor of Measure B and 29 percent opposed. More than 13 percent of precincts reported.

San Jose Mayor Chuck Reed called the vote a victory for fiscal reform.

"The voters get it, they understand what needs to be done," he said in an interview.

Supporters had a straightforward pitch: Pensions for city workers are unaffordable and more generous than many private companies offer, forcing libraries to slash hours and potholes to go unfilled.

"We believe people are tired of having services cut back because of big pensions," San Diego Mayor Jerry Sanders, a Republican who is being forced from office by term limits, said recently.

Shrinking tax revenues during the recession are also responsible for service cuts, but pensions are an easy target. San Diego's payments to the city's retirement fund soared from $43 million in 1999 to $231.2 million this year, equal to 20 percent of the city's general fund budget, which pays for day-to-day operations.

As the pension payments grew, San Diego's 1.3 million residents saw roads deteriorate and libraries and recreation centers cut hours. For a while, some fire stations had to share engines and trucks. The city has cut its workforce 14 percent to 10,100 employees since Sanders took office in 2005.

San Jose's pension payments jumped from $73 million in 2001 to $245 million this year, equal to 27 percent of its general fund budget. Voters there approved construction bonds at the beginning of the last decade, but four new libraries and a police station have never opened because the city cannot afford to operate them. The city of 960,000 cut its workforce 27 percent to 5,400 over the last 10 years.

Opponents, led by public employee unions, say the measures deprive workers of benefits they were counting on when they got hired. Some workers decided against potentially more lucrative jobs with private companies, figuring their retirement was relatively safe.

"This is part of a broader effort to attack workers and to make their lives miserable," San Diego Councilman Todd Gloria said during a debate on the San Diego measure.

Thom Reilly, former manager of Clark County, Nev., and now a professor of social work at San Diego State University, said opponents face a difficult task. He expects the California measures may spawn similar efforts elsewhere if they pass.

"The ones who are actually paying the taxes will never see these benefits in their lifetimes, so there's not a lot of sympathy in the public," he said.

The ballot measures differ on specifics. San Diego's Proposition B imposes a six-year freeze on pay levels used to determine pension benefits unless a two-thirds majority of the City Council votes to override it. It also puts new hires, except for police officers, into 401(k)-style plans.

More than 100,000 residents signed petitions to put the San Diego measure on the ballot.

Under San Jose's Measure B, current workers would have to pay up to 16 percent of their salaries to keep their retirement plan or accept more modest benefits. New hires would get less generous benefits.

Reed, a Democrat, joined an 8-3 City Council majority to put the measure on the ballot. He said Tuesday that he expected other cities in financial binds to pursue similar measures.

"We're at the leading edge but we're not alone," he said.

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