There's a nice summary of the efforts of the government of San Jose, California, to avoid bankruptcy by reducing one of its largest budge items: pension and retiree health benefits: "San Jose now spends one-fifth of its $1.1 billion general fund on pensions and retiree health care, and the amount keeps rising." Unlike San Bernadino, that filed bankruptcy to cut its pension obligations and Stockton which is so far using bankruptcy to maintain its pensions at the expense of bondholders, San Jose is implementing a two-tier system of retirement benefits that will pay less to all new hires than to those who began to work under the former system. (You can read my comments about Stockton here and here. You can download my article about Stockton by going here.)
Not surprisingly, San Jose's unions are vigorously opposed to this two-tier system but I think it will pass muster under California's constitution. Whether it will be enough to keep the city out of bankruptcy is another question, and I suspect the answer may be no. The financial burden on San Jose to continue paying its retirees until their deaths is enormous. It may be able to survive until , say, 2043, but it will be a tough row to how and will mandate continuing reduction of services to its current residents.
Not surprisingly, San Jose's unions are vigorously opposed to this two-tier system but I think it will pass muster under California's constitution. Whether it will be enough to keep the city out of bankruptcy is another question, and I suspect the answer may be no. The financial burden on San Jose to continue paying its retirees until their deaths is enormous. It may be able to survive until , say, 2043, but it will be a tough row to how and will mandate continuing reduction of services to its current residents.
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