by Adam Summers
Reason Foundation
March 05, 2014
Policy Study
San Jose California’s unfunded liability for post-employment benefits grew from $300 million in 2003 to over $4 billion today. The primary cause is a massive increase in both salaries and benefits, so San Jose tried to cut employee salaries and government services. Employees voluntarily accepted wage cuts of 10–18 percent. Other budget cuts were wide ranging. But these cuts were not enough, so the city embarked on a series of pension reforms. The reforms culminated with the passage of Measure B, under which retirement benefits were reduced for new employees, while current employees had to choose between switching to a plan with reduced benefits or contributing more of their salaries. Though San Jose has faced legal battles over its constitutional authority to deal with pension benefits, the City has identified a reform path that other financially distressed municipalities may use to address their mounting pension liabilities.

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