California's third-largest city, San Jose, and its employee unions presented final court arguments yesterday in a case that has major implications for other cash-strapped local authorities wanting to cut pensions, including bankrupt Detroit, Reuters reported yesterday. Even though voters in San Jose overwhelmingly backed a measure last year that would cut pensions for new workers and force current employees to contribute more to their retirement benefits, the city's unions sued, claiming that the reforms were unconstitutional. Both sides, following a judge's request made at the end of a five-day trial last month, filed voluminous closing arguments and summaries yesterday, much of which will likely be reprised in the litigation between unions and city authorities in Detroit, which filed for the biggest municipal bankruptcy in U.S. history in July. San Jose's pension overhaul was promoted by Democratic Mayor Chuck Reed and approved by 70 percent of voters in 2012. Reed believed that filing was the best way to alleviate an acute budget shortfall and a rapidly growing unfunded pension liability, which sits at nearly $3 billion, and to save further cuts to essential city services. City workers, led by San Jose's police union, sued, demonstrating how difficult it is for local governments in the United States -- even with a reform measure backed by voters -- to rein in soaring pension and other retirement costs.
