AirTalk for December 26, 2013

Who should take the hit when local government runs out of money?

David McNew/Getty Images

San Jose, Calif.

A state judge has barred voter-approved pension cuts in San Jose -- the ruling may set a precedent for cities facing similar budget cuts.

Cash-strapped local governments across the country have debated their options when it comes to cutting budgets. In Southern California and Detroit, the debate over whether bondholders or pension cuts should take the greater hit has laid groundwork for similar battles across the country.

San Jose's Measure B, proposed by Mayor Chuck Reed, proposed pension cuts for municipal works and was well received at the polls, but this ruling would prevent the cuts, claiming that while reducing paychecks is legal, cutting into pension is not. Reed is pressing for a statewide ballot initiative aimed at cutting pensions, but for now, San Jose municipal workers are holding on to those funds.

How should local government deal with bankruptcy? What are the best cuts to make -- should cutting pension funds be illegal?

Guests:
Mike Rosenberg, a reporter at the San Jose Mercury News who has been covering the story

Sharon McNary, Politics reporter for KPCC


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