Tuesday, November 20, 2012 – 12:01 a.m.
It took bankruptcy filings by the California cities of Stockton and San Bernardino to shed light on just how much a cities solvency, or better yet, insolvency, can strip away the gold plating from public pensions.
If the fact that taxpayer-funded pensions aren’t as constitutionally-protected under federal bankruptcy laws as previously thought hasn’t quite settled in with some public sector labor unions, it should.
U.S. Bankruptcy judges are sending the message loud and clear.
For contractual pensions obligations to be fulfilled, the municipality making that contract must have the capability to keep up its side of the bargain, with the pension system. If this can’t happen, then neither will the pension payments. A hard reality that’s starting to set in with employee union’s, who have been resistant to compromise.
Retiree’s themselves don’t even know what to think at this point.
The city of San Bernardino is the best example.
The bankrupt city has reneged on, maintaining current, its contributions with the California Public Employees Retirement System (Calpers). Calpers is the city’s pension plan provider.
Why? The city is essentially broke.
Now Calpers has intervened in the city’s bankruptcy proceedings as a major creditor in order to collect what the city owes it.
The theme resonating here? Pay us what you owe us or future payments to your current and future retiree’s will cease.
In other words, there is no free ride for anyone on this issue.
Stockton, on the other hand, kept current it’s pension obligations to Calpers. So in their case this scenario isn’t at issue.
San Bernardino, as a part of its bankruptcy pendency plan, is trying to defer more payments to Calpers, while at the same time, negotiate a repayment plan for the delinquent millions it already owes the pension system.
This is another bad sign for the city’s prospects, because at some point the deferred amount owing has to be paid, with interest.
Calpers has no choice in the matter. The pension funds trustees must protect the solvency of the plan for all of its members. And should San Bernardino fall out, then so be it.
The city doesn’t have any financial means of buying out (pre-paying all obligations to current benefit receiving pensioners) of the system for current retirees either.
The same type of legal fight would likely occur if San Bernardino County were to fall into the same boat.
The trustee’s for the county’s stand-a-lone pension system, even the trustee’s appointed by county supervisors, would have to act with the best interests of the pension fund, not the county, in mind.
Why? The county pension fund operates as an independent special district, separate from the county itself.
Employee groups far and wide should take the unfolding saga in San Bernardino as a sign to protect their own pension plans and layoff the greed on the steroids approach being employed by many.
Today’s situation, one that was envisioned by a just handful of people a few years ago, is now coming to fruition.
It’s time to pay attention.