Pat Morris

Former San Bernardino Mayor Pat Morris ponders a question Wednesday, July 11, 2012, regarding the city council vote authorizing a bankruptcy filing outside San Bernardino City Hall in San Bernardino, Calif. (AP Photo/The San Bernardino Sun, Rick Sforza) Former San Bernardino Mayor Pat Morris ponders a question Wednesday, July 11, 2012, regarding the city council vote authorizing a bankruptcy filing outside San Bernardino City Hall in San Bernardino, Calif. (AP Photo/The San Bernardino Sun, Rick Sforza) — AP

Bankrupt San Bernardino rolls over, but pension problems persist
By Steven Greenhut
Nov. 21, 2014

SACRAMENTO — The recent announcement that the bankrupt city of San Bernardino has agreed to fully pay its pension debt to the California Public Employees’ Retirement System has public-employee unions cheering. But pension reformers, though demoralized, believe the CalPERS victory is a hollow one.

San Bernardino was $45 million in the hole in a budget of $128 million when it decided to file for Chapter 9 bankruptcy. The city tried to withhold its $24-million annual pension payment on the grounds that it didn’t have the money to pay. But now it will make all its payments to cover the pension costs for city workers, including the back amounts owed to CalPERS.

San Bernardino’s decision to do what CalPERS says is the “smart decision” is the most obvious repercussion from the recent bankruptcy proceedings in another economically depressed city. Last month, a federal bankruptcy judge approved Stockton’s bankruptcy exit plan that did not shave pensions, but instead gave a huge haircut to one particular creditor.

Pension debts have been soaring in many California cities, but the so-called California Rule has meant government agencies can never reduce promised pension payments to their employees — even going forward. This has left cities with few choices other than raising local taxes and cutting back on services. State controller John Chiang’s new numbers show the state’s unfunded pension liabilities have grown more than 30-fold in 10 years, so something has to give.

Reformers’ hope was in bankruptcy cities could get rid of some of these burdens, and get back on a sound footing. The threat of losing pensions in a bankruptcy proceeding, others argued, would provide an incentive for unions to negotiate reasonable cutbacks before a city reached that precarious spot.

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