San Bernardino Sign

A San Bernardino sign on I-10 East is seen on Wednesday, July 11, 2012 in San Bernardino, Calif. The San Bernardino city council voted Tuesday night in favor of the city filing for bankruptcy. (AP Photo/Grant Hindsley)

San Bernardino’s deal means pensions off bankruptcy table
By Steven Greenhut1:47 p.m.July 7, 2014

SACRAMENTO — The nation’s largest pension fund, the California Public Employees’ Retirement System, has racked up another victory in its effort to halt any effort by municipalities to get out from under their crushing pension obligations.

Last month, CalPERS and the bankrupt city of San Bernardino agreed to a still-confidential deal that will require San Bernardino to begin making back payments. In 2012, the impoverished Inland-Empire city 110 miles north of San Diego filed for Chapter 9 bankruptcy after facing a budget deficit of almost $50 million. It became Ground Zero in a fight of statewide importance.

Unlike the two other recently bankrupt northern California cities, Vallejo and Stockton, San Bernardino tried to treat CalPERS like any other creditor and stopped making its contributions to pay for its workers’ pensions. CalPERS then used its formidable resources to challenge the bankruptcy in federal court, lest it set a precedent.

San Bernardino officials relented and began last year making its payments to CalPERS, but resisted making missed payments. This deal reportedly provides a payment schedule for San Bernardino to make good on the $16.5 million it owes to CalPERS. This is troubling news for any Californian who is not vested in a public pension system — more evidence that even in bankruptcy cities will not be able to reasonably trim their pension costs.

Most solvent California cities are being hit with large contribution-rate increases to make up for CalPERS’ inadequate investment performance (and to pay for large increases in benefit promises over the last decade or so).

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