CalPERS (California's Largest Pension Fund)
Almost
exactly TWO years ago U.S.
Bankruptcy Judge Christopher Klein ruled that Stockton, CA. could move forward
with a plan to reorganize its debt. In that decision, he twice stated that the
creditors had acted in bad faith and had refused to pay their share of the
costs for negotiations. The ruling made Stockton eligible for bankruptcy
protection and left the door open for CalPERS’ (California’s pension giant) obligations
to be part of negotiations in the coming phases of the bankruptcy.
The
Stockton decision has opened the door for the state to follow suit.
In the ongoing fight, the issue will be whether U.S. bankruptcy
law trumps California law, which says the pension plan must be funded. IF it
does, then the pension system there is all but dead in the water and that opens
the door for more direct, or frontal assaults on public pensions across the
country.
Considering the fact that the $900 million Stockton owes to the
California Public Employees' Retirement System (CAlpers) to cover pensions is
its biggest debt - as is the case with many cities in California – you can see
where BOTH sides are fully dug in.
Prior to bankruptcy, Stockton predictably slashed its police and
fire departments, halted bond payments, cut employee benefits and adopted an
emergency spending plan that drastically reduced many city services, but the
city continued to pay into the state pension.
AND it didn’t take long for the fight to expand, as just
400 miles south, in the city of San Bernardino, in that city’s bankruptcy case,
the pension fund faces a new legal challenge from two companies owed $50
million. The companies say it's illegal for the city to continue paying CalPERS
to fund workers' pensions while they get nothing.
"This is significant," said Adam Tatum,
research director at California Common Sense, a nonprofit think tank. "It
has put a chink in CalPERS' armor."
Karol Denniston, a public finance lawyer at Squire
Patton Boggs, said Klein's ruling was "critical for every municipality in
California."
"Next time we see a Chapter 9 bankruptcy
filing," she said, "pensions will be up for negotiation just like
every other creditor."
Indeed, San Bernardino could become the first city
in California to consider cutting worker pensions in a bankruptcy.
The fight has Municipal Labor in California back on
its heels. Dave Low, chairman of Californians for Retirement Security, a
coalition of 24 public unions, said workers are willing to discuss changes to
their benefits during contract negotiations. He noted that Stockton's workers
had agreed to give up the free healthcare they had been promised in retirement
— a benefit worth more than $500 million.
"Unions have no interest in seeing their cities
go bankrupt," said Mr. Low.
The fight is very real and with private sector
pensions already gutted, the public sector workers are left with few allies
among fellow workers.
WHAT, if anything, does this mean for New York?
That’s hard to say, given that the New York State-run
pension funds are some of the best funded pension funds in the nation. STILL,
that does NOT make New York immune to such national trends.
It also doesn’t help that new Municipal workers in
New York City have lost many of the pension benefits that older workers have.
Over a relatively short time period, those workers will become the overwhelming
bulk of city workers and eventually ALL such workers. Couple that with the fact
that the majority of pensioners leave places like New York for warmer, cheaper
environs and you get a perfect storm – politicians willing to sacrifice a non-voting group and resentful
newer workers willing to trade the oldster’s pensions for some short term
benefits for themselves.
SEE: http://articles.latimes.com/…/la-me-ln-stockton-bankruptcy-…
No comments:
Post a Comment