Posted in the South Pasadena Forum
CalPERS Again Seeks Appeal Of San Bernardino's Ch. 9 Status
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Law360, Los Angeles (November 08, 2013, 7:12 PM ET)-- California's state pension system on Thursday again urged a California bankruptcy judge to certify its appeal to the Ninth Circuit of an order allowing the city of San Bernardino to move forward with its bankruptcy, saying the appeals court's precedent is inconsistent with the judge's ruling.
The decision comes after the California Public Employees' Retirement System challenged the bankruptcy judge's decision in October, saying the judge improperly glossed over key requirements for granting Chapter 9 protection. On Oct. 29, the bankruptcy court orally denied the request...
Elections in bankrupt U.S. city usher in pension reformers, Calpers battle
Fri Nov 8, 2013 2:26pm EST
* New San Bernardino leaders vow to cut pensions, seek Calpers concessions
* Old guard swept from power in recall elections
* New leaders set to enter talks with Calpers, other creditors, this month
By Tim Reid
SAN BERNARDINO, Calif., Nov 8 (Reuters)- Elections in bankrupt San Bernardino, California this week ejected a heavily pro-union old guard and ushered in new leaders who say they are determined to take on California's giant retirement system and the city's pension costs.
After council elections on Tuesday, the likelihood that San Bernardino will seek to renegotiate its pension obligations with the California Public Employees' Retirement System (Calpers)through the bankruptcy courts have greatly increased, analysts and new officials say in interviews with Reuters.
With mediated negotiations between the city and its creditors set to begin later this month, the stakes are high for Calpers, America's largest public pension fund with assets of $277 billion. Calpers is San Bernardino's biggest creditor, and has argued strenuously that pension payments cannot be touched even in a bankruptcy.
San Bernardino, a city of 212,000 that lies 65 miles east of Los Angeles, filed for bankruptcy last August and along with Detroit - the biggest U.S. city to seek Chapter 9 protection - is likely to set a precedent on whether retirees or Wall Street bondholders suffer the most when a city goes broke.
Calpers has objected to San Bernardino's bankruptcy at every turn, fearing in part that if the city is allowed to lower payments to the fund, other cash-strapped cities will follow suit.
After Tuesday's San Bernardino elections, the balance of power - and the implications for how the city will deal with Calpers - shifted dramatically, with a new-look council and the recall of the city attorney, James Penman.
Penman, a long-time local powerbroker with close ties to the unions, was ousted after 26 years in the post.
While Penman had been circumspect about how the city intended to deal with Calpers, his successor, local real estate attorney Gary Saenz, was less so.
"Calpers has to accept the fact of San Bernardino's situation and look at compromise," Saenz told Reuters.
One of the new council members, Jim Mulvihill, a retired professor who sits on the city planning commission, told Reuters that San Bernardino paid too much in pensions to its public employee union members, especially police and fire.
The pension promises "are obligations we may not be able to make," he said. "We've know for a long time that pensions were going to be a problem. We are going to have to sit down with Calpers."
Scott Beard, a realtor who invested $150,000 of his own money to fund some of the candidates in Tuesday's elections, said:
"At some point, a federal judge is going to have to tell Calpers to take 80 cents on the dollar."
One heavily pro-union councilman, Robert Jenkins, lost his re-election bid two weeks after facing multiple criminal indictments related to sex ads he allegedly posted on Craigslist in an alleged plot to exact revenge on a former boyfriend.
His replacement, Benito Barrios, said the main message he received from voters was that the police and fire unions wielded too much power and influenced too many members of the city council.
Most of the new leadership will be sworn in next week, before three days of closed-door negotiations with creditors beginning November 25.
"To the extent you now have a council which views pensions and Calpers more negatively,
the negotiations with Calpers will presumably be more contentious and adversarial,"
said Michael Sweet, a San Francisco bankruptcy attorney not involved in the case.
A Calpers spokesperson, Rosanna Westmoreland, said: "We will continue to work with whoever the city leadership is to preserve the pension promises that they have made to their employees."
CalPERS Again Seeks Appeal Of San Bernardino's Ch. 9 Status
Calif. Agencies Say San Bernardino Suit Is Unconstitutional
CalPERS Appeals San Bernardino's Bankruptcy Eligibility
CalPERS Can't Block San Bernardino's Ch. 9 Proceeding
San Bernardino Bankruptcy OK Gives Troubled Cities Leverage
San Bernardino Can Continue Under Ch. 9 Despite Outcry
San Bernardino, City Union Reach Deal Over Bankruptcy Plan
CalPERS Pushes Court To Kill San Bernardino Bankruptcy
San Bernardino Bond Creditors Support City's Ch. 9 Case
Two Years after Bankruptcy, California City again Mired in Pension Debt
Tuesday, 01 Oct 2013
Less than two years after exiting bankruptcy, the city of Vallejo, California, is again facing a budget crisis as soaring pension costs,
which were left untouched in the bankruptcy reorganization, eat up an ever-growing share of tax revenues.
Vallejo's plight, so soon after bankruptcy,
is an object lesson for three U.S. cities going through that process today - Detroit, Stockton and San Bernardino, California -
because it shows the importance of dealing with pension obligations as part of a financial restructuring, experts say.
The Vallejo experience may be particularly relevant to Stockton, which is further along in its bankruptcy case than Detroit and San Bernardino and has signaled its intention to leave pension payments intact.
All three current bankruptcies are considered test cases in the titanic battle between Wall Street and public pension funds over whether municipal bondholders or current and retired employees should absorb most of the pain when a state or local government goes broke.
"Any municipal bankruptcy that doesn't restructure pension obligations is going to be a failure because pension obligations are the largest debt a city has," said Karol Denniston, a municipal bankruptcy attorney in San Francisco.
"A city like Vallejo can be reasonably managed but it is still going to be flooded out because it cannot be expected to keep up with its pension obligations."
Vallejo, a port city of 115,000 near San Francisco that was staggered by the closure of a local naval base and the housing market meltdown,
filed for Chapter 9 bankruptcy protection in 2008 with an $18 million deficit.
During its three-and-half year bankruptcy,
the city slashed costs, including police and firefighter numbers, retiree health benefits, payments to bondholders and other city services.
The only major expense the city did not touch was its payments to the $260 billion California Public Employees Retirement System.
"We realized we did not have the time or the money to take on a giant behemoth like Calpers,"
said Stephanie Gomes, Vallejo's vice mayor.
Now city leaders say that growing, and unexpected, costs to Calpers are putting its post-bankruptcy budget under enormous strain.
The city budget shows a deficit of $5.2 million for this fiscal year,
and that is set to rise to $8.9 million next year unless significant cost savings can be found.
When Vallejo entered bankruptcy in 2008,
its annual employer payments to Calpers were $8.82 million, or 11 percent of the city's general fund, according to the city's finance department.
When it exited bankruptcy at the beginning of 2011, the payments to Calpers were just over $11 million, or 14 percent of the fund.
The latest budget pegs those payments at $15 million, or 18 percent of the general fund.
The increase comes largely from the recent decision by Calpers to lower its projected investment return rate, from 7.75 percent to 7.5 percent,
and to change the way it calculates long-term pension maturity dates.
Those changes mean cities, state agencies and counties must pay rate increases of up to 50 percent over the next decade.
Vallejo expects an increase in pension contribution rates of 33 to 42 percent over the next five years.
Our five-year business plan was based on things we knew," said Deborah Lauchner, the city's finance director.
"Now we have to figure out a way to pay for these new Calpers rates.
Every time we react to the last rate change they impose, they come up with another one.
I understand they want to improve their funding status, but it's on the backs of the cities."
David Skeel, a bankruptcy law professor at the University of Pennsylvania Law School, said: "Vallejo made a conscious decision under enormous pressure not to mess with Calpers.
That is a decision coming home to roost."
Marc Levinson, of the law firm Orrick, Herrington & Sutcliffe, was the lead attorney for Vallejo in its bankruptcy and has the same role for Stockton.
He says his clients would welcome pension reform in California, and he is the first to say that contributions to Calpers are a big problem for cities.
But, Levinson said, dealing with the issue is no simple matter.
"How does a city start a new pension plan when it can't pay its bills?", Levinson said.
"How can a city break away from Calpers and still retain employees when other jurisdictions have a pension plan?"
Vallejo has met in full its annual payments to Calpers since exiting bankruptcy, and even accurately projected them.
"But just because a cost is projected does not make it sustainable,"
said Lauchner, the finance manager.
Dan Keen, Vallejo's city manager, said the only way for the city to meet growing pension costs is to get more concessions from city unions - contract negotiations are underway -
and to cut services further.
Keen said options were to slow or freeze hiring and make other cost cuts, for example,
at the city marina.
But he added: "The reality is we don't have anywhere else to cut."
Gomes, the city's vice mayor, said of Calpers:
"It's the biggest part of my city's problem. I don't know any city that can afford it."
© 2013 Thomson/Reuters. All rights reserved.
Comment from CAJusticeForAll
Posted earlier by Trash Talk in the Calderon topix
CAJusticeForAll at 3:39 PM November 13, 2013
Calderon has not negotiated for the hundred thousands of dollarslife time pension yet.
So, the public has to wait until he is
promised hefty pension for the rest of his life.
He can go to the prison
but not without his pension,
and he will fight until he goes to his grave for the pension.
The law is designed to assist law makers to do committed crimes but still get paid via pension !!!
Look at Rizzo at BELL to see how public official mastermind their trick !
Only new law can STOP this kind of abuse !
Wednesday, 07 Aug 2013
By Michael Kling- Moneynews/ New York Times
With one of the most poorly funded pension systems in the country,
Chicago faces a looming pension crisis.
Its pension fund for its teachers is approaching collapse, and four other funds are short $19.5 billion, The New York Times reported.
The state of Illinois will require Chicago to contribute an additional $1 billion a year starting next year to make up shortfalls.
Chicago Mayor Rahm Emanuel told The Times the city would have to raise taxes by up to 150 percent, something he called "unacceptable."
The approaching crisis did not arise overnight. The city's pension contributions,
although following a state-approved plan, have been inadequate.
Plus, economic downturns lead to investment, according to The Times.
The state, which is responsible for setting the city's pension benefits and contributions levels, has failed to reach an agreement on cutting expenses.
State politicians are engrossed in wrangling that makes Washington seem polite.
Gov. Pat Quinn said he would withhold legislatures' pay until they reached a solution. Lawmakers sued Quinn in response.
Mayor Emanuel has proposed:
increasing retirement ages,
increasing employee pension contributions, and temporarily freezing inflation adjustments
("cost of living") to retirees.
San Jose Mayor Chuck Reed tweaks public pension ballot proposal
Read more here: http://www.sacbee.com/2013/11/13/5908307/san-...
Trying to be reasonable, trying to be fair”:
A Public Sector Inc. Q&A with
San Jose Mayor Chuck Reed
analysis of the ongoing crisis in state and local governments' budgets
Long Beach got into that billion-dollar hole in the same way many other cities and local governments in California did — by relying on assumptions about pension investments that turned out to be wrong.
In 2000, during a rise in the stock market, Long Beach's pension obligations were "superfunded," meaning its investments were returning so much that CalPERS advised the city it could take a pension holiday and skip paying into the system for a few years. The city resumed funding its pension account in 2004, but when the economy stalled in 2008, its investments were underperforming, and the unfunded portion ballooned to more than a billion dollars.
The experience of Long Beach is a scenario likely to be repeated in cities across the state in coming years.
Many California cities have promised workers far more in pensions than they can deliver. Attempts in San Jose and San Diego to reduce public employee retirement packages have ended up in court.
The California Taxpayers Association estimates state and local governments have racked up $138 billion worth of unfunded pension obligations. California's watchdog agency, the Little Hoover Commission, put it at $240 billion and bluntly said that "Pension costs will crush government."
A group of mayors recently proposed the Public Pension Reform Act of 2014, a ballot initiative that would let voters and public agencies change future benefits of current workers. The proposal would have to get substantial public support to reach the ballot.
Long Beach City Councilman Gary DeLong says he is inclined to support it.
The bond rating firm Moody's helps investors understand the risk of lending money to cities. Eric Hoffman, Moody's lead analyst tracking California local governments, says unfunded pension liability is part of their evaluation.
"Long Beach's unfunded pension burden is definitely on the high side," Hoffmann said.
He describes Long Beach's burden as more than three times its annual operating expenses, about the same as in Los Angeles. But it's not as high as San Jose, which he calls an outlier, with a pension burden of more than four times its operating costs.
The higher the burden, the lower a city's pension bonds are rated, which makes it more expensive to borrow money and leaves less cash to pay for salaries and city services.
"Well, there's no question it's a challenge for local governments. Their revenues have not been growing at the same rate as their obligations," Hoffmann said.-
Long Beach is taking the steps to reduce its unfunded pension liability. That's the amount of money an agency has promised to pay in pensions, but doesn't have enough projected income to cover. Foster says that Long Beach's unfunded liability was above $1 billion just a year ago, but changes in union contracts and improvements in investment returns have reduced it to $700 million, an amount the city should be able to pay off in 25-to-30 years.
PROBLEM O|WITH SPREADING OUT CURRENT OBLIGATIONS INTO THE FUTURE IS THAT THE KIDS END UP PAYING FOR PARENTS EXCESSES while at the same time having to pay for current pension obligations
See more at:
Underlying this initiative is the fact that the out of control increase in pension contributions are chewing up an ever increasing portion of local budgets,
forcing cities to cut public services, furlough or lay off employees,
and underfund the maintenance and repair of our streets, sidewalks, and the rest of our deteriorating infrastructure.
This proposed change to California’s “vested rights doctrine” was recommended by the Little Hoover Commission in February of 2011 when it “confirmed that California [and its local governments] cannot solve its pension problems without making prospective changes going forward for current employees.”
But public sector unions are adamantly opposed to any changes to the current system, arguing that this is a cut in benefits that were
promised when the city worker was hired.
Even CalPERS issued a press release denouncing this statewide ballot initiative, despite the fact it supported Senate Bill 400 which foolishly granted retroactive pension increases to state employees in 1999.
However, we have not heard of any realistic solutions to avoid “service level insolvency” from the public sector unions other than huge tax increases on an already heavily taxed electorate.
But the massive pension problem that is eating the City’s lunch is not going to be solved unless the City is willing to adjust the future benefits of current employees.
In any case, we are in for a battle royal, starting with the need to overcome union sponsored sabotage of the effort to gather over 800,000 valid signatures followed by a nasty and very expensive donnybrook if this pension reform initiative makes it to the ballot...
Do they endorse meaningful pension reform that was favored by 70% of the voters in San Jose and San Diego? Or do they bow to the campaign funding leaders of our public sector unions who have failed to offer constructive solutions to the City’s financial problems?
Put another way, will Progressive Democrats who want to revitalize the Los Angeles River, repair our streets, and provide services to the public and the less fortunate prevail over union funded Democrats who endorse increased salaries and benefits?
We are in for a knockdown, dragged out rumble.
It is certainly not surprising for a public employee union leader to criticize a ballot proposition that fundamentally reforms the public employee pension system.
However, Ron Cottingham's arguments are devoid of facts.
His argument justifying these pensions because public sector salaries trail their private sector counterparts is no longer true.
What is true is that private sector employees are tired of funding guaranteed retirement benefits for public employees that are far more lucrative than their own.
They are also tired of pensions eating up larger and larger portions of public entity budgets, sacrificing the ability of cities and counties to deliver basic services.
Cottingham conveniently disregards the hundreds of millions of dollars of unfunded liabilities burdening our cities and counties.
The private sector realized years ago that defined benefit pensions are unsustainable.
It's time for the public sector to come to grips with reality also.
Read more here: http://www.sacbee.com/2013/11/10/5893333/publ...
Chicago continues from Wed
While it might be the worst case, Chicago is not the only city facing pension problems.
Moody's gave Chicago a "super downgrade," cutting its rating by three levels, according to The Times.
Moody's says municipal pension costs have been underestimated, according to Fox News.
Accounting changes being implemented by Moody's and the Governmental Accounting Standards Board show the problem is worse than thought.
Already, California cities like Stockton and San Bernardino are in dire financial straits.
With the accounting changes, other cities in that state, including Los Angeles, San Francisco, San Jose, Azusa and Inglewood, could join them.
Last Thursday Steven Greenhut was on a pension-reform panel in San Francisco with two leading California Democrats — Mayor Chuck Reed of San Jose and David Crane, a Stanford instructor and former adviser to Gov. Arnold Schwarzenegger.
Reed is the lead voice in a statewide reform initiative that would allow California cities to reduce pension benefits for current employees on a forward-going basis.
Reed showed charts of how his city’s pension payments have soared as service levels and employees have been reduced.
This public-service argument resonates with many liberal Democrats — at least the ones bold enough to stand up to the public-sector unions.
An editorial this week in the Sacramento Bee,
with its left-of-center editorial page and huge state-worker audience,
made a similar compelling case for pension reform.
In fairness, the Bee has long been great on this issue.
As it noted,“As hard as it was to achieve, last year’s pension overhaul legislation was woefully inadequate.
The changes have not given cities, counties and special districts the fiscal relief they need to restore healthy budgets. As the numbers in the accompanying chart show, most local governments are paying 50 percent more in retirement contributions than they did just five years ago.
Sacramento is typical. In 2008-09, Sacramento’s pension bill was $51.8 million, or 12.2 percent of the city’s $423 million general fund budget.
Even though the city has shed 1,000 employees and reduced its budget to $372.7 million during the last five years, its pension costs have jumped to $55.4 million, or 14.9 percent of the general fund budget.”
The alternative to reform, the newspaper argued, are cutbacks in the workforce.
The facts are clear, so why are we still losing the battle?
Steven Greenhut is the California columnist for U-T San Diego.
Greenhut formerly was vice president of journalism at the Franklin Center for Government and Public Integrity, where he managed a team of 35 investigative reporters and editors who covered state capitols across the country.
He founded CalWatchdog in 2009, which provided Sacramento-based investigative news coverage and he writes regularly for publications including Reason, Human Events,
Bloomberg and City Journal.
He is author of the 2009 book, "Plunder!
How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives
And Bankrupting the Nation" and the 2005 book, "Abuse of Power: How the Government Misuses Eminent Domain."
A Call to get those pension funded
LAbour should make it a priority over minimum wage and higher pay
The LAO suggests paying down debt and setting aside money to pay for unfunded liabilities, such as the $70 billion shortfall in the teachers retirement system, CalSTRS.
That’s sound advice.
Statewide pension ballot measure attacked by myths and halftruths: Guest commentary
By Daniel Borenstein
As San Jose Mayor Chuck Reed promotes his statewide pension initiative, unions have cranked up cries that their retirement benefits and future security will be gutted.
Not true. Anyone who cares about state and local government finances should take the time to understand what the measure would actually do. It’s much-needed reform enabling government leaders to control the ballooning costs of public employee retirement programs.
To be sure, even if Reed’s campaign collects the necessary signatures, and if voters approve the initiative,
it will only survive if the state Supreme Court reverses its previously misguided rulings.
As difficult as that might seem, it’s an effort worth pursuing.
While Gov. Jerry Brown and legislators last year developed new pension rules that made small incremental changes, Reed’s initiative would provide critical reform essential for financially stabilizing the system.
Let’s be clear:
The initiative would not affect current retirees. It would not affect pension benefits that current workers have already earned.
It would only allow changes to future pension accruals, making the rules similar to those for the private sector and most other states in the nation.
To understand what’s at stake, remember that pensions are just one form of compensation.
Each year that an employee stays on the job,
he earns a salary, benefits like health care insurance, and additional future pension income payable after retirement.
What’s at issue is the rate of pension accrual. For example, a police officer might be promised a pension equal to 3 percent of final salary for every year worked.
But what happens when the employer recognizes it cannot afford such a generous benefit?
A private-sector company would probably reduce the rate of future accruals.
It might tell the worker that he can keep the 3 percent credit for each year he has already worked,
but going forward he will only earn pension benefits at a rate of, say, 2 percent a year.
However in California,
thanks to the Supreme Court,
once a public employee starts working,
that accrual rate can never be reduced.
It can go up, but not down.
In our example, that 3 percent-a-year accrual rate is the minimum for the worker’s entire career.
Financially strapped government employers can reduce salaries, trim health care benefits,
impose furlough days and even lay off workers.
But they cannot touch future pension accruals, which are merely another form of compensation.
That is what Reed aims to fix.
Once again, notice that the initiative would only affect future accruals. Yet, it’s a critical change.
As the Little Hoover Commission,
a state bipartisan watchdog group, concluded,“state and local governments have made a promise to workers they can no longer afford.”
Pensions will strangle funding for needed public services unless officials reduce future accrual rates for current workers, the commission reported in 2011.
Since then, government pension costs have continued to rise.
But the state Supreme Court has stood in the way of reform, ruling more than two decades ago that future accruals are promises that government cannot impair without violating the contract clauses of the state and federal constitutions.
If voters pass Reed’s initiative, which would amend the state Constitution, the issue will almost certainly return to the state Supreme Court.
In 1991, the court overturned a part of a voter initiative that would have ended future pension accruals for state lawmakers.
A lot has changed since then. Pensions are draining public funds like never before.
The seven-member court has five new members. I
t’s time for them to revisit the issue.
But voters must act first.
Dan Walters: Pension problems persist for California cities
Public employee union propaganda notwithstanding, California has a serious public pension problem.
Or, more precisely, cities and some fire districts have a pension problem because they spend so much of their budgets on highly paid, high-pension police and firefighters.
Pension obligations are consuming ever-larger portions of those budgets, squeezing out money for other services.
Payments into the state’s public pension fund played central roles in the bankruptcy of three cities and the one that has emerged from bankruptcy,
Vallejo, is already back in distress.
Cities are in this pickle because of a perfect storm of shortsighted decisions.
Great posts above
Fixing California: Report ignores state’s vast pension liabilities
By U-T San Diego Editorial Board 5 P.M.NOV. 21, 2013
(Just Like Montebellos "Budget with a surplus"
Imagine a family in which both parents work and make $100,000 a year between them but have $300,000 in steadily growing credit-card debt. If the parents got raises and their income increased to $110,000 a year, would you say the family is suddenly in good shape financially? Of course not.
But that sort of happy talk is just what we’re hearing from state leaders after an upbeat report from the Legislative Analyst’s Office predicted a coming era of budget surpluses because of revenue from tax hikes and a surge in capital-gains tax receipts, thanks to Wall Street’s latest boom.
The 62-page report mentions the state’s massive unfunded liabilities for the California Public Employees’ Retirement System and the California State Teachers’ Retirement System only briefly. A more thoughtful assessment would have mentioned those liabilities on nearly every page.
As of September, CalPERS had about $260 billion in assets and about $340 billion in liabilities. Those numbers are based on CalPERS’ assumption that decades of investment returns will average 7.5 percent annual growth.
But a comprehensive 2011 study overseen by Joe Nation, a professor at the Stanford Institute for Economic Policy Research and a former Democratic state lawmaker, concluded assumptions of 5 percent to 6 percent are more historically appropriate. In September, Nation said a more realistic assessment of CalPERS’ current unfunded liability is $170 billion — not $80 billion.
Yes, CalPERS serves local governments as well as the state. But the state is by far its biggest client. The Legislative Analyst’s Office’s report simply doesn’t contemplate what state budgets would look like in coming years if they addressed and paid down the state’s share of CalPERS’ unfunded liability. Instead, it only predicts a slow growth in annual contributions to $2.8 billion by 2019-20 — meaning the total unfunded liability will continue to grow by billions each year.
CalSTRS is in even worse shape than CalPERS. The state teachers’ pension system reports assets of $172 billion and an unfunded liability of $70 billion. But it too uses the 7.5 percent projection for investment returns. Even with that questionable assumption, CalSTRS is on track to run out of funds in 2043. If Nation’s more prudent model were followed, CalSTRS’ unfunded liability would double, and it would run out of funds long before 2043.
Once again, the LAO report doesn’t contemplate what state budgets would look like in coming years if they addressed and paid down CalSTRS’ unfunded liability. Even if the optimistic 7.5 percent earnings estimate is used, it’s been estimated that CalSTRS needs $4.5 billion a year for 30 years to dig out of its financial hole. Yet the LAO only predicts a slow increase of state funding to $1.8 billion in 2019-2020.
And CalPERS and CalSTRS are not the only huge long-term funding challenges facing the state. Controller John Chiang says the state has a $63 billion liability in unfunded retiree health benefits, for example.
These immense shortfalls are real.
At some point, they must be paid. Any state agency that depicts state finances in a good light by downplaying these long-term obligations is being destructive, not constructive.
Yet that is just what the Legislative Analyst’s Office has done.
Special Series: Bankruptcy Didn’t Make the Sky Fall In Orange County
This is the first in a CalWatchDog.com
Special Series of 12 in-depth articles on municipal bankruptcy.
Overwhelmed by enormous unfunded liabilities for retired employees’ pensions and health care,
local governments throughout California are increasingly contemplating what once seemed unthinkable:
declaring Chapter 9 bankruptcy to hold off creditors,
to buy breathing time to reorganize and to attempt to reduce costs by any legal means necessary.
This fiscal crisis is outwardly downplayed or dismissed by the state’s public employee unions, who insist that claims of strained finances at all levels of California government are either exaggerated by alarmists unfamiliar with the ebb and flow of pension investment portfolios or the fabrications of anti-government ideologues.
But that these same unions know the crisis is real is manifest in their successful push to get the Legislature to pass Assembly Bill 506,...
But in an era in which San Jose Mayor Chuck Reed – a liberal Democrat – openly speculates about his city being forced to switch to a volunteer fire department, crushing financial pressures are certain to prompt many governments to consider Chapter 9.
No Serious Disruption- Orange County Bankruptcy
“There wasn’t any kind of serious disruption over the long term for the residents of the county,” Mark Baldassare, author of “When Government Fails: The Orange County Bankruptcy,” said in a recent interview.“It was shocking, it was surprising,
it was something that caused a lot of frustration, but for the average county resident,
it didn’t matter that much.”
the 200 agencies (including MONTEBELLO) that had invested with Citron were made nearly whole,
given checks or wire transfers that brought their recovery on their investments to from 94 percent to 97 percent.
In March 2011, at an American Enterprise Institute forum on municipal debt, Pat Shea, an attorney representing 175 of the cities, water, school and sewer districts with investments, reflected on the outcome:
“Five years afterwards everyone, at least on my side – within government, within the family of government –
every one of them would say this worked out as well as it possibly could for every member of government.”
Yet in reviewing Orange County’s history to determine what lessons it offers,
those lessons may not be quite the tidy package that the county’s rebound would suggest.
The circumstances of how the county lost its way are nearly without precedent in U.S. history, having relatively little in common with the retirement benefits crises now bedeviling so many local governments.
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