CalPERS is worried

CalPERS is worried

Last week, U.S. Bankruptcy Judge Steven Rhodes ruled that Detroit city workers’ pensions could be part of the Chapter 9 proceedings. So the pensions could be cut substantially. That obviously affects the federal bankruptcy trial for San Bernardino and, potentially, Desert Hot Springs and other California cities.

Here’s the response from the California Public Employees’ Retirement System:

CalPERS Issues Statement on Detroit Bankruptcy Ruling
December 3, 2013

In response to Judge Steven Rhodes ruling today that Detroit can impair current employee and retiree pensions as it moves through the bankruptcy process, the California Public Employees’ Retirement System (CalPERS) issued the following statement:

“The Detroit court failed to recognize the difference between a two party contract and the unique nature of a state public employee retirement system, which creates a three-way relationship among a public agency, its employees and the retirement system. In California, our members’ vested rights to their pensions are protected by the California constitution, statutes and case law.

“Unlike Detroit, CalPERS is not a city pension plan. CalPERS is an arm of the state and was formed to carry out the state’s policy regarding public employees. The Bankruptcy Code is clear that a federal bankruptcy court may not interfere in the relationship between a state and its municipalities. The ruling in Detroit is not applicable to state public employee pension systems like CalPERS.

“The ruling is short-sighted and does not take into account the promises made in exchange for the financial and physical investments that public employees and retirees make in our communities.

“CalPERS will continue to protect and champion the public employees and retirees who serve California every day.”


Two things need to be noted. First, notice which party isn’t even mentioned by CalPERS: you, the California taxpayer. CalPERS will not “continue to protect and champion” you. You’re stuck paying the bill even if that means your city effectively dissolves — with all police, fire, parks, roads and other functions canceled — and the city only existing to pay the pensions of long-retired workers.

Second, it’s touching how CalPERS has faith that the California Constitution presides; that the courts will interpret it according to the wishes of CalPERS; and that the federal government won’t say federal courts, federal laws, and the federal Constitution don’t trump California legalisms.

In fact, constitutions and laws are playthings for courts, legislators and chief executives. Look at the legal gyrations involving same-sex marriage in California in just the past 15 years.

Bankruptcy conventionJudges of all kinds, including bankruptcy judges, meet all the time for conferences. It’s a nice junket, paid for by taxpayers, and they discuss off-agenda matters over martinis and golf. The National Conference of Bankruptcy Judges threw a big bash in Atlanta just over a month ago. Nearby is a screen shot of the Oct. 31 panel on municipal bankruptcy.

Description: “This panel will discuss competition for a municipality’s funds between pension obligations and Capital Market Creditors.”

Notice one of the panelists: “Kevyn Orr, Emergency Manager, City of Detroit, MI.”

The judges obviously are aware of the municipal pension problems plaguing many cities, and likely won’t want their dockets stuffed with hundreds of cases. And they likely won’t want a passel of municipal bankruptcies bleeding red ink into state budgets. (Technically, state’s can’t go bankrupt; but they can become insolvent.)

So they’re letting CalPERS and the other pension funds know that the funds better start getting a little more reasonable, or they’ll all end up like Detroit.

Oh, and this also was from the brochure for the bankruptcy judge convention:

Bankruptcy convention 2



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  1. LetitCollapse
    LetitCollapse 8 December, 2013, 11:19

    Judge Rhodes is to be commended for his courage. My guess is that he gets overruled or the state or federal government comes in for the stick save. Effectively, expect a bailout, as corrupted as the Detroit pension system has been exposed to be.

    In California, if push comes to shove, they’ll just raise your taxes or create a few more ‘fees’ to save the pensions, as long as YOU allow them to get away with it.

    Americans are incredibly apathetic when it comes to civic affairs that impact our lives.

    Did you know that in Iceland after the 2008 economic meltdown that the Icelandic citizens organized what was called the “Pots and Pans Revolution”? A large percentage of them took to the streets and started pounding on pots and pans demanding change and were persistent. The meltdown destroyed a good part of their economy. As a result, a huge number of their Congress resigned, many bankers were thrown in jail and the citizens themselves rewrote their constitution to include many safeguards that would prevent another similar meltdown from ever occurring. Naturally little of this was reported by the US media. You should be able to figure out why.

    If CalPers gets into trouble they’ll just run to the California politicians for a bailout. And they’ll get it unless the people resist. Look what Stockton did recently. The citizens voted in higher tax rates to bail out the government pensioniers. We are a far cry from being Icelanders.

    Unless John and Jane Doe demand a halt to the corruption, nothing changes. That’s the bottom line here.

    Reply this comment
    • S Moderation Douglas
      S Moderation Douglas 8 December, 2013, 13:48

      According to Bloomberg:

      “Stockton residents voted 53 percent in favor of a ballot measure to raise the city’s sales tax to 9 percent to generate about $28 million annually, which would go toward exiting bankruptcy, restoring city services and paying for law enforcement.”

      Or, alternatively:

      “Look what Stockton did recently. The citizens voted in higher tax rates to bail out the government pensioniers.”

      I doubt the voters in Stockton care that much about pensions specifically. If anything, they may be more concerned about the mass exodus of Stockton police officers to greener pastures. 

      I suppose you could blame ALL of Stockton and Desert Hot Springs budget problems on “government pensioniers”, or you could instead consider all the real budget problems.

      Reply this comment
  2. LetitCollapse
    LetitCollapse 8 December, 2013, 15:38

    Let the Stockton cops go to ‘greener pastures’ if they can find one. But they would have to find another government job because it’s hard to lead a decent lifestyle with hourly wages of $12/hr to 16/hr that the the private sector would pay them. That’s about all they would be worth.

    The real solution to the municipal bankrupcy problems is to pay government workers only what they are truly worth – and use the private sector as the gold standard. A clerk, secretary, cop (security), teacher, etc.. in government shouldn’t make a dime more than their counterparts in the private sector when it comes to wages, benefits and retirements.

    If I managed Stockton I would applaud a cop exodus so that I could start over again and rehire cops who would make half of what their predecessors made. And I would not lose any quality whatsoever in the process. Not in this job market.

    Extorting the public to pay cops and firefighters like they’re medical doctors is at the root of the bankrupcy problems.

    And for the citizens of Stockton to bail out the very people who are responsible for their financial demise only goes to show how dumbed down that population of people must be.

    Reply this comment
  3. SeeSaw
    SeeSaw 8 December, 2013, 16:08

    Sixty-four cents of every CalPERS pension-dollar comes from the investment earnings. The other 37 cents comes from the employer and the employee–money that is available from the salaries that are earned by providing services to the public. So stop with the ridiculous claims that you alone are funding the pensions! No, CalPERS is not worried. All it has to do is the job that it is mandated to do by the State of CA.

    Reply this comment
    • Rex the Wonderdog!
      Rex the Wonderdog! 9 December, 2013, 13:32

      Sixty-four cents of every CalPERS pension-dollar comes from the investment earnings.
      Baloney. That whopper belongs right up there with CalTURDS claim that SB400 would pay for itself through the stock market.

      Reply this comment
  4. Ulysses Uhaul
    Ulysses Uhaul 8 December, 2013, 16:49

    Everyone is worried…..we are running out of Doomers to move out of California… was a good run, but we need some really gloomy California prospects articles to help salvage our winter moving season.

    Try Obamacare taxes on the idle rich or the huge influx of temporary aliens stealing jobs or the leisure class getting free stuff or something…….

    Reply this comment
  5. SeeSaw
    SeeSaw 8 December, 2013, 20:57

    Correction: 36 cents comes from the employer and the employee.

    Reply this comment
  6. Ted Steele, CEO
    Ted Steele, CEO 9 December, 2013, 08:21

    Well said Moderation, SeeSaw and Mr. U,

    John– The golf course seminar? Really? Every profession has these networking morale things….so what?

    Ask yourself the REAL question that you and your ilk NEVER has the courage to ask… “What about the Roswell Aliens ™ and the abduction of federal BK judges”?

    You know I’m right John.

    Reply this comment
  7. SkippingDog
    SkippingDog 9 December, 2013, 13:11

    I’m amused by the reporting about the Detroit bankruptcy, and particularly with what seems to pass for “analysis” on the judge’s statements about including pension obligations in the general creditor class.

    If you actually read Judge Rhodes’ ruling, you’ll quickly find that he hasn’t ruled in favor of any party, and is in fact merely using his powers to force all the parties to the table to construct an equitable plan of adjustment.

    If you refer to page 80 of the decision, you’ll find the following statement:

    “Nevertheless, the Court is compelled to comment. No one should interpret this holding that pension rights are subject to impairment in this bankruptcy case to mean that the Court will necessarily confirm any plan of adjustment that impairs pensions. The Court emphasizes that it will not lightly or casually exercise the power under federal bankruptcy law to impair pensions.”

    and on page 143:

    “The Court reminds all interested parties that this eligibility determination is merely a preliminary matter in this bankruptcy case. The City’s ultimate objective is confirmation of a plan of adjustment. It has stated on the record its intent to achieve that objective with all deliberate speed and to file its plan shortly. Accordingly, the Court strongly encourages the parties to begin to negotiate, or if they have already begun, to continue to negotiate, with a view toward a consensual plan.”

    The Court is clearly using its authority to force all the parties to the table and into an acceptable plan of adjustment. But the Court itself has already acknowledged the special nature of pension obligations an announced its intent to closely oversee any attempts at their impairment.

    Reply this comment
    • Tough Love
      Tough Love 9 December, 2013, 15:02

      SkippingDog, The words “special nature of pension obligations “are YOUR words, not the Judge’s words.

      Keep dreaming Skippy …. when the “S” hits the fan in CA, the FIRST thing they should take away is the retroactively increased portion of YOUR pension.

      Reply this comment
      • SkippingDog
        SkippingDog 9 December, 2013, 22:27

        Apparently you were too busy to actually listen to the judge when he discussed his decision from the bench. He was very clear about his intention to treat any efforts to impair pension obligations differently than other creditor contract impairments in the eventual plan of adjustment.

        Reply this comment
  8. Rex the Wonderdog!
    Rex the Wonderdog! 9 December, 2013, 13:33

    Jude Rhoades has clearly said pensions are getting a haircut. Get out your reading glasses.


    Reply this comment
  9. Rex the Wonderdog!
    Rex the Wonderdog! 9 December, 2013, 13:34

    What is going to happen is the higher the gov pensions, the BIGGER the cut, w/no cuts below a set floor, probably $15K or so IMO.

    The higher the pension the bigger the cut. Just like the PBGC.

    Reply this comment
  10. SkippingDog
    SkippingDog 9 December, 2013, 14:43

    Only time will tell about the Detroit outcome. It’s not likely to produce the kinds of pension cuts some people seem to hope for, nor is it likely to leave the pensioners of Detroit completely untouched. A plan of adjustment that is ultimately both accepted and disliked by everyone involved is the most likely outcome.

    Reply this comment
    • S Moderation Douglas
      S Moderation Douglas 9 December, 2013, 18:37

      As I recall, discount rates play a big part.

      Detroit estimates about $800,000 unfunded using their 7 to 8 percent rate.

      Orr estimates $3+ BILLION using “conservative rates”. He wants to take the cuts from the higher estimate.

      If Detroit actual pension investment returns just split the difference, they may not need to make ANY cuts.

      When I first read Orr talking about this, he was discussing MAYBE limiting COLAS for retirees and moving new employees to a DC plan.

      Will this effect Stockton or San Bernadino? Maybe legally, but pragmatically, they are limited in any changes they make if they still want to attract and retain a qualified police force.

      Reply this comment
      • Tough Love
        Tough Love 9 December, 2013, 23:25

        Quoting…”Will this effect Stockton or San Bernadino? Maybe legally, but pragmatically, they are limited in any changes they make if they still want to attract and retain a qualified police force.”

        Hogwash, the difficulty in finding “qualified” candidates (among the 100’s that apply for each position) is intentionally CAUSED BY the current police rejecting qualified candidates to manufacture a perceived shortage … all to keep compensation excessively high.

        Reply this comment
  11. SkippingDog
    SkippingDog 9 December, 2013, 14:45

    BTW, Rex, how much do you owe Freedom Communications now?

    Reply this comment
  12. Rex the Wonderdog!
    Rex the Wonderdog! 9 December, 2013, 15:16

    $0, still in the appeals process~!!! How much did you pay out in legal fees Skippy 🙂 Oh wait, you are on a “pre-paid” plan…Hahahhahahahaha…guess that prepaid paid didn’t work out so well for ya!

    Reply this comment
    • SkippingDog
      SkippingDog 9 December, 2013, 22:21

      Worked out great, Rex. So far my total expenses for your goofiness amounts to about $30, which I spent on flowers for my lawyer after she thumped you in court.

      Reply this comment
    • SkippingDog
      SkippingDog 9 December, 2013, 22:31

      Having a final judgement filed that assesses you all of the court costs and attorney fees for your nonsense will be an excellent day. Between Freedom Communications and me, you’re not going to ever be able to inherit anything from dear old mom.

      You’re already well above $100k in costs and expenses, and probably closer to $200k. How are you ever going to pay it?

      Reply this comment
  13. Billybs
    Billybs 9 December, 2013, 17:08

    Still think that euthanasia for all gov t pension holders after 15 years of nursing off the gov t is fair and equitable to all, especially family members of the surly retirees.

    Reply this comment
    • Tough Love
      Tough Love 9 December, 2013, 17:38

      According to their Unions, as justification for their EXTRAORDINARILY generous pensions, safety workers only live for 5-10 years after retiring.

      Lying should have a price … a pension cut-off after 10 years would be an interesting payback.

      Skippy, how long are you retired?

      Reply this comment
  14. Justin McCarthy
    Justin McCarthy 9 December, 2013, 17:11

    Desert Hot Springs has never been financially viable. Nothing new there. It should be an un-incorporated part of the County of Riverside. Most commentators fail to acknowledge the fact that public employees are shouldering more and more of their own retirement costs as opposed to the taxpayers. The State of California effectively picked up another $5 billion per year in revenue when it ended redevelopment agencies. This revenue will backfill school districts and their pensions. Will there be high profile bankruptcies? Yes.

    If the OC Register wants to opine on public pensions it should look into the funding variances between the State Legislator’s Retirement Fund and that of the rank and file state employees. That might be an interesting analysis.

    Reply this comment
  15. SeeSaw
    SeeSaw 9 December, 2013, 20:58

    Chapter 9 Bankruptcy rules say that the entity that is going bankrupt decides its own plan of adjustment, subject to approval of the judge. The judge cannot tell the Chapter 9 appellant what and how much to cut, and who to cut. Its up to the bankrupt entity.

    RWD and TL, you need to wipe off your glasses–the judge in Detroit has not received a case involving any city in CA. You will both be in your graves before you ever see any public sector pension cut in CA, if such pension was earned legally, according to the statutes enacted by the State of CA. Touche’!

    Reply this comment
    • Tough Love
      Tough Love 9 December, 2013, 23:36

      I’d give it a 50-50 chance that San Bernadino is relived of a portion of it’s IOU to CalPERS.

      And if they are, I guess it will be up to CalPERS to decide if it will suck-it-up or reduce the workers’ pensions. But under no circumstances should forgiven amounts for San Bernadino be passed on to other cities to make up.

      Reply this comment
  16. NTHEOC
    NTHEOC 9 December, 2013, 22:16

    You anti pension soldiers are funny! The truth is California has made significant changes to its pensions amounting to billions of dollars. Public employee unions in more than 300 municipalities throughout the state sat down at the bargaining table and made concessions. Governor Brown signed a pension reform plan into law that represents a reduction of as much of $100 billion to public employees’ benefits. Detroit did none of this and is only now being forced by a judge to start, we are way ahead of the game here in California! And stop trying to compare the CITY of Detroit with the STATE of California or any large city in our state! There is no comparison as Detroit is a single-industry city relying almost entirely on the automobile industry. Good luck little anti pension soldiers in your continued failed quest……….

    Reply this comment
  17. Tough Love
    Tough Love 9 December, 2013, 23:39

    NTHEOC, All BS because 95% of the changes only apply to NEW workers.

    Reply this comment
    • Ted Steele, CEO
      Ted Steele, CEO 12 December, 2013, 10:55

      TL– Money saved is money saved and it saves billions– sorry you can’t accept that because it hurts your rhetoric.

      Reply this comment
  18. bkybob73
    bkybob73 12 December, 2013, 10:22

    Just for the record, The National Conference of Bankruptcy Judges annual meeting is entirely privately funded by fees for attending and involves no government funding whatsoever, including for judges’ transportation and expenses.

    Reply this comment
  19. Former City Worker
    Former City Worker 24 June, 2014, 21:47

    I have around 50k in Calpers and I am unsure whether to leave it or transfer. One thing I do know is that when Calpers abruptly halted the home loan program that was a definite sign that something was wrong. It was a great program for it’s members and they just stopped it. I personally think City workers ARE overpaid (being a former one myself) However Police and Fire have the city council members and Mayor’s at their mercy because of the potential public outcry they can create. Police & Fire are a problem but not the entire one. Trade departments like water & sewer departments have a place because they generate money while landscape, streets & parks DO NOT generate, rather TAKE money to operate.

    Reply this comment

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