San Bernardino bankruptcy shows pensions crowding out services

San Bernardino bankruptcy shows pensions crowding out services

 

San Bernardino city seaL BANKRUPTIn his novel “The Sun Also Rises,” California novelist Ernest Hemingway wrote, “How do you go bankrupt? Two ways: Gradually, then suddenly.”

Case in point: the City of San Bernardino, which filed for bankruptcy in 2012. The pace of municipal bankruptcy there has been slow because in 2013 the city resumed making its pension fund payments to the California Public Employees Retirement System.

The city’s recently elected mayor, Carey Davis, has been telling CalPERS to stand in line with other creditors and be prepared to take a loss on its unpaid past pension payments.  From August 2012 to July 2013, the city failed to make $17 million in payments to CalPERS, a sum the city now wants CalPERS to absorb.

The wrangling is part of the ongoing court case, where some progress apparently is being made even though CalPERS still is contesting an earlier court ruling that the city is eligible to file for bankruptcy. The Riverside Press-Enterprise reported:

“Nearly two years after San Bernardino declared bankruptcy, the city had good news for U.S. Bankruptcy Court Judge Meredith Jury at a recent hearing.

“ ‘There has been significant and substantial progress as a result of extended good-faith negotiations with CalPERS,’ said lawyer Paul Glassman, who represents the city in the Chapter 9 municipal bankruptcy case.

“The announcement was stunning, given that the California Public Employees Retirement System fought San Bernardino’s bankruptcy filing from the start and is still fighting Jury’s ruling that the city is eligible for bankruptcy protection.”

CalPERS realizes that, if San Bernardino succeeds in using bankruptcy to write down unpaid debts, more cities in California will do so.  The sudden domino effect of distressed California cities lining up for bankruptcy would have political repercussions beyond just CalPERS.  San Bernardino has $400 million in debts owed subject to bankruptcy, many of them to other public agencies.

Settlement

The San Bernardino City Professional Firefighters union’s lawyer, David Goodrich, indicated it might be willing to consider a settlement with the city through the court-appointed mediator if the outcome is kept confidential from its union members.

It isn’t just the pensions. Cash-strapped cities like San Bernardino have been forced into bankruptcy partly because they must now pick up the tab for the state’s lower spending on local government services.   The situation will get worse when the state can no longer ignore $6 billion in annual unfunded health care costs for government retirees and teachers’ pensions.

The City of San Bernardino’s bankruptcy isn’t all due to its own financial mismanagement.  It is due to the state’s pension systems crowding out local government services.

Gov. Jerry Brown’s January budget proposal for fiscal year 2014-15, which begins on July 1, conceded that $4.5 billion a year more will be needed to keep solvent the California State Teachers’ Retirement System. But the budget did not include any solutions to the CalSTRS deficit, postponing them to the future. The budget did include some whittling away at what he calls the state’s Wall of Debt, estimated to total more than $300 billion.

The governor’s May Revision to his budget will released early next month. But it likely will not include any solutions to that problem because the governor is in re-election mode and wants to get past November to undertake any new big projects.

In the meantime, the sun is just beginning to rise in San Bernardino and elsewhere as to the consequences of California’s lucrative guaranteed government pensions.

33 comments

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  1. Ted O'Steele, CEO
    Ted O'Steele, CEO 23 April, 2014, 10:23

    LOL– ALL of the so called bk threat is due to budget mismanagement not pensions— cart’s should ride after horses. Zzzzzzzzzzzzzzz

    Reply this comment
    • Rex the Wonder Dog!
      Rex the Wonder Dog! 24 April, 2014, 07:52

      ALL of the so called bk threat is due to budget mismanagement not pensions—

      err…right…30% of the budget going to union pension costs and still underfunded, but hey “it’s not the pensions, it is the management”…LOL! I am positive if they were in SS it would still be bad management.

      🙂

      Reply this comment
      • S & P 500
        S & P 500 24 April, 2014, 14:55

        I wonder if CalSTRS reps were able to keep a straight face when they asked the legislature for an extra $240 billion for their union pensions. It’s like Mini-Me suing the world for a billion dollars in the Austin Powers movie and being told that there isn’t that much money in the whole world.

        Reply this comment
  2. Ulysses Uhaul
    Ulysses Uhaul 23 April, 2014, 19:49

    Rizzo was a bad boy manager. Most government pensions are modest….they are hard earned.

    It is hard work keeping Californians civilized….

    Poodle how do you truck stop patrons in line…..you must have some unique social and organizational skills….bravo!

    Reply this comment
  3. SeeSaw
    SeeSaw 24 April, 2014, 08:36

    RWD, you need to stop referring to every issue as “union” this and “union” that. Most pension costs for any entity are portions of the, salaries and benefits budgeted for its, respective, employees–the bulk of that, in any entity, is going to be allocated to the salary budgets of non-union, high-level, highest-paid members. Unions are simply negotiation representatives for the rank and file.

    The closing of military bases in the Inland Empire, the disappearance of the former factory jobs, the world-wide financial crash of 2008, and the Governor’s plan for the realignment of jail inmates, coupled with his bill to abolish Redevelopment all overshadow the cost of pensions when it comes to the cause of this bankruptcy. Its times for the authors of these incendiary pieces and their foils like RWD to knock it off, when it comes to blaming pension-costs for everything, and get serious about what it is going to take to bring jobs back to CA. Earn your keep instead of looking for fall guys to blame.

    Reply this comment
    • Smith
      Smith 24 April, 2014, 15:28

      Right. It’s not public safety retiring at 90% of their salary at 50 years old. About a $3 million haul if they live to be 80.

      Reply this comment
      • SeeSaw
        SeeSaw 25 April, 2014, 08:58

        How many safety retirees do you know who started their full-time careers at the age of 20?

        Reply this comment
        • Rex the Wonder Dog!
          Rex the Wonder Dog! 25 April, 2014, 09:44

          A few…doesn’t matter how many started anyway at age 20, or 25, or 35 or 45, they can ALL retire at age 50, every single one.

          Reply this comment
          • SeeSaw
            SeeSaw 25 April, 2014, 14:29

            So, you show your true colors again–it doesn’t matter when they started or how much they got–you’re against that, because–by darn–you didn’t get in and nobody else should get in either–you are going to stomp and hold your breath until you get some attention and stop this! You belong in Russia!

          • Rex the Wonder Dog!
            Rex the Wonder Dog! 25 April, 2014, 15:26

            You trough feeding baby..how does HUBBY DEAL WITH YOU!!!!!!!!!!!

          • S Moderation Douglas
            S Moderation Douglas 25 April, 2014, 15:27

            Actually, most state miscellaneous employees can retire at 50 also, if they have at least five years service.

            In the 2% @ 55 formula, they would get 1.1% per year.

            I believe that is the reason CalPERS lists “average” retirement age as 60. By far, most of the people I have known retired at closer to 65. There are a number of people who worked five or more public sector years earlier in their careers, then moved to private. They can be working a private sector job, and begin drawing a state pension at 50, which brings down the average age.

            And it DOES matter how many started at 20. Any public safety worker CAN retire at 50, but very few can retire at 50 with 90%. (About one percent, as I recall.)

          • Ted O'Steele, CEO
            Ted O'Steele, CEO 26 April, 2014, 10:19

            Poor rex the Poodle– name calling is all she has….

    • Tough Love
      Tough Love 24 April, 2014, 17:19

      SeeSaw said:

      Most pension costs for any entity are portions of the, salaries and benefits budgeted for its, respective, employees–the bulk of that, in any entity, is going to be allocated to the salary budgets of non-union, high-level, highest-paid members.

      This isn’t acceptable grammar … even for a 8-th grader.

      Best and brightest my foot.

      Oh how Taxpayers have been hoodwinked into premium wages, pensions, and benefits.

      Reply this comment
    • Rex the Wonder Dog!
      Rex the Wonder Dog! 25 April, 2014, 07:31

      seesaw, you trough feeding monkey, I will refer to unions anyway I want to.

      Now go to the mall, sit down, see a movie and pipe down. Or else I am calling your poor abused hubby to get you off the computer 😉

      Reply this comment
  4. billyBS
    billyBS 24 April, 2014, 12:38

    ” Knock it off” Last time I looked it is still a free oountry.

    Reply this comment
  5. Gonzo
    Gonzo 24 April, 2014, 14:04

    This is couple of quotes from a SD UT article in 2009

    [Californians questioning why their state budget is in perpetual red ink need look no further than the California Public Employees’ Retirement System’s (CalPERS) implicit forecast in 1999 that the Dow Jones Industrial Average would reach 25,000 by 2009, 595,000 by 2049 and 28 million by 2099 and that its investment earnings would rise alongside]

    [CalPERS is still acting like it’s 1999, recently telling a journalist (Sacramento Bee, Nov. 20) that now it implicitly forecasts the Dow to double in 10 years and hit 7 million by 2099. To put that in perspective, now CalPERS is implicitly forecasting that the Dow will grow nearly four times more than it did in the entire 20th century and do so in nine-tenths of the time.

    Couple that with the passage of SB400in 1999 which granted 3% per year of service up to 30yrs ie..90% of your last year of service (which led to all of the pension spiking) oh yeah and it granted increases to those already retired! you can’t make this stuff up.

    From Calpensions: [actuaries said the annual state payment to CalPERS, $159 million in 1999, could soar to $3.954 billion in fiscal 2010-11 — a long-range forecast that scored a near bull’s-eye on the $3.888 billion state payment for the fiscal year that began this month.]

    It’s time to consider abolishing all govt pensions and rolling the cash into Social Security and base pension payments on SS rates.

    Reply this comment
  6. S & P 500
    S & P 500 24 April, 2014, 14:50

    That news about how Postal Workers are going to picket in front of Staples to protest the sale of postal items in a non-union retail store pretty much shows where unions stand. It’s like unionized teachers protesting lower cost charter schools.

    Reply this comment
  7. Ulysses Uhaul
    Ulysses Uhaul 24 April, 2014, 18:44

    Staples cutting edge efforts to provide popular small business productivity enhancers is the American Way!

    Many retail services provided by the post office must be streamlined or discontinued, unfortunately, paying someone $25.00 per hour and taking in in far less revenue per hour cannot go on forever……..service workers cannot increase productivity much, so either raise counter prices or stop retail services…..simple…..the buggy whip era is over.

    Reply this comment
  8. Shelby
    Shelby 24 April, 2014, 22:43

    Let the voters decide.

    Reply this comment
  9. S Moderation Douglas
    S Moderation Douglas 25 April, 2014, 21:31

    What’s all this “pension” talk? We did that last week. It’s done. Stick a fork in it.

    After “cart’s should ride after horses”, everything else is redundant.

    Reply this comment
  10. Queeg
    Queeg 26 April, 2014, 08:06

    We are sick of pension articles!

    1000 forks already…….give it a rest!

    No mas-

    Reply this comment
  11. SeeSaw
    SeeSaw 26 April, 2014, 15:39

    Amen!! Its time we started planning and supporting new jobs in CA–so that more people may have pensions in the future! Make sure all the State’s roads and bridges are secure; retrofit unsafe buildings–our state is the greatest one–we need to live up to that!

    Reply this comment
    • S & P 500
      S & P 500 28 April, 2014, 14:15

      Calif. is the greatest certainly in terms of unfunded pension liabilities–$ trillion to be exact. It also has the greatest number of illegals and has the most anti-business climate of any state. Public workers are fine with potholes and unsafe bridges because the money went to their pensions instead of infrastructure.

      Reply this comment
  12. Cindy
    Cindy 26 April, 2014, 22:42

    How about using our energy resources and creating jobs instead of stifling the economy with wind and solar mandates that drive up the cost of electricity? How about legalizing marijuana and empty the jails of non violent offenders and cut our police and prison guard numbers to reflect about 25% of our prisoners, remember most probation violations are pot related because every other drug or alcohol is out of the system in two days. We can make money off the legal pot and save money of the mass incarceration side of the equation. When people are working and making money and taxes are rolling the pension issues gets smaller. We do need to rethink the 50 year retirement age, why can’t police be trained to work in other areas at 50?

    Reply this comment
  13. Leotis Ahmad Jones
    Leotis Ahmad Jones 27 April, 2014, 08:15

    We need to talk about pensions today. AHaul, you need to get trained like in prison. I am the caboose: wonder what kind of sounds you make?

    Reply this comment
  14. Donkey
    Donkey 27 April, 2014, 08:53

    RAGWUS feeders, dumb as rocks, but very stimulating liars. 🙂

    Reply this comment
    • Ted O'Steele, CEO
      Ted O'Steele, CEO 27 April, 2014, 16:06

      Poor Duncey girl– you sound PARTICULARLY frustrated today!

      I hear the DMV is hiring???

      Reply this comment
      • S Moderation Douglas
        S Moderation Douglas 28 April, 2014, 21:14

        If only!! DMV is where I should have gone!

        ” Let’s take a miscellaneous employee, a common classification that covers everyone from DMV office staff to local school custodians. Say the employee retires at age 55 after 20 years of service with a final salary of $92,200.”
        …………….
        Jon Ortiz, SacBee State worker blog Apr 9, 2014

        That glass is MORE than half full.

        Reply this comment
  15. Margaret
    Margaret 28 April, 2014, 20:11

    That’s why we need to think about voting for Tim Donnelly. Look up his Facebook. He is fed up with the damage Brown has done to this state. He’s our guy!

    Reply this comment

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