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- Aug 27, 2011
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Pension Showdown Brewing in California | Via Meadia
The Wall Street Journal reports that San Bernardino, which filed for bankruptcy two months ago, has missed a $5.3 million payment to Calpers, the state pension fund, and is projected to miss further payments in the future. This is the first time a California city has refused to make its payments. Amid the subsequent confusion, both sides are digging in their heels:
I dont look at Calpers as being any different than any other creditor, said Jim Morris, chief of staff to San Bernardino Mayor Patrick Morris.
Calpers argues that it cannot forgive or reduce a citys pension contributions. The city of 213,000 people is effectively violating state law by stopping its pension payments, a Calpers spokesman said in an email.
Calpers, for its part, is looking to avoid a showdown with one of the states largest cities, but San Bernardinos finances are in such bad shape that it may be unavoidable:
Pension officials said they would attempt to help San Bernardino get back on track, as the fund has done with other cities that fall behind. One option is to increase the amortization period of the obligations, a step that stretches out the payment period for cities.
But San Bernardinos options may be limited. The city already amortizes its public-safety pension obligations over 30 years, the maximum allowed. Ms. Norris said it was rare for cities to become delinquent on their pension bills.
The stakes here are high for both parties. San Bernardino is desperate to save money anywhere it can, and pension contributions are among its largest costs. Calpers, meanwhile, wants to avoid setting a dangerous precedent that cities in trouble can refuse payments. There are plenty of distressed cities throughout the state, and they will be watching this showdown closely. If San Bernardino can get off without making payments, other cities will expect the same treatment, leaving Calpers with a serious crisis on its hands.
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This is political.
This is what is going to start happening in many cities as they simply can't meet theri obligations.
I don't gloat.....but there is simply no way you can run things the way they have and expect the books to stay balanced.
The Wall Street Journal reports that San Bernardino, which filed for bankruptcy two months ago, has missed a $5.3 million payment to Calpers, the state pension fund, and is projected to miss further payments in the future. This is the first time a California city has refused to make its payments. Amid the subsequent confusion, both sides are digging in their heels:
I dont look at Calpers as being any different than any other creditor, said Jim Morris, chief of staff to San Bernardino Mayor Patrick Morris.
Calpers argues that it cannot forgive or reduce a citys pension contributions. The city of 213,000 people is effectively violating state law by stopping its pension payments, a Calpers spokesman said in an email.
Calpers, for its part, is looking to avoid a showdown with one of the states largest cities, but San Bernardinos finances are in such bad shape that it may be unavoidable:
Pension officials said they would attempt to help San Bernardino get back on track, as the fund has done with other cities that fall behind. One option is to increase the amortization period of the obligations, a step that stretches out the payment period for cities.
But San Bernardinos options may be limited. The city already amortizes its public-safety pension obligations over 30 years, the maximum allowed. Ms. Norris said it was rare for cities to become delinquent on their pension bills.
The stakes here are high for both parties. San Bernardino is desperate to save money anywhere it can, and pension contributions are among its largest costs. Calpers, meanwhile, wants to avoid setting a dangerous precedent that cities in trouble can refuse payments. There are plenty of distressed cities throughout the state, and they will be watching this showdown closely. If San Bernardino can get off without making payments, other cities will expect the same treatment, leaving Calpers with a serious crisis on its hands.
********************
This is political.
This is what is going to start happening in many cities as they simply can't meet theri obligations.
I don't gloat.....but there is simply no way you can run things the way they have and expect the books to stay balanced.
