The California Public Employees’ Retirement System is trying to rewrite the rules for bankrupt cities, claiming that it should get paid before almost everyone else, including bondholders.
The biggest U.S. public pension fund would set a legal precedent should courts adopt Calpers’s position that, as an arm of the state, it is exempt from rules that apply to other creditors in the Chapter 9 bankruptcy cases of San Bernardino and Stockton. A Calpers victory would threaten public services in a city trying to reorganize in bankruptcy, or in an extreme case, cause a city to disincorporate, attorney James E. Spiotto said in an interview.
“Chapter 9 was never intended to cause the liquidation of a municipality or the reduction of services,” said Spiotto, who isn’t involved in the San Bernardino and Stockton cases. “What Calpers is doing is threatening the basic tenet of Chapter 9.”
Pension costs for retired public employees are straining local governments from California to Rhode Island. In Southern California, San Bernardino says it is so strapped for cash it must put off $13 million in payments to Calpers or risk public safety. About 400 miles (644 kilometers) north, creditors of Stockton are fighting Calpers in court as well, arguing that the pension fund shouldn’t be given preferential treatment and urging the city to take an aggressive stance in negotiations.
San Bernardino will battle Calpers in a federal court in Riverside, California, on Dec. 21 over two related legal issues: whether Calpers can sue the city to force it to make about $7 million in missed payments and whether the city should be kicked out of bankruptcy.
Calpers blames elected officials for San Bernardino’s financial problems, saying in an e-mail that they made “irresponsible and short-sighted” decisions. Cutting back on what the city owes employees would make it hard to recruit qualified workers, Calpers spokesman Robert Glazier said.
Blatant Lies By Calpers
Just listen to those pathetic lies by Glazier. California would be flooded with qualified people for every position if it could put contracts out for competitive bids outside of collective bargaining contracts.
Taxpayers have to pay through the nose because corrupt California politicians are in bed with corrupt administrators and corrupt union officials.
California, Illinois Completely Dysfunctional
California and Illinois are uniquely, and completely dysfunctional with the most union corruption and the worst funded public pension plans in the nation.
Bankruptcy is the only way to fix the problem, unless of course some corrupt judge protecting his own public pension rules in Calpers' favor.
Both house speaker John Boehner and president Obama have given ground in the "fiscal cliff" drama. The sides are still far apart but concessions now are steady. The fact there is ongoing movement makes a deal possible.
Will we get there? Can Boehner get enough in return on entitlement cutbacks? On that score the president has barely budged, but the stock market sure seems to think a deal will be reached.
House Speaker John Boehner on Tuesday floated a back-up plan to raise taxes on incomes of $1 million and above, even as Republicans and the White House were moving closer to a deal to avert the fiscal cliff.
Dubbed “Plan B” by the Ohio Republican, the proposal was met with immediate pushback from the White House and Senate Democratic Leader Harry Reid, who said it cannot pass both houses of Congress.
The speaker said he remains confident a deal can be done before the end of the year. But he dismissed Obama’s latest offer as unbalanced. Boehner said he wants $1 trillion in spending cuts for $1 trillion in revenue.
“That would be my version of a balanced approach,” he said.
The only difference between Plan A and Plan B that I can tell is the offer of tax hikes on those making over $1,000,000. Wasn't that hashed out over a week ago?
Taxes: Monday night, Obama dropped his long-held insistence that rates rise for incomes of $250,000 and above. The new target: allowing Bush-era rates to expire for incomes of more than $400,000. The speaker is willing to accept higher rates on $1 million incomes and above. Chances are that neither side is done moving toward the other. Could $500,000 be the sweet spot?
Spending: Obama has offered $1.2 trillion in spending cuts, including $400 billion in savings from entitlement programs. That’s a $50 billion increase in entitlement savings, but still far from the $1 trillion in entitlement cuts sought by Boehner. Debt ceiling: Some Republicans had wanted to use the threat of default to push the White House to make spending cuts. But last week, Boehner offered a one-year increase in the debt ceiling as part of a fiscal-cliff deal — as long as it is coupled with corresponding spending cuts. But Obama upped the ante on Monday night, calling for a two-year extension. (He’d originally wanted unlimited power to raise the ceiling.)
There is a huge gap between $400,000 and $1,000,000 on tax hikes.
There is a huge gap between $400 billion and a $trillion on entitlement cuts.
Boehner wants a debt-ceiling deal to include spending cuts for every dollar upped. Will Obama agree to that if Boehner agrees to a two-year extension?
The gaps that still remain are huge. Nonetheless, the stock market acts as if a deal is at hand. Should there be a deal, a sell-the-news event seems likely.
Assuming there is a deal (and I am still not entirely convinced there will be one), the only market-favorable fundamental is the Fed, and at some point that will cease to work.