Calif. Employee Pensions Are Not Sacred Cows, Judge Rules. But Don’t Call the Slaughterhouse Just Yet.
Scott Shackford|Oct. 2, 2014 10:50 am
Public sector unions in California have used their enormous clout to protect their plum pensions, making it nearly impossible for municipal governments to scale back benefits in any way shape or form (even for employees they hadn’t even hired yet). Even as California cities file for bankruptcy, unable to pay off various creditors, the California Public Employees’ Retirement System (CalPERS) has argued that debts owed to them are special and off the table. They cannot be reduced or severed, even in the case of bankruptcy.
And then yesterday U.S. Bankruptcy Judge Christopher Klein’s told CalPERS it was wrong. In the case of a bankrupt city, pensions can be cut just like any other debt. That’s what the bankruptcy process is for. As The Sacramento Bee explains, the ruling came because a creditor in the bankruptcy of the city of Stockton, Franklin Templeton Investments, is upset that it’s only going to get a ninth of what it’s due and wants a better deal, and that might come from money going to pensions.
https://reason.com/blog/2014/10/02/calif-employee-pensions-are-not-sacred-c
Given that 85% of public pensions could fail in 30 years (source: https://www.cnbc.com/id/101575849#) this should be a wake up call. Public pensions in this country have just $3 trillion in assets to cover liabilities that will balloon to $10 trillion in future decades. Time to scale back benefits, reduce growth in wages and entitlements, and have public sector employees contribute more of their wages to their pension savings and health care costs.
SMORE #1. Same broke record.
Precedent to give municipalities a free pass to to cut pension liabilities is not a “broke record”. This is taxpayer protection from the courts.