Once again, California is leading the way. California has long been the place where things happen first and then spread east. It looks like it’s happening again the difference this time, is that it’s a good thing.
We guess California doesn’t really deserve all the credit, since it wasn’t really California that did this, it was the Federal Bankruptcy Court in California.
What we are talking about is public employee pension funds. California public employee pension system, known as CalPERS, is the largest pension fund in the nation depending on the assumptions you applied to their return on investment, CalPERS is somewhere between $200 billion and $700 billion underfunded. The Progressive California Legislature, and their senile Governor, still known as Moonbeam, are funding the retirement system with fairy dust.
Some time ago Democrats passed a state law that guaranteed public employee pensions, and made them immune to bankruptcy.
Stockton California file for bankruptcy a couple of years ago. CalPERS immediately went for the throat. They bullied Stockton into an agreement that their employees pensions would not be on the table. The bankruptcy judge, Christopher M. Klein, accepted the agreement and then blew CalPERS out of the water.
He ruled that Stockton could have legally chosen to cut employee pensions. And he blasted CalPERS as a “bully” for weighing in to insist – wrongly – that the city was required to pay workers their promised pensions.
In other words, he pointed out to the city of Stockton, the state of California, and CalPERS that federal bankruptcy law trumps state law, and the state constitution.
Public employee union pensions are now on the negotiating table. And Nextep San Bernardino. Their bankruptcy is being challenged by two companies at the city refusing to pay while agreeing to continue to pay CalPERS. The Stockton ruling puts a big chink CalPERS armor. It looks like San Bernardino’s pensions are on the chopping block.
CalPERS has been put on notice that they can’t push California cities around anymore. It remains to be seen how Stockton is going to live up to terms that they agreed to. Their current pension cost is 46% of the salaries of police and fire, a payment that will rise to 60% of payroll in just five years.
Public employee unions have been served notice by the Federal Bankruptcy Court that their gravy days are over. The best part of this is that this ruling doesn’t just apply to California. When Chicago files for Chapter 9 there unions will be staring down this same gun barrel.
It couldn’t happen to nicer people.
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