Today Christopher Klein, a U.S. bankruptcy judge, approved the city of Stockton’s plans to exit bankruptcy – ensuring that the pensions of Stockton’s retired public workers will not be subject to a tug of war among the city’s creditors.
“Judge Klein’s decision reinforces the confidence we had in our plan from the beginning,” Stockton City Councilmember Elbert Holman told Capital & Main by phone. Holman, along with Paul Canepa and Kathy Miller, voted to file for Chapter 9 bankruptcy; all three remain in office.
The judge’s Thursday decision had not been a foregone conclusion. On October 1, Klein had ruled that the federal bankruptcy code could trump the state’s retirement law that protects public employees’ defined-benefit pensions – and thus expose these retirement plans for “impairment,” or cuts. This prompted the Sacramento Bee’s political columnist, Dan Walters, to cite a Wall Street source’s favorable response: “Moody’s Investors Service underscored that effect by declaring that Klein’s ruling is ‘welcome news for investors’ in municipal debt.”
Stockton’s experience with bankruptcy – and the shadowy role of Wall Street credit-rating firms —
A 40-foot fall isn’t necessarily fatal for the average adult. But for California’s public employees whose jobs require them to routinely work on ladders or mechanical devices at heights more than 40 feet, it was deemed enough of a threat to life and limb to offer them a modest premium in their monthly pay packet.
In the case of firefighters, it also seemed sensible to kick in a little more for the tiller operators that control the 100-foot aerial ladders from which their brothers occasionally rescue a taxpayer from a burning building.
In fact, 99 such hazard premiums and professionalizing workforce incentives that have historically been considered pensionable compensation for public workers were deemed to be such no-brainers that they passed the scrutiny of the legislature and the governor when Jerry Brown signed into law 2012’s Public Employee Pension Reform Act (PEPRA). Today the average public pension in California is $2,945 per month.
My hometown just declared bankruptcy. No, not the town I was born in, and not the place I have lived most of my adult life, but where I grew up. Stockton, with a population of about 300,000 is the largest city in America to file for Chapter 9 protection. Conventional wisdom says it was the unfunded pension liability or mismanagement or too much debt, and under state guidelines for bankrupt cities, somebody has to take the blame. But the choices that led to this debacle go back decades.
When I left Stockton in the mid-1960s for college, it was a divided city. The affluent and mostly white people lived on the north side. The “others” lived to the east and south. Others were people who worked with their hands, people who picked the fields, people who worked the seasonal canneries. These were mostly low-wage workers, sometimes no-wage workers who turned fresh produce into food for supermarket shelves across the country.