Bankrupt city owes $5.3 million to CalPERS; judge may have to decide payment priorities
THE ORANGE COUNTY REGISTER
The city of San Bernardino filed for bankruptcy protection three months ago, and shortly afterward was reported to be under investigation by the federal Securities and Exchange Commission, allegedly for hiding deficits by diverting money intended for sewers, roads and construction to pay ongoing bills instead.
Now, the Wall Street Journal reports the Inland Empire city of about 210,000 residents "has stopped making its regular payments to the California Public Employees Retirement System" and owes $5.3 million toward its employees' pensions. A San Bernardino official told the Journal the city needs to be put on a payment plan because it doesn't have enough cash to pay its bills.
A San Bernardino sign on I-10 East is seen July 11, 2012. The San Bernardino city council voted Tuesday night in favor of the city filing for bankruptcy.
This is just the latest in a string of California municipal fiscal difficulties. Perhaps more troubling, San Bernardino may offer a glimpse of the future for other cities struggling to avoid bankruptcy as varied interests and creditors make demands for limited funds. A lawyer for the state employees retirement system, known as CalPERS, says federal bankruptcy law doesn't pre-empt state control over benefits overseen by the fund, the Journal reported. To Read More......
My Take - This is what I call the Inevitability Factor. It’s when reality reaches its zenith. Back in the 1970’s there was a steel mill in Youngstown, Ohio that closed. The union sued them in Federal Court saying that they couldn’t close because they had a contract. The judge threw it out saying that there is no law that requires anyone to keep losing money. Reality is the greatest leveling agent in life there is. When the money runs out that’s it.
When a company fails to negotiate intelligently it just goes out of business. When government fails to negotiate intelligently they print money....at least at the federal level. They can print it, but if there is no foundation for that money inflation makes it worthless; and at some point the Factor that is Inevitable is bankruptcy….and the disastrous social upheaval that would naturally follow. There is more than enough historical foundation from the 20th century to justify that statement for those who pooh pooh such talk. RK