SACRAMENTO — The most optimistic pension reformers had hoped that the decrepit city of Stockton’s 2012 bankruptcy would be a “day of reckoning” — a point where the city’s leaders would pare back overly generous retirement benefits and embark on a road to fiscal responsibility.
They saw hope for hard-pressed cities everywhere, as Bankruptcy Judge Christopher Klein set up a possible showdown over pension payments when he rejected efforts by bond insurers to stop the bankruptcy motion. Klein said he was leaving everything on the table, meaning that city employees might eventually join the bond guys in taking a haircut.
But as often happens with government-reform efforts, the pessimists turned out to be right. Earlier this month, the Stockton City Council approved a plan that restructures debt and fully funds the California Public Employees’ Retirement System, thus leaving pension benefits for city employees unscathed.
If there’s any doubt who won out, one need only read the CalPERS statement: “By continuing to fully fund its pension obligations, Stockton … acknowledged the importance of a secure retirement to its current employees and retirees, and the positive impact that pensions have on recruitment and retention of quality public servants.”
It’s hard to believe that such lush pensions are needed to lure “quality public servants.” But whatever the case, when cities run out of money everyone should share the pain. Instead, the key “stakeholders” — city employees, union leaders, Wall Street creditors — declared a “win-win,” but the deal is not without its losers: taxpayers.
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