The State pension system, CalPERS, a feisty player in Stockton’s bankruptcy trial, is seeking to have a law firm involved in the case kicked out because the law firm hired away CalPERS attorneys.
Those crafty lawyers at Winston and Strawn LLC perpetrated ”a very serious case of lawyers engaged in side-switching, which is ethically impermissible,” CalPERS alleges.
Winston and Strawn is representing National Public Finance Guarantee Corp., a bond insurer, In Stockton’s BK trial. This story does not explicitly say whether the attorney, Larry LaRose, is a former CalPERS employee, or whether the pension giant wants him booted because his law firm is now full of side-switching CalPERS defectors who have given him information that should have remained confidential.
All of this is no big deal. It just says something about CalPERS: when you sitting on billions of taxpayer dollars, you can afford to pick a fight with anybody.
Here are charts from a city PowerPoint contending that his plan does impact the General Fund.
These charts are also important for understanding that Stockton’s bankruptcy does not make its debts go away. It reduces some and pauses payments, but the city will have to pay them. So any plan that does further drain the General Fund should be avoided like the proverbial plague.
— “We can’t give CalPERS a haircut and continue to stay in CalPERS,” says city spokesperson Connie Cochran.
— “We can only reject the contract by paying nearly $1 billion (to go into a special “termination pool”–MF).
— “Even if we had the money to reject the CalPERs contract, we do not have the money to start a new plan.
— “Without a pension fund, employees will leave the City to go to work where they can get pension benefits.”
I cannot tell whether the city is siding with CalPERS out of legal realism or the Stockholm Syndrome, in which hostages begin to identify with their captors. But here is a CalPERS video outlining their position.
The city also disputes the notion that the federal bankruptcy judge has telegraphed he will rule CalPERS enjoys no special immunity, and so pensions can (and therefore should) be cut.
“The Judge made no decision or judgement about CalPERS as a creditor, because it had nothing to do with eligibility,” Cochran said.
For the Judge’s exact words, please see the transcript of his oral ruling: page 46 (page 589 of the transcript (page numbers are in the upper right corner of the page), line 22, continuing onto the next page.
“You’ll see that the Judge recognized that these are complex issues, which he is going to have to “…get down into the nitty-gritty of the CalPERS situation…at this point, have no clue how that’s going to come out…” (page 590, lines 24-25)” Cochran writes.
City Manager Bob Deis adds, “If the City was to leave the PERS system, they (PERS) would seek $1 billion from us as the termination liability. It’s this amount and the process they would follow to terminate our contract, makes it easy to recommend staying in the PERS system.
“Besides the $1 billion figure, like it or not, PERS (and systems like it) are the industry standard for public sector employers. We cannot be an outlier and expect to staff a vulnerable vity like Stockton.
“Vulnerable” is a euphemism, but I don’t feel like translating.
“Life in a bankrupt city isn’t easily summarized on a postcard. The water still runs in showers. The trash is still picked up. Residents already on the bottom rung have nowhere to drop. Yet there’s a sense of surrender here, too, a whiff of weariness from a brutal, humiliating process that has yet to improve their community, or their lives.”
Stockton Forward must be smacking its head to have missed this guy.
Columnists are helpful people, always willing to say how best to run the show.
Take this 2010 column in which I sagely suggested that a broke city should sell off some of its property — expecially since it owns 600 pieces of property, some of it quite weird for a city to own. A rod an gun club? Really?
Now that the city has announced it will do just that, you’re wondering, Mike, which property should I buy? Well, not the Philomathean Club; that property comes with a contractual provision giving the club’s members the right to meet there in perpetuity, regardless of who owns it and what the owner tries to do with it — a deal-killer so ludicrous it could only have been concocted in Stockton.
But for my money, the real plum is the land up at New Hogan Reservoir. The city owns “over 100″ acres of rolling, oak-dotted land around the reservoir, some of it waterfront property.
Why? Nobody is sure. The city property guy conjectured that when the city replaced old Hogan Dam with New Hogan Dam in 1964, it had to buy land to accommodate the expanded reservoir; some parcels included more land than necessary for the basin.
In 2010 we took interest in a historic peace boat, The Phoenix of Hiroshima, that vanished in the San Joaqin Delta. We later found it — sunk.
We also started tracking down important parts of the boat. We didn’t always publish our findings. But the daughter of the original owner is blogging about it.
Despite the hallowed status the boat enjoys in pacifist circles, apparently it’s a white elephant. The current owner, an Oakdale physician, has never got around to raising and restoring it. So it sits at the bottom of the Mokelumne River at Tyler Island. Important to some, but not important enough.
“One of the more delicious ironies to Stockton’s fiscal plight pertains to the 10th Amendment. You know, the left’s least favorite constitutional provision, usually invoked by conservatives in order to protect individuals and states from federal jurisdiction.
“But today it’s the usually left-leaning unions screaming bloody murder about states’ (and local) rights. Their view: Stockton’s politicians freely signed contracts they could not afford — deal with it. And pay us.”
—Maryland Congressman Robert Ehrlich, writing in the Baltimore Sun.
Touche. Labor is Democratic, and Democrats favor stong federal government. They cry foul when Republicans invoke states rights to — to cite one example — preserve Jim Crow from Uncle Sam’s civil rights reforms. Because the law of the land is the law of the land, right?
But as we’ve seen for years here any philosophy takes a back seat to unions bent on lining their pockets. Their every philosopy, their every argument, is window dressing. Give me my money, is what it all boils down to.
While it stings to be the bechmark for fiscal catastrophe, it’s worth reading the piece because it highlights Stockton’s strength: it’s not being run (into the ground) by union members sitting on the council.
“One reason that Bridgeport can’t get its act together is its patronage politics,” the author writes. “Unlike Stockton, Bridgeport has city employees on its city council, including the president, who is deputy director for the city’s labor relations. … This represents a clear conflict of interest and is a major barrier to achieving the structural changes necessary to restore fiscal sanity in Bridgeport.”
What’s chilling is how pro-labor council people in places such as Bridgeport and San Bernardino keep piloting the plane full-throttle even when it has descended to 11 feet off the ground. The dynamics of union politics give no incentive for union leaders to make concessions. In Stockton, at least, the reformers are still in control. Though labor supported the mayor.
The public employee union of San Joaquin County says county leaders are disrespecting them by proposing prudent austerity measures during the worst recession in decades.
SEIU Local 1021 members in San Joaquin County object that the county has proposed to (quoting their press release):
Take away all floating holidays.
Double employee contribution for employee-only Kaiser healthcare plan.
Increase retirement contribution to 50 percent of employee contribution rate.
Eliminate daily overtime after eight hours
Eliminate employees’ right to strike.
Eliminate joint healthcare committee.
Eliminate healthcare stipend for lowest paid employees.
No more equity surveys.
And, oh yes, the haven’t got a raise in two years. Many in the private sector haven’t have a raise since 2008.
Equity surveys are a recipe for perpetual raises. COLAs are perpetual raises. Only in the public sector could asking employees to contribute to their health care and pensions be considered unfair. Private sector workers have been doing it for years. And the union is not glad county fiscal prudence allowed them to get raises through several years of the recession.
”The county … made its lack of respect for county employees perfectly clear,” Patrick Ikeda, president of the local 1021 said in this press release.
I’ll go this far with them: eliminating the right to strike is a deal-breaker. A union without the right to strike is no union. Nor am I rooting for the union to get skinned. Members have families to feed. I’ll even stipulate that county leaders set a bad example with their perpetual self-enrichment (I believe they cut 25 percent off their lucrative cafeteria plan for one year; big deal).
As for the rest of it, the recession is not over. Adjust expectations accordingly.
Mike Fitzgerald is The Record’s award-winning metro columnist. His column runs in the paper three times a week. Born in San Francisco, he was raised in Stockton. His column covers diverse beats including, sometimes, the offbeat. Read Full