David ducks Goliath

Numerous sharp Stocktonians continue to believe Stockton is missing a golden opportunity to set its fiscal house in order by dragging CalPERS, the state pension giant, into bankruptcy court for a haircut.

City Manager Bob Deis speaks to this issue in a report at tonight’s council meeting. Here he is:

“It should be noted the suggestion that the City somehow pull out of CalPERS to solve our problems is just a variation on this theme (that Stockton could cut more expenses and services),” writes Deis. ”Losing retirement benefits that are the standard statewide would, as the prevailing evidence showed in the bankruptcy eligibility proceedings, result in a mass exodus of employees, leaving the City unable to staff at the numbers and quality needed to sustain critical public services.

“Cancelling the CalPERS contract would also saddle the City with a $946 million termination payment obligation to pay for accrued liability, which the City has no ability to fund. We would have a crippled organization with a mass employee exodus and no potential for hiring replacements.

“We would also gain a new “battle front” with another creditor that will consume time and resources, but to what ends? We would have to replace CalPERS with a market competitive pension plan.

“Instead, we need to continue advocating for CalPERS reform in Sacramento.”

The money phrase is “To what ends? We would have to replace CalPERS with a market competitive pension plan.” This is a fresh argument. The city could at great cost replace CalPERS with another pension management system; but whatever the system, Stockton still would have to pay market-level pensions or would hemorrhage employees. For all the talk of “three-dimensional thinking” on this issue, no one has projected the next step after bailing from CalPERS.

The counter-argument is that Stockton does not need to withdraw from CalPERS. It needs to reduce its pension costs. And the BK judge wields the golden shears. That is a valid argument. To which Deis responded in the above-linked column that Stockton can pay increasing PERS costs without compromising public safety.

“Simply put, the new PERS rates (they’re going up) will not cause police layoffs in the 10-year horizon,” Deis said.

I have no confidence that Stockton’s advocacy of pension reform in Sacramento will succeed. That’ll be the day. But the point is Deis believes that by cutting everything but (woefully unreformed) pensions Stockton can emerge from bankruptcy and recover.

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  • Blog Author

    Michael Fitzgerald

    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
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