A judge tentatively okayed Detroit’s bankruptcy, meaning Stockton is no longer the largest American city to go Ch. 9. It also means most media attention will turn to Detroit.
The judge also appointed a mediator to referee a dispute between the city and its creditors: Portland-based U.S. Bankruptcy Judge Elizabeth Perris, the judge mediating Stockton’s bankruptcy.
The Detroit News story here.
Almost simultaneously, a different judge approved San Bernardino’s bankruptcy, over the objections of CalPERS, which argued ludicrously that a city plummeting into uncontrolled default should still pay the pension system everything it owes.
Said a blogger over at Reason: “Their lawyer might have a stronger case if public employee unions didn’t sue to block every single effort at pension reform and declare that pension benefits cannot categorically ever be reduced, ever. CalPERS’ clients are one of the main reasons why California cities are finding themselves unable to fix their financial problems.”
His view here.
Given a truly insolvent city, CalPERS doesn’t have a leg to stand on in federal court. It’s a shame that Stockton backed off cracking the pension giant’s carapace of state case law in its proposed Plan of Adjustment. But then, the judge may not approve that plan precisely because it spares CalPERS while scalping others; and the judge in San Berdoo may also rule that CalPERS has to share in the sacrifices of the recession.
That wouldn’t bother me one bit. I’m skeptical of City Manager Bob Deis’s arguments that cutting pension here will trigger a mass exodus of city employees. Look what happened with police. Yes, many left. That was part of a very bad year for the city. But the department has staffed back up. All of its 345 positions have been filled.