A California judge has ruled that the city of San Bernardino can impose cuts on its firefighters’ union as it tries to drag itself out of bankruptcy. Reuters reports:
In a tentative ruling, federal U.S. Bankruptcy Judge Meredith Jury said San Bernardino was entitled to unilaterally impose benefit cuts on the city’s firefighters, something their union had fiercely opposed.Jury conceded that the cuts, which involve greater pension contributions by firefighters and reduction in overtime, were a hardship on the firefighters.But she said the city had also been persuasive in showing that what it had been paying in terms of benefits to the firefighters was a financial burden, and being able to reject the firefighters’ collective bargaining agreement was a key step to forming a bankruptcy exit plan.
San Bernardino entered bankruptcy in 2012, and has since been involved in a dustup with California’s public pension fund, Calpers, which objected to the city declaring bankruptcy—not to mention to its refusal to pay its pension contributions for a year. That dispute has since been resolved, but San Bernardino is still attracting national interest as one of the first cities to decide a question facing municipalities all over the country: How do debts to pension-holders stack up against debts to other creditors, and in the end, who gets paid? As Reuters puts it:
[San Bernardino] is one of a handful of municipal bankruptcies being closely watched by the $3.7 trillion U.S. municipal bond market. Bondholders, public employees and other state and local governments are keen on understanding how financially distressed cities handle their debts to Wall Street, compared with other creditors such as pension funds, during Chapter 9 protection.Last month the city reached an undisclosed deal with its police union. In June, it also reached a deal – subject to a judicial gag order – with its largest creditor, the California Public Employees’ Retirement System (Calpers).
These are the wages of the blue model: bankrupt cities and broken promises. San Bernardino, and even Detroit, are previews of what could someday happen in Chicago or New York.