SAN BERNARDINO, Calif. — When this bankrupt, working-class city took the unprecedented step in 2012 of stopping its required pension contributions — arguing that it could not otherwise make payroll — other financially stressed California cities took notice: Could San Bernardino defy Calpers, the powerful agency that administers the state’s huge pension system?
The resistance ended last year when the city resumed its payments. But now, with a mayor who swept into office last month promising to deal once and for all with skyrocketing pension costs, San Bernardino is in another fight with Calpers that could embolden other municipalities seeking relief from crippling payments to the nation’s largest public pension system.
“We are under the microscope, no question about it,” said Carey Davis, 61, the mayor. “San Bernardino took a different approach in bankruptcy as related to pensions, and everybody is waiting to see how it comes out.”
At issue is the $17 million in back payments and penalties that San Bernardino failed to make between declaring bankruptcy in August 2012 and resuming payments in July. Calpers has maintained that it is owed in full. But now in bankruptcy negotiations, the city is hoping to pay only a fraction of that, arguing that the city’s creditors must all share in the bankruptcy pain. The amount may be small, given the system’s assets, but if San Bernardino gets a reduction, the precedent could be huge, opening the door to other struggling municipalities using bankruptcy law to justify delaying or withholding payments to the pension system.
“This city has taken on the 800-pound gorilla, which is Calpers,” said Ron Oliner, a lawyer for the San Bernardino Police Officers Association, which represents the city’s uniformed officers. “Everyone in California is watching San Bernardino, and everybody in the nation is watching California.”Read more...
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