The consistent success of the California Public Employees’ Retirement System in municipal bankruptcies amounts to a loss for taxpayers, according to an op-ed yesterday in The Press-Enterprise. CalPERS has repeatedly inserted itself in municipal bankruptcy proceedings with the aim of preventing any serious discussion of pension reform. With pension costs at all levels of government in California crowding out other spending, CalPERS’s behavior threatens the long-term stability of local government finances. In the bankruptcies of both Stockton and San Bernardino, CalPERS made a point of smothering even the consideration of pension cuts. Hon. Christopher M. Klein noted the “extraordinary” effort to block consideration of impairing pension obligations. “CalPERS has bullied its way about in this case with an iron fist, insisting that it and the municipal pensions it services are inviolable,” reads Judge Klein’s Feb. 4 opinion. Despite this behavior, he found that the “bully … also turns out to have a glass jaw,” and ruled “pensions may, as a matter of law, be modified by way of a Chapter 9 plan of adjustment.” It is unfortunate that public employees and local control have become so costly. So long as CalPERS and public employee unions continue to prevail over taxpayer interests, this problem will persist.
