When A City/State Goes Bankrupt, Can They Legally Do Anything About The Benefits Of People Already Retired?

  • metta

    Posts: 39144

    Jun 29, 2012 8:40 PM GMT
    Stockton, Calif., Files For Bankruptcy - Biggest US City to file for protection

    http://www.npr.org/blogs/thetwo-way/2012/06/29/155981661/stockton-calif-files-for-bankruptcy

    "City leaders on Tuesday night signaled their intent to file when they adopted an emergency budget that stopped bond payments and slashed employee health benefits and pensions."

    http://latimesblogs.latimes.com/lanow/2012/06/stockton-bankruptcy-gag-order.html


    For example, with school districts, they normally sign contracts with the teachers unions. If a school district went bankrupt, would they be able to make cuts in what they agreed to pay people in contracts they signed, whether they are retired or not? I'm just curious.

    I know that many cities with contracts with the fire departments and police, the benefits alone can sometimes become the largest expenditure for the entire city.
  • conservativej...

    Posts: 2465

    Jun 29, 2012 10:06 PM GMT
    socalfitness saidNot an attorney, but I believe the bankruptcy judge has discretion. That plus the reality that they may not have the money to pay or the credit lines to tap.


    The Stockton retirees will be moved to the Pension Benefit Guaranty Corporation, a federal agency. The maximum per employee per month payout is about $2800 currently. Unfortunately, like many things in the federal government, PBGC is very short on funds. They are looking at brining payouts way down from $2,800. per month. But alas, they can now use Obamacare for heath insurance as PBGC doesn't cover healthcare.
  • metta

    Posts: 39144

    Jun 29, 2012 10:14 PM GMT
    ^
    Wow...thanks for the information. I was wondering about that.

    So if a city or other government organization goes bankrupt and the employees/retirees were depending on a 6 figure a year retirement plan, for example, they could possibly cut it to $2800/mo, possibly less. I realize that each system is different, but it gives me an idea of what could potentially happen to people.

    I think in California, the teaches have their own fund that the teachers actually put the money into. And I think the Sheriffs in CA do the same thing. Hopefully that is a safer way to go than to tie in the retirement with the rest of the government entity.
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    Jun 29, 2012 10:49 PM GMT
    metta8 said^
    Wow...thanks for the information. I was wondering about that.

    So if a city or other government organization goes bankrupt and the employees/retirees were depending on a 6 figure a year retirement plan, for example, they could possibly cut it to $2800/mo, possibly less. I realize that each system is different, but it gives me an idea of what could potentially happen to people.

    I think in California, the teaches have their own fund that the teachers actually put the money into. And I think the Sheriffs in CA do the same thing. Hopefully that is a safer way to go than to tie in the retirement with the rest of the government entity.
    They do.. however they put it in the hands of the wall street folks.. and thats 'the rest of the story'..
  • conservativej...

    Posts: 2465

    Jun 29, 2012 10:53 PM GMT
    metta8 said^
    Wow...thanks for the information. I was wondering about that.

    So if a city or other government organization goes bankrupt and the employees/retirees were depending on a 6 figure a year retirement plan, for example, they could possibly cut it to $2800/mo, possibly less. I realize that each system is different, but it gives me an idea of what could potentially happen to people.

    I think in California, the teaches have their own fund that the teachers actually put the money into. And I think the Sheriffs in CA do the same thing. Hopefully that is a safer way to go than to tie in the retirement with the rest of the government entity.


    The problem with the separate fund is it may not be fully funded at the time of bankruptcy. In that case, one simply says "oops."
  • metta

    Posts: 39144

    Jul 12, 2012 9:00 PM GMT
    Add San Bernardino & Mammoth Lakes to the list of cities

    More city bankruptcies on California horizon?
    San Bernardino declaration raises questions over which city is next


    http://www.marketwatch.com/story/more-city-bankruptcies-on-california-horizon-2012-07-12
  • conservativej...

    Posts: 2465

    Jul 12, 2012 11:04 PM GMT
    metta8 saidAdd San Bernardino & Mammoth Lakes to the list of cities

    More city bankruptcies on California horizon?
    San Bernardino declaration raises questions over which city is next


    http://www.marketwatch.com/story/more-city-bankruptcies-on-california-horizon-2012-07-12


    It's just the result of what poeple vote for. The city in which I grew up has a population today of around 18,000. It is so well managed and so adept at fostering good business relations that it has around $240,000,000 in its' rainy day fund. In the days before Obama came along, interest on those funds covered virtually all of its' operting expenses. Today its' effective tax rate on property is 0.16 percent. (0.0016).