San Diego’s pension problem must be fixed. The city is not powerless to address this problem. In fact, there are many options short of illegally abrogating vested pension rights. Lately, Chapter 9 bankruptcy has again become popular among easy-fix advocates. File bankruptcy, they say, and pensions will vanish.
Bankruptcy advocates like to cite Vallejo’s municipal bankruptcy, where the judge abrogated current labor contracts, requiring the parties to renegotiate. But, as with Orange County’s bankruptcy, vested pension benefits were not touched.
The small suburb of Mobile filed bankruptcy last year and stopped making pension payments. The bankruptcy judge ordered Prichard to develop a plan to pay retirees. The city is now facing lawsuits from pensioners.
Chapter 9 differs from Chapter 11 bankruptcy, which allowed United Airlines to abrogate its pension obligations. Under California’s Constitution, vested pension benefits cannot be seized by government. If Chapter 9 pre-empts state and local constitutional protections of vested pension rights, what other constitutional protections are at risk? What if a city wants to increase taxes to pay debts? Could a bankruptcy judge waive the requirement of voter approval? Although that, too, would be inconsistent with Chapter 9’s statutory provisions, in a 1994 decision, the judge dismissed a local government bankruptcy because it refused to increase taxes. Our city would not benefit. San Diego doesn’t need Chapter 9 for leverage.
Bankruptcy advocates like to cite Vallejo’s municipal bankruptcy, where the judge abrogated current labor contracts, requiring the parties to renegotiate. But, as with Orange County’s bankruptcy, vested pension benefits were not touched.
The small suburb of Mobile filed bankruptcy last year and stopped making pension payments. The bankruptcy judge ordered Prichard to develop a plan to pay retirees. The city is now facing lawsuits from pensioners.
Chapter 9 differs from Chapter 11 bankruptcy, which allowed United Airlines to abrogate its pension obligations. Under California’s Constitution, vested pension benefits cannot be seized by government. If Chapter 9 pre-empts state and local constitutional protections of vested pension rights, what other constitutional protections are at risk? What if a city wants to increase taxes to pay debts? Could a bankruptcy judge waive the requirement of voter approval? Although that, too, would be inconsistent with Chapter 9’s statutory provisions, in a 1994 decision, the judge dismissed a local government bankruptcy because it refused to increase taxes. Our city would not benefit. San Diego doesn’t need Chapter 9 for leverage.
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