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Former Schwarzenegger Press Secretary Aaron McLear and attorney Joey Jackson on CalPERS lawsuit against San Bernardino, California, for not making pay...
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-- at our top story tonight could be a total game changer for pensions and municipal creditors.
The nation's biggest public employee pension fund that's calpers is preparing to still.
The bankrupt city of San -- Diego California since that Sydney stopped making payments to the pension pot.
How has says the city already o.s with bond almost seven million dollars since filing for bankruptcy in August on -- first.
Now this first I gotta tell you know city has ever halted payments to calpers.
What could it -- all other cities follow -- with me now is -- clear former governors were Schwarzenegger is Press Secretary.
An attorney Joseph Jackson Joey Jackson thanks so much for joining us both at -- We -- I start with the year -- This first but it's not I mean it's not totally expected -- what are -- supposed to go.
Well that's way go to bankruptcies of the other courts can figure out who your first and -- who gets what money but you're exactly right they're broken and short of -- -- the powerball San Bernardino has very few options.
-- either needs to cut services elsewhere to pay -- -- or the need to raise taxes to pay for the pensions but I think one -- another they're gonna have to pay that bill.
Really our Gerri what do you think I think he's right what does that some ballots this sweet smell of victory.
Ultimately I don't think the municipality can get out of this and here's why I mean.
-- yes it's in federal court so the question becomes you know why does the federal government take priority -- the -- take priority back goal all along time ago Melissa one that and it statute was enacted the bankruptcy.
-- that -- federal because that the federal statute however this -- contract and what does it say it's -- you honored that obligation.
And I think states as sovereign municipalities a sovereign the feds are gonna be real walk with reluctant to tell them what to do.
Ultimately it's an obligation bankruptcy and not that -- to be satisfied.
Karen that's bankruptcy is all of that out -- -- that's why you you declare bankruptcy and that's why you go through all the penalties that are involved -- it's not a happy thing.
And it's going to be very hard for them to borrow money in the future they're going to the downside of bankruptcies so it seems like they should get the upside as well and -- -- They don't have the money I mean raising more taxes people are fleeing this city as it is.
It's.
What will happen to let you know which was the first California city to go bankrupt back in 2008.
As they actually did raise taxes but of the along with that they told the citizens that they could decide where those taxes -- Times are you basing a similar situation in places like -- you -- I did I tell you Melissa it's not to be the last one I know pensions for local governments are only about 50%.
Funded at this point -- -- the situation going on all across the state.
You have a situation going nine where there are just these liability is.
That there is no way to -- down the line break -- and he is not the real problem.
Well the problem is -- -- -- the local government state governor has been making promises they just can't keep.
I.s really up the fall of the employees or frankly the labor unions we're gonna ask frolicking gets the fault of the politicians who make these promises without setting this aside the money to pay for them.
And we see both the state level and the municipalities.
That we're starting to pay more more money each year to pensions and retiree health care benefits.
And less and less every year to things like education public safety.
And that's gonna continue until we solve this problem fix or pensions for good.
Joey you think that calpers prevails in this situation I do but this isn't gonna be the only time that we're gonna see this try -- I mean again it's someone else is gonna try they're gonna find a lot that.
Way to not pay this I think down the -- it's not San Bernardino it's another.
It'll be someone else but I think a precedent will be sent here and -- -- what the issue was a mean what evidence that bankruptcy what is it about it's about reorganizing and restructuring your debt.
Such that it's manageable manageable in such that you can't afford it.
In this instance here where you have a contractual obligation by the state that says look at that the find that if it you have to pay I think -- -- end up doing is structuring and in such a way that frees up their Billy didn't do this hit the -- question most of the logic questioning how would that works out because ultimate.
That we you know this all -- Creditors right you have debtor creditor is that you -- -- -- what old money there are some creditors who owed money we're in the priority chain in the list of priorities there weighed down.
But when you have commitments you have the honor those commitments and this is a commitment that know what -- municipality -- tried to get out up.
They are now trying to do what I think the precedent that will be said it would be dangerous it would lead to the parade of horrible by many others who would try to avoid this.
That would lead to disaster as a result I say.
Pay up that's what the courts are gonna do predicted.
I cannot -- I don't know I mean I just I I don't know I agree with that because it's -- it in bankruptcy like there's always an obligation to pay that's what every single contract is about and I understand that some debt is subordinate to other debt.
But I mean that's this is what bankruptcy is all about I am broke I am so sorry.
I cannot meet my obligations now let's restructure and figure out what to do with here -- mean this sounds like.
Every time -- union is broken every time I mean this this is the -- -- to me.
Well they they can pay if they just have to do less stuff and that's what's happening in my place like bloody hell did this city you -- really redefining what a city does here in California.
-- because of these obligations for pensions -- retiree health care benefits that we just can't pay.
How we have to do fewer things as a city government is we're gonna come down to a some cities are are are not going to exists to provide services that to the taxpayers.
They're going to exist to basically write checks and process checks Lauper retirees have made it -- really headed that way.
Blouse and they're gonna they're gonna fund the retirees rather then you know picking up trash or whatever -- did you -- -- I have to admit they they they may have to -- pointed to admit I have a choice of the -- they would just you have to pay this first.
Then they're gonna have to say final word I could pick up trash were not enough cops -- is gonna pay pensions well let's -- utilizes the bend down the right we -- -- -- -- revenue.
Raise taxes don't want the hair raising taxes does not increase revenue necessarily but that's a discussion for another time thanks to both of you guys for joining us people just leave -- -- San Bernardino BP's -- you discover the border all right thanks so much.
So.
