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And thanks for joining us here's what -- have the top of the stack is your pension safe well under the current rules bankrupt companies can.
Dumped -- employee pension obligations into a government IE taxpayer backed agency.
The retired employee.
Now they usually get only cents on the dollar that was promised to them.
But what about if you work for a government agency not many people have made careers in government because of the secure.
Secure paycheck secure benefits.
Now all of that is up from the year joining -- -- -- Manhattan institute fellows Steve aligned.
This stalking case is really important it seems.
Well I think it is important certainly first -- California.
Because they have a tremendous pension.
Obligations that are not funded in many of them are local obligations what I mean by that is towns and cities.
A -- in school districts across the the state and so there's a battle going on because the state pension system has previously fought to not allow any did munition a pension benefits and -- it.
And and away -- when they were bankrupt factly but it but again if you if if if your company goes bankrupt.
Well they dump your pension and you get your -- whatever piece of it might be left.
I just going to be decided by a judge but it seemed like that's why the stalking case is so important beyond California.
Is because of the fact that will -- federal bankruptcy judge be able to say eight to the retirement system in the state you don't.
Get to collect everything.
Well first ball in municipal bankruptcy which is chapter nine as opposed to private sector -- bankruptcy in municipal bankruptcy the bankruptcy judge is even more of just -- refereed.
And the reason he is is because it would be considered un democratic for him to impose a solution -- -- not elected.
Exactly and frankly let's face it a lot of people want -- or talking about how you know chapter nine bankruptcy -- bankruptcy we're just gonna break all the contracts.
But what if you get a bankruptcy judge who sides with the unions and says.
Here's how -- gonna fix -- we're gonna raise taxes by 50%.
You can do that judges who cannot do that on and we're now it's still a negotiated.
The big issue you mentioned the -- held the previous bankruptcy.
-- -- A California pension system calpers had threatened to silverlight hole if they tried to reduce pensions and bankruptcy in the later decided.
We just don't want to go through with that right they were called -- City Council member and the like help the 800 pound gorilla in the room.
Another California city and its bankruptcy San Bernardino has already stopped paying calpers they basically have said.
You're part of the problem are for your -- -- part of problem they're a big part of the problem we're not paying you anymore so they're letting that debt accumulate there are actually.
Into in a way in a way being more aggressive in Stockton right now.
So but again calpers is the is that the public employee retirement system yes.
There -- just another creditor or are they see they argued no they argue that they are a state agency and that in municipal bankruptcy you can't essentially break the judge cannot interpose -- intercede in relationships between a local government and the state agency they're not a creditor states should.
They are claiming no -- ruled on that yet.
Four -- a government employee.
RR I mean I've been warning for years and years and years and and people on my radio show have called me to work for the government and say I'm just.
Tried to scare them -- -- I try to scare you with just at the promises made and the money available.
Doesn't match in so the question will be will the judge finally come in a bankruptcy judge in.
If you say -- -- for -- How is this going to be resolved is it going to -- walked through the.
Courts as well as very interesting in Stockton because.
Much of their debt is in fact -- -- -- And is retirement debt for basic city employees never understand in cities most of their budgets or salaries so -- and salaries and gosh -- many businessmen the most of it is that important part of the businesses to -- exactly so when they go back when they go bankrupt you.
There there's -- ways that you can -- and essentially cut their obligations without.
Cutting these obligation on -- say.
That -- Stockton has already done they additionally -- 500 million dollars in unfunded liabilities for retiree health care that they promised to people starting in the ninety's which they never bothered to calculate what it was gonna cost.
Because that is not.
Protected by the California constitution.
They immediately stopped ended that program.
So they had taken one big step in that -- -- employees are suing them saying it's a contract you have to honor but.
If you don't if you are forced to pay both the pensions and the retiree health care I don't really see a solution.
In Stockton except raising taxes.
Even more than they're good -- that inevitably going to go anyway.
-- I'm I'm I'm missing something here so.
Again San Bernardino Stockton whatever might be if a bankruptcy judge cannot go win and -- I thought that was that the big key issue here.
Was that the bankruptcy judge is going to -- per hour and no liability that they have to.
It's still a negotiated settlement in the back it's just can certainly hold everybody's feet to the fire if you did -- -- -- -- representing -- pension plan the pension cut of the California public employees pretend.
Pension system right I'm not gonna give I'm gonna fight this all the way in -- not to negate I'm not taking one and the lives.
And we'll see you -- court are they going to go right side of bankruptcy.
Well that that is exactly what that but but what sick wedge LA hosts the City Council member said that.
Calpers threatened and and the problem with that is that and the reason the calpers K that -- OK it is because.
Then that could take years to resolve in which case the city would stay in bankruptcy for years which is kind of ugly situation.
It stopped -- case and it Samberg in this case you look at their balance sheet and you think.
There may not be a viable solution otherwise so somebody's gonna have to be the test case this may be at one of these may be yet.
Will -- go out of bankruptcy court.
I got it could -- it could go so absolutely could go somewhere else absolutely to another yeah.
Which therefore then brings up.
Again would this be dubbed.
Benchmark -- it would be used by cities.
So all over the all over the country that are watching Stockton saying what happens there is a lot of cities are hurting because of their obligation -- obligate.
You're absolutely right I certainly that would be the case in California you have to understand however that in a lot of other cities they're hurting because of their obligations.
And what it's going to mean is not insolvency of the -- stopped and could get into this process is because the judge looked at their balance -- so don't really insolvent they've got what you know.
But other cities the -- the prospect that we face is that you're going to see taxing for security saying it.
Pension costs are crowding out other all the other services right and so basically we're entering an era in which.
Taxes are going to rise.
Not to build roads and bridges.
Or new to -- new schools but rather simply to pay these hidden obligations that have been piling up.
Stories going not gone away just as well it is an entity -- to thank you so much her take care don't come on the big TV.
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