According to The New York Times article “In Ruling on California Town’s Bankruptcy, Judge Challenges Security of Pensions”:
“A federal bankruptcy judge on Wednesday upended the widely held belief that public workers’ pensions have a special status in California that makes them impossible to cut, further chipping away at the idea that pensions are sacrosanct in a municipal bankruptcy.”
The judge ruled against the sanctity of CalPERS pensions and declared the CalPERS liens on the city of Stockton, California to be null and void.
What’s that mean?
It means that a federal judge has ruled that a government—albeit the relatively small government of the city of Stockton, California—that’s bankrupt, doesn’t have to pay its debts—not even to California government workers now on CalPERS pensions. That means the debt owed by the city government of Stockton to the pensions of government employees, will not be imposed on the people of Stockton. If the city government is bankrupt, the city’s government’s debts are null and void.
The city employees (who’ve been sticking it to the city taxpayers for years) argued that being associated with the government, they were special and, if the bankrupt city government couldn’t pay their pensions, then the city’s chumps (the taxpayers) would still have to be held responsible.
The bankruptcy court disagreed.
The court said that if a city government becomes bankrupt, all of it debts–even those owed to other governmental agencies–can be discharged and left unpaid.
Pretty shocking, hmm?
This means that if government employee wages and/or pensions become so high that they help force a government into bankruptcy, the government employee pension funds could also wind up bankrupt. And that means that if government workers want to collect their pensions, they’d better not get too greedy.
The City of Stockton bankruptcy case implicitly acknowledged what I’ve been saying for years: Government debt is too great to be paid. What can’t be paid, won’t be paid. If the Stockton government is bankrupt, even debts owed to government pensions must be, and will be, rendered void.
Written By: ALFRED ADASK – continue at ADASK’S LAW