The city of San Bernardino has stopped making its required payments to CalPERS since filing for bankruptcy and owes the big pension fund $5.3 million, CalPERS said today.
San Bernardino's missed payments creates a bizarre new twist in the unfolding political and financial drama over cities' pension obligations. It raises significant questions about whether cities can use their financial problems to justify getting out of their obligations to the powerful pension fund.
CalPERS spokesman Brad Pacheco said the pension fund has been talking to the city about the missed payments. "If we can't resolve the missed payments...CalPERS will assert its rights and remedies available under the law," he said.
Ultimately, the San Bernardino pension program could be terminated, and the dollars contributed by the city to CalPERS over the years would be put into a special fund. No more money would be contributed, and the pension program for city workers would depend entirely on how that remaining pool of money is invested.
Pacheco said that, because of grace periods, the city's delinquency totals $1.2 million.
Steve Turner, president of the San Bernardino Police Officers Association, said employees have been assured by CalPERS that retirement benefits aren't being cut off.
An unidentified San Bernardino official told Reuters the missed payments "are one of a number of obligations that the city has deferred due to our dire cash flow situation in order to keep making payroll to our employees and to keep paying for those materials and services that are most critical to our continued operations while the city works through its financial crisis."
By contrast, Stockton went bankrupt earlier this year but has kept current on its obligation - even though a group of Stockton creditors are trying to halt the flow of city dollars to CalPERS.
Keeping current on payments to CalPERS has been considered a must-do for cities regardless of their financial traumas. But "if you don't have the money, you don't have the money," said James Spiotto, a Chicago lawyer and expert on municipal bankruptcy.
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