Two troubled California cities and their largest employee unions have worked collaboratively to reach deals in recent weeks that will help their municipalities emerge from bankruptcy. The cities of Stockton and San Bernardino have both agreed to keep pensions intact despite a court ruling opening the door to cutting retirement benefits if the employer is bankrupt.
In both instances, public employee unions have shown once again their willingness and ability to make sacrifices and negotiate settlements with management at the bargaining table. As the largest creditor in most municipal bankruptcies, it has fallen to the employee unions to help return the employer to sound financial footing, while offering a fair deal for the middle-class families who work and live in the city.
When cities fall on hard times, their primary responsibility and concern should be to the communities, families and workers – not Wall Street hedge funds and corporate investors. These cities will be rebuilt by hard-working employees who provide essential services and make up their economic backbone.
While the recent news from Stockton and San Bernardino would be considered good for anyone who truly cares about the real-world impacts the bankruptcies had on working families or the long-term financial stability of the cities, they were met with howls and moans from disappointed pension reformers and Wall Street executives.
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Those seeking to undermine retirement security of teachers, firefighters, custodians and hundreds of thousands of public employees were hoping that precedent-setting rulings would make it easier to break promises made to thousands of working families. Alas, it was not to be. In Stockton and San Bernardino the agreements reached between workers and city management provide models for how to emerge from bankruptcy without reneging on promises and further damaging services and safety.
Municipalities should not be filing for bankruptcy in waves in efforts to jettison pension debt. For the very few severely distressed cities that may consider bankruptcy, the question will not be whether they can reduce pensions, but whether they should. In Stockton and San Bernardino, the answer to that question was clear to all with a stake in the cities’ future.
The settlements are the latest blow to a right-wing effort to undermine retirement security. Like Wile E. Coyote in the “Roadrunner” cartoons, these so-called reformers have been salivating at the opportunity to get their hands on the retirement accounts of workers and turn them over to their hedge-fund friends on Wall Street. But like the poor coyote, compromise between city leaders and workers left these so-called reformers empty yet again.
They are not interested in taking a thoughtful look at the challenges facing working families across the state, even as the wealthiest Californians make more money than ever before. Instead they are looking for a wedge issue after years in the political wilderness, regardless of the public cost or policy ramifications.
Municipal bankruptcies should be a true last resort – not a tool to undermine pension and retirement promises to employees. If the consequences for an individual facing bankruptcy are devastating, the consequences for a municipality are 10 times as dangerous. Bankrupt cities face soaring crime rates, shrinking property sales and the reduction or elimination of basic public services. It’s not a decision that an elected official or city manager should willingly make unless there are no other options.
Despite the media attention to cities like Stockton, San Bernardino and Detroit, municipal bankruptcy is exceedingly rare. According to one analysis, only 13 local governments have declared bankruptcy since 2008. Five of those filings have been dismissed. There are more than 39,000 local governments in the U.S.
Nobody has a greater stake in a city’s financial solvency than its employees. Public employees have shown time and time again that they are willing to be part of the solution. State, county and city workers are paying more than ever toward their own retirement costs. But as the rulings in San Bernardino and Stockton confirmed, the place to have these discussions is at the bargaining table, not at the ballot box or in the courts.
Ray Martinez is chapter director of Cal Fire Local 2881, which represents more than 6,000 current and former employees of the California Department of Forestry and Fire Protection.