As usual, the outrageous pensions and benefits offered to public workers is behind the proposed bankruptcy, pointing the way to much more disruption going forward, as Governors won't take the steps to slash the benefits or make the workers pay more into their own pensions. The result is what we're seeing in states all around the nation, where cities will be forced at an unprecedented level to declare bankruptcy.
What is important about this particular bankruptcy will be the outcome of the issues involved; primarily, whether creditors or government pension funds get to be paid first by the respective cities.
In other words, does the federal bankruptcy law take precedent over California law. The law of the state asserts the state pension fund must be paid.
The U.S. Bankruptcy Judge ruling on the case, Christopher Klein, said this: "I don't know whether spiked pensions can be reeled back in. There are very complex and difficult questions of law that I can see out there on the horizon."
Stockton, with its pension promises, already owes the California Public Employees Retirement System (CalPERS) approximately $900 million. It's a very similar situation in cities across California. So much for the big government, Keynesian experiment in California. To think people not that long ago looked at California as a bellwether for the rest of the county. It is of course; one that shows exactly how not to conduct business at the state and local level. This is why big government must be shrunk. It is no longer sustainable. In truth it never was, it always has been a matter of time before it all came collapsing down around the ears of state and local governments.
Other cities in California under severe pressure because of the outrageous pensions allotted government workers are San Jose, San Bernardino, Atwater and Fairfield, among over a dozen others.
In order to finance the pensions of these government parasites, numerous cuts in employment have been made by the city, including a Police Department which is only allowed to respond to emergencies in progress. The crime rate in Stockton is one of the worst in the nation.
I wonder if investors are still feeling comfortable and safe with their municipal bond investments which a number of so-called experts declared as safe?
It's far past time to shrink government and its parasitic workers, who are increasing the amount of unfunded liabilities while refusing to cut back on their borderline criminal perks.