In the Vallejo bankruptcy, press reports suggested that Calpers threatened to tie the city up in a long court case if it tried to cut pensions. Calpers denied it made any such threats, though a city councilwoman who participated in the negotiations subsequently said:
According to our lawyers, CalPERS' outside bankruptcy lawyers told them that they would challenge any attempt by the City to reduce current retiree pensions...The 1,000-pound gorilla in the room when making our decisions was always CalPERS -- they had a lot more time and money to fight us in court than we had available in the middle of bankruptcy.
One result of Vallejo's failure to fight for a reduction in pension costs is that it exited bankruptcy with continued high employee costs. The average cost of employing a cop in Vallejo this year is $230,000 (see chart above). Besides an average salary for cops of $124,000 a year, the biggest cost is $47,000 annually in Calpers payments.
The city manager of Stockton, writing in the Wall St. Journal, has taken the same position as Calpers, namely that the city won't seek to reduce pensions for employees through bankruptcy court. He's being challenged, however, by other creditors in the case, who have argued before the bankruptcy judge that Stockton should be kicked out of Chapter 9 because it hasn't made a meaningful attempt to reduce its pension debt.
San Bernardino seems ready to pick a fight with Calpers, on the other hand. Maybe city officials have seen the numbers from Vallejo and think it's simply not workable. Maybe they simply think that fighting Calpers makes as much sense as fighting other creditors in court claiming the city isn't doing enough to reduce its pension debt. Either way, the implications of this battle could reverberate throughout California.