I spent a pleasant hour yesterday chatting with a reporter about the Vallejo Chapter 9, the flagship (or Judas goat?) among municipal bankruptcies. The immediate hook is that Vallejo has proposed a plan; there's a hearing set on the disclosure statement for March 7. After (if) the city gets court approval on the disclosure statement it can solicit consents and then count the ballots. If it gets the right number of votes, it can ask the court to bless it, and if the court blesses the plan, then the plan becomes law--a kind of "judicial contract" to supplant whatever contract obligtions it bore when it came into the case.
Two things strike me in the plan: one, the employees sure are taking a big hit on their pre-BK claims--the papers are saying 20c on the dollar if they are luck. And two, the utter absence of any attempt to take on CalPers, the big California pension fund.. I suppose I can understand that the reluctance of the one little city (of 100,000+) to tackle the massive CalPers--evidently CalPers has made it clear that it regards itself as the protector of retiree rights and that it will fight tooth & toenail to make sure they are not impaired. But if no individual city has the right incentives to make a fight, will CalPers win by default? (For perspective--I gather retirees will take a huge hit on health care).
The other eye-popping point is the matter of how much of the haircut is being borne by newer, usually younger, employees at the expense of their seniors. Might make for some moments of rancor in the squad car or on the fire line.
I'm an old guy and I do get a sense I've seen all this before. That old/young split: they did it with pilots back in the early days of deregulation. Pilots used to get paid like doctors; the younger ones are lucky if they get paid like bus drivers.
And that whole rejection-of-labor-contract thingy: didn't we see this all back in the 80s with airlines, with meat packing, with steel? My take back them was that the unions just didn't believe it could happen to them until it did happen to them--now public employees are getting the same lesson. I don't mean to show contempt for the working man here: one, I'm enjoying my own public pension and two, I am soo glad I don't have to put on a uniform and hit the streets of Vallejo every morning.
People are talking about more municipal bankruptcies to come but I am skeptical: the city's success in the Vallejo case will likely lead to fewer rather than more public entity bankruptcies: once the public employee groups see what really can happen to them in bankruptcy, they may decide that it just not cost effective to fight the issue.
I also agree with my friend Ignoto who says Vallejo is a pretty good argument in favor of electing city officials for life so they have to clean their own poo off the carpet.