RIVERSIDE–(March 18) U.S. Bankruptcy Judge Meredith Jury, the federal judge hearing San Bernardino’s bankruptcy case who in September ruled the city could abrogate its contract with firefighters, this week extended that ruling to include the city’s police officers.
San Bernardino’s bankruptcy filing in 2012, following years of touch-and-go problems with its finances, set off a series of hard fought battles with its employee unions and the California Public Employees Retirement System (CalPERS).
While stiffing a number of its creditors, vendors and service providers, San Bernardino is struggling to put its financial house in order and recover from years of deficit spending so it can exit bankruptcy and bring its future expenditures in alliance with its future revenues.
San Bernardino’s situation is exacerbated by provisions in its municipal charter that put in place a system which essentially guarantees the city’s safety employees – fireman and police officers – will be paid at a level equal to the average paid to safety employees in comparatively sized cities in California. City officials have claimed that this requirement had contributed to the erosion of the city’s finances and they asked Jury for permission to suspend the terms of the city’s contracts with the police and fire unions so the city can get back on its feet financially.
When the city ceased making scheduled payments to CalPERS, lawyers for that entity made arguments that CalPERS had a special status that moved it to the front of the line of the city’s creditors. The court did not confirm that assertion, and a compromise was reached between CalPERS and the city over the continuation of payments to CalPERS subsequent to the some $14 million in missed payments during 2012 and 2013. Union attorneys and representatives of the firefighters and police officers sought to impress upon Jury that the city’s safety officers had special status as well, per the city charter. But Jury has consistently ruled that the city should be granted wide leeway in dealing with the financial burdens it faces so it can exit bankruptcy as soon and as expeditiously as possible.
Jury has not dictated to the city what it should do, but merely ruled on what it can do, while encouraging it to devise a pendency plan that will allow it to return to some semblance of financial order. She said the city could, if it chose, insist upon both firefighters and police officers picking up a greater percentage of their respective pension costs than was the case previously. Jury’s ruling on March 17 provoked San Bernardino Police Officers Association attorney Ron Oliner to brand this type of sacrifice on the part of the police officers as “cost-sharing,” which he said was out of compliance with state law. He intimated an appeal on behalf of the union.
Though there is no assurance the city will actually utilize the freedom to the welsh on the police contract Jury has granted it, the city did last October impose a redrafted contract on the firefighters in accordance with Jury’s September ruling. The firefighters union is legally contesting that move.
City officials expressed frustration at the police union’s reluctance to get on board with the austerity plan the city has devised, which calls for sacrifices from all of the city’s employees. The city had sought to mediate a resolution to the dispute with the police union and last summer achieved what was referred to as a tentative agreement, but subsequent disagreements untracked that accommodation. In making its argument to Jury, the city told her that five of San Bernardino’s seven unions have accepted “modifications” to their contracts, including increasing employee contributions to their pension plans.
The city claims it is “burdened” by the contract it has with the police union and that continuing to pay the police officers in keeping with that contract will result in the city having “to run a deficit in its general fund.”
The city charter disallows the city reducing police or firefighter pay and a city-sponsored initiative to change that portion of the charter failed in November. Nevertheless, bankruptcy court is a federal institution and legal experts maintain federal law trumps state law.
The police union is contemplating testing whether that principle will hold true.