Courtesy of Mish.
Now that a federal judge properly ruled pension obligations are not sacrosanct (see Lesson for Union Dinosaurs) the spotlight is once again on union dinosaurs in California.
Bankrupt San Bernardino foolishly did not attempt to shed pension obligations in bankruptcy, but perhaps it can now reconsider.
What about Stockton and Vallejo?
On April 1, 2013 Judge Rules Stockton CA Bankruptcy is Valid, City Acted in Good Faith. Hopefully Stockton will follow inevitable pension cuts in Detroit.
Second Chance for Vallejo
Vallejo had a golden opportunity to shed pension obligations in its first bankruptcy. When the city failed to do so, I made an easy prediction: Within years, Vallejo would be back in bankruptcy court.
That prediction appears well-founded. On October 20, 2013 I penned Vallejo, Mired in Pension Debt Again; Lesson for Stockton and Detroit – Shed Those Pension Obligations Now!
My comment from above: “Stockton and Detroit have a choice. They can cut pensions now, or cut them later in a second bankruptcy, just like Vallejo will.“
Will Stockton get it right? Hopefully, but some things will depend on Detroit. We have not yet seen the final ruling, but steep haircuts on pension promises and unsecured general bonds should be forthcoming.
Battle in San Jose
The battle in San Jose, population 983,000 and California’s third-largest city, is of a similar nature.
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