voiceofsandiego.org | News. Investigation. Analysis. Conversation. Intelligence. - Explainer: Are Pensions Fair Game in Bankruptcy?: "Since last fall, talk of municipal bankruptcy has wormed its way back into public debate at the city of San Diego."
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The city has a $2.1 billion obligation to the public employee pension funds. There is a difference of opinion over whether they can make this go away by filing for municipal bankruptcy.
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Only $2.1 billion? We'd kill for that kind of liability here in Illinois, where the state liability ALONE is something like seven times as much per state resident. But of course states can't declare bankruptcy. And the only prominent Illinois politician who has actually uttered a sentence along the lines of "raise taxes and close the pension scheme to new hires", namely Governor Quinn, is laughed at by his own House Speaker. And no other Illinois politician's numbers add up.
From about the 1830s to the 1930s, US states had a way of dealing with situations like this. They'd go somewhere else, usually London, find some mugs to buy bonds, and then default on them. Of course, trying the same strategy today would be a little tough because you wouldn't have the old "growing economy" and "virgin lands waiting to be settled" sales pitches.
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