A judge ruled on Thursday that the bankrupt city of San Bernardino, California, could cut firefighter pension benefits as part of its bankruptcy plan.
The cuts would be in the form of higher pension contributions from firefighters and fewer hours of overtime. From Reuters:
In a tentative ruling, federal U.S. Bankruptcy Judge Meredith Jury said San Bernardino was entitled to unilaterally impose benefit cuts on the city’s firefighters, something their union had fiercely opposed.
Jury conceded that the cuts, which involve greater pension contributions by firefighters and reduction in overtime, were a hardship on the firefighters.
But she said the city had also been persuasive in showing that what it had been paying in terms of benefits to the firefighters was a financial burden, and being able to reject the firefighters’ collective bargaining agreement was a key step to forming a bankruptcy exit plan.
Last month the city reached an undisclosed deal with its police union. In June, it also reached a deal – subject to a judicial gag order – with its largest creditor, the California Public Employees’ Retirement System (Calpers).
The city only began face-to-face negotiations with some of its other large creditors – bondholders and insurers including Ambac Assurance Corp – last month.
The judge has made clear that it will not be before next year that she expects the city to produce a bankruptcy exit plan, known as a plan of adjustment.
San Bernardino filed for bankruptcy in 2012. It’s 2012 budget deficit was $45 million.