Bankrupt San Bernardino, California, voted on Monday to present a plan to a bankruptcy judge that seeks to balance its budget through deferring payments to the state's public employee pension fund and to the city's bondholders.
San Bernardino's council passed the plan after the judge overseeing its request for bankruptcy protection demanded an orderly budget be filed in court by Friday, Nov. 30.
San Bernardino's "pendency plan," intended as the city's operating budget as it works its way through bankruptcy, is aimed at closing a nearly $46 million budget deficit for the current fiscal year. It also seeks savings through cuts in jobs, pensions and overtime payments.
The plan runs to just 12 pages, in stark contrast to the pendency plan approved in June by Stockton, another California city seeking bankruptcy protection.
Stockton - a city of 292,000 85 miles east of San Francisco - produced a restructuring plan that ran to 790 pages. It came after over 90 days of mediation with the city's creditors.
San Bernardino, a city of 210,000 about 60 miles east of Los Angeles, avoided any discussions with creditors by declaring a fiscal emergency in July.
Its 19-month pendency plan calls for about $26 million in salary and benefit cuts. Another $35 million in savings would come from the deferral and renegotiation of payments to creditors, particularly the powerful state pension fund and holders of nearly $50 million in pension obligation bonds.
San Bernardino has already halted its biweekly $1.2 million payment to the California Public Employees' Retirement System (Calpers) since it filed for bankruptcy protection on Aug. 1.
The city calls the halted payments "deferrals," but under the pendency plan it would not resume any payments to Calpers until the 2013-2014 fiscal year. It also wants to negotiate its debt to Calpers so it can be repaid over 30 years.
Calpers, America's biggest pension fund which serves many cities and counties in California, is San Bernardino's biggest creditor. The city lists its unfunded pension obligations to Calpers at $143.3 million. Calpers says if the city halted its relationship with the fund immediately the debt would be $319.5 million.
Calpers has already formally objected to San Bernardino's bankruptcy filing. While it says it wants to negotiate with the city, it has also said it will ultimately take legal action to recoup any unpaid pension payments.
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