Detroit Does to Pensions What SD Officials Said Couldn’t Be Done

Tuesday was a big day for pension changes.

The Illinois Legislature pushed through a dramatic pension cut and a federal judge gave the go-ahead for Detroit to cut pensions through bankruptcy proceedings. Even though pensions have dominated San Diego politics for the better part of a decade, no changes to the pension system here appear to go as far in cutting pensions for current workers as the moves made in the Midwest yesterday.

Pension cutting through bankruptcy became taboo for former Mayor Jerry Sanders and City Attorney Jan Goldsmith after a task force of business leaders impaneled by Sanders raised the issue in late 2009. Sanders said it couldn’t be done.

“Bankruptcy cannot be used to void employee pension benefits once they are vested, which occurs the first day of employment,” he wrote in a 2010 op-ed.

Detroit’s federal bankruptcy judge, Steven Rhodes, disagreed.

“Pension benefits are a contractual obligation of a municipality and not entitled to any heightened protection in bankruptcy,” Rhodes said Tuesday.

Former Sanders spokesman Darren Pudgil and I had this exchange on Twitter Tuesday night. (Note that my use of “jerks” was meant as a cheeky reference to the ex-mayor’s PR flaks.)

@Pudgil Hmm? You Sanders jerks were so jerky about this when I wrote about it. http://t.co/6bQ3a8LkX2

— Liam Dillon (@dillonliam) December 4, 2013

@Pudgil Ah, the old blame Jan defense. 🙂

— Liam Dillon (@dillonliam) December 4, 2013

Through a spokesman, Goldsmith said the main points from his own 2010 op-ed on pensions and bankruptcy still stand: San Diego could reform its pension system without bankruptcy, and the city wouldn’t qualify for bankruptcy because it’s not insolvent. Goldsmith also noted the judge in the Detroit case hadn’t made a final decision yet.

“It will be interesting to follow the Detroit case if the judge, in fact, changes vested pension rights over objections and there are appeals,” Goldsmith said.