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Jun 27 2012

Flap’s California Morning Collection: June 27, 2012

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Hearst Castle, San Simeone, California

Good Wednesday morning!

The California Legislature is in session.  Today’s schedule is here.

The California Assembly’s Daily File is here and the California State Senate’s here.

Tonight at midnight California Governor Brown must sign the California budget.

Gov. Jerry Brown has until midnight tonight to sign the budget, and both the Senate and the Assembly have scheduled sessions at 9 a.m. to vote on legislation needed to finalize it.

Click here to see the list released Tuesday of 21 updated measures they’re expected to consider. Brown may be sharpening his blue pencil already.

On to today’s California headlines:

Stockton council votes to go into bankruptcy protection

Years after betting on a sustained housing boom to bankroll a waterfront redevelopment and dole out salary and benefit perks to city employees and retirees, Stockton cashed in its chips Tuesday in a plan that will lead it into bankruptcy.

The City Council voted to approve an austerity plan, including stopping bond payments and making deep cuts in retiree health care, as part of a plan to file Chapter 9 bankruptcy.

The insolvent city of nearly 300,000 residents, home to America’s second-highest rate of foreclosure, is now certain of the additional ignominy of becoming the largest city in America to declare bankruptcy.

Only six years ago, Stockton had appeared to be a boomtown as median home prices shot up from $110,000 to $400,000.

Bursting with new tax revenue and anticipating 10 percent annual increases in its budget resources, Stockton cashed in by selling bonds for an urban renewal including a $68 million arena and invested $125 million in a pension fund that resulted in fiscal disaster.

On Tuesday night, in preparation for the bankruptcy filing, the City Council voted 6-1 to enact a plan to slash retiree health coverage starting this year and possibly eliminate it next year.

Stockton also will use bankruptcy protection to suspend contracts with its public employee unions to cut city employee pay and benefits. It will also stop bond payments as it seeks protection from creditors and renegotiates its debts.

Stockton to file for bankruptcy, will be largest U.S. city to fail

This Gold Rush-era port city, an epicenter of California’s agricultural exports, will become the nation’s largest city to seek protection under the U.S. bankruptcy code after its City Council on Tuesday stopped bond payments, slashed employee health and retirement benefits and adopted a day-to-day survival budget.

City Manager Bob Deis likened the process to cutting off an arm to save the body. He is expected to file bankruptcy papers immediately.

A Delta wind had scrubbed the Central Valley sky blue as residents gathered hours early for the 5:30 p.m. meeting.

Most knew what the night held; bankruptcy has been a long time coming. Stockton has been in negotiations with its creditors since late March under AB 506, a new California law requiring mediation before a municipality can file for reorganization of debt. It was the first use of the law, and policy analysts who watched its torturous and tedious progress have titled their report on it “Death by a Thousand Meetings.” Mediations ended Monday at midnight.

Recent council meetings have been boisterous and contentious. Tuesday night’s meeting was quieter, with an evident sadness on faces in the packed audience. Many residents said they were there mostly to hear for themselves that the day so long expected had finally come.

The Three Words That Made Pensions Untouchable

As it stands in California law, on the day municipal workers start their jobs, their pension benefits can only go up, not down.

This legal principle has been a bedrock behind the city of San Diego’s decade-long pension drama. Despite a growing pension debt that has dominated the city’s political discourse, reforms have focused on new employees, not the retirees or current workers who are owed the bill.

It’s one reason why the June pension initiative, Proposition B, stuck new workers with 401(k)s, yet did nothing to guarantee San Diego’s existing pension debt would be cut.

This legal principle is important, foundational even, to how California governments do business. And, according to a fascinating new article in the Iowa Law Review, it all goes back to three words in a 1917 California Supreme Court decision about benefits for a police widow.

At issue in that 1917 decision was the legal status of pensions. Are they bonuses granted to employees after their service to the government? Workers’ property akin to their houses or other possessions? Or part of their employment contracts?

The 1917 decision didn’t make a definitive call. Instead it used the three words, “in a sense,” to link pensions to unbreakable contracts for the first time. In the 95 years since that initial decision, courts in California and other states have expanded on that three-word phrase to the point where we are now with pensions. The article calls the legal principle the “California Rule.”

Shenanigans abound as final budget vote nears

 More legislative shenanigans appear to be in the works as state lawmakers prepare to vote on the final pieces of the state budget Wednesday.

One newly introduced budget trailer bill would create a statewide authority to negotiate union agreements for In-Home Supportive Services workers. The IHSS program is managed at the county level, where collective bargaining agreements are currently negotiated.

This new proposal, pushed by the Service Employees International Union and American Federation of State, County and Municipal Employees, would take collective bargaining power away from the individual jurisdictions that actually run IHSS and give it to officials in  Sacramento, the seat of union power.

Watch for this bill to be controversial with some moderate Democrats.

Another trailer bill raising eyebrows deals with Californians who qualify for both Medi-Cal and Medicare, which we wrote about earlier on the OC Watchdog blog. This bill would enroll so called “dual eligible” Californians in Orange and seven other counties into managed care plans, to save the state money on their health care.

Some California doctors have been concerned that this proposal would force them to accept low fees for their services, but the initial, proposed language of the bill tempered some fears. Initially, the bill said that doctors would be paid “according to the prevailing Medicare fee schedule” and would receive “the full Medi-Cal rates for Medi-Cal benefits.” From the doctors’ perspective that’s not so bad.

Recently, however, the language was changed to say that the state would “pay providers reimbursement rates sufficient to maintain an adequate provider network and ensure access to care for beneficiaries.” This new language has doctors very worried that they’re going to be forced to take peanuts for their services.

Enjoy your morning and Dan Walter’s Daily video: ‘We told you so’ on majority-vote budget

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