The rare good news may be more the product of timing than anything anyone did.
A settlement is in the offing that will put to rest the ill-fated 2012 Proposition B pension overhaul, and it might not take much of a financial bite out of the city coffers, if any. Not long ago, cost estimates of making whole thousands of workers who were denied pensions ranged from
But the rising stock market has lifted a lot of boats, including the 401(k)-style plans given to those employees in lieu of pensions. That could be a big factor in the settlement.
The legal dispute and the emerging resolution stemmed from the the pension scandal in the early 2000s that ripped through
The precipitating pension underfunding scheme caused widespread economic and political damage, and tainted
A mayor and other top officials resigned, the city's credit rating was destroyed, financing for
The pension system's costs to the city have escalated since, diverting money that could be used for public services. That is expected to continue for several years before the payments eventually start shrinking.
A handful of officials were prosecuted by local and federal authorities, though none was convicted.
But before delving too far into the past, let's get back to the present.
The yearslong court battles over Proposition B came to an end
Proposition B, which was overwhelmingly approved by voters, prohibited new city employees except police officers from receiving pensions. Instead, they were given retirement plans similar to 401(k)s that were funded by contributions from both the city and the workers. The move shifted the risk of market volatility from the city to the employees.
His election in November, the passing of the legal deadline, and the muscular stock market all came together to signal now is the time to move on.
Unwinding the measure will be complex but the potential market cushion may make it easier. About 4,500 employees hired since Proposition B went into effect in 2012 have been affected.
Those workers may have a choice whether to start their pensions going forward or make them retroactive. The latter potentially will cost some of the employees a lot of money — likely out of their 401(k)-type plans — but that would give them larger pensions for life.
The bottom line for
That does not mean the city's pension worries would be over.
Those costs would grow with future raises for city employees. Studies have concluded that salaries in the city's workforce are generally lower — in some cases substantially — than in other municipalities.
There's some irony that the stock market may help the city out of this jam because, in a way, a robust market contributed to creating it.
In 1996 and 2002,
It turned out to be a losing bet as investment returns fell off. That may be a lesson for the stakeholders in the current pension situation: Solve this while the market is still hot.
The scam was brought to light by
She was publicly vilified by other board members and city officials. Board members had threatened to put her under citizens arrest, and then call the police, if she didn't leave a board meeting. That plan was diffused when Shipione agreed to leave. Nevertheless, they voted to file ethics charges against her, which were eventually dismissed by the city's ethics commission.
The financial house of cards she warned about collapsed. Several city officials resigned and were brought up on various criminal charges involving accusations of fraud, conflict of interest and more. Then-Mayor
In 2004, Standard and Poor's suspended the city's credit rating, which wasn't restored until 2008. Among other things, that delayed the city's refinancing of bonds for the construction of
Earlier, the city approached the pension fund board for a stadium construction loan because it was having difficulty finding buyers for bonds amid lawsuits over the project. City officials eventually found financing elsewhere, but it was expensive.
Shipione not only was proved right, but, eventually was lauded by a wide variety of organizations and individuals across the region.
The coming pension resolution may close the book on the Proposition B saga, but it won't erase this ugly chapter in
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