Which Fullerton Recall Candidates Will Rule Out Municipal Bankruptcy?

Bankrupt "Monopoly Man" in front of Fullerton City Hall

Fullerton council members would never really try this -- would they?

The Friends for Fullerton’s Future blog has two stories out since Friday on Democratic reactions to the Fullerton recall — one of which you see cross-posted just before this story.  One notes that the Democratic Party of Orange County Central Committee endorsed the Fullerton recall.  The cross-posted one notes that many of Fullerton’s liberal “old lions” took out an ad opposing it in the Fullerton Observer. Comments to each were … well, maybe they’re worth reposting in a later story, but that’s not what this story is about.

Many Fullerton Democrats seem somewhat conflicted about the recall.  I don’t know any who will defend police brutality; most seem to agree that FPD made some has made bad hires, including some who were involved in the killing of Kelly Thomas.  (Does this rise to a “culture of corruption” — or is this just pretty much how police departments, and other bureaucracies, almost everywhere operate?  Let’s just say that I’m not convinced that a police force hand-selected by Bruce Whitaker and Tony Bushala would be immune from rallying around the accused in blue after someone was killed.  It’s pretty much the nature of the beast.) If the water tax was truly and clearly illegal in all respects, then yes it should go.  (But what will Fullerton do without it?  I’m getting to that.)

It’s the third leg of the FFFF hot-issue tripod — the notion that public unions are bad, public employees are bad, public pensions are bad, and that they have long been an injustice foisted upon the citizenry — that I think could save the incumbents and that I think motivates the reaction of the liberal anti-recall Fullerton forces (of which I am not one.)  Put simply, the problem is this:

They are concerned that Tony Bushala and the FFFF claque of commenters, included candidates who might replace the incumbents, are completely nuts.

(Reading FFFF’s comments, as we’ll be doing later this week, does nothing to allay that fear — but I’ll emphasize up front that none the comments I’d cite on this point come from either Bushala or the FFFF-associated candidates.)

By “completely nuts,” I don’t mean hallucinating, delusional, paranoid, sociopaths — although there might be a touch of that in some cases.  I mean “nuts” in a policy sense: rabid, radical, reckless, irresponsible people who don’t mind wreaking havoc because someone else will end up paying for the damage.  I mean, in other words, that the critics’ concern — which I don’t know is valid — is the FFFF crowd is willing to consider drastic and uncalled-for solutions, which would do great harm to the city.  Beyond this, by not campaigning directly on those issues they are pulling a “bait and switch” on the electorate.

Is all of this true? I don’t know — but I can ask them!  In fact, I’ll do that below.

Here to me is the prototypical example of a jaw-dropping, reckless irresponsible policy — an example of policies that some people fear so much that they will vote against the recall if that is the best way to prevent a council majority that might implement them.  I present this policy not because I think that Sebourn, Levinson, and Kiger actually favor it, but because I want to give them a real clear chance to deny it — to commit to the electorate that this is NOT what they stand for.  (This assumes, of course, that they don’t.)

Here is the campaign issue that dares not say its name:

“To curtail its pension obligations, Fullerton should explore municipal bankruptcy.”

This is not the only possible terrible policy idea out there, but it’s among the most shocking.  In the past few months I’ve brought up the issue in comments both at FFFF and here, asking for people to reject it categorically as a possibility.  And I have not gotten the reassuring rejections that I would have expected.

So now I’m going to ask here — and I’m going to ask loudly:

Will City Council candidates reject this possibility, period?

If so, and if another few assurances are given, then I don’t think that the prospective three new members of the Whitaker claque are going to scare people enough that they’d rather live with “the devil known.”  But if they won’t reject it — quickly and loudly — well, then to me that is the real issue here: not only whether the incumbents deserve to stay in office (they don’t) but whether the cure of their potential replacements could be worse than the disease.

Is it crazy to think that the FFFF could explore a municipal bankruptcy for bargaining position?  Let’s take a look.

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The Google and I did some research.

(1) This is from FFFF, September 26, 2010; “English Major” writes on the future policy alternatives for the City Council in cruel economic times:

The chances of raising local taxes, like Don Bankhead did (and McKinley and Jones would have likely joined him) in 1993 seems dim. Nobody’s going to stand for it. Not even the ignoramuses who voted them in.

And this leaves us with the spectacle of the public employees fighting among themselves for their share of the diminishing fiscal pie. And to that I say: Amen! Competition is good. It causes us constantly to assess our priorities. It’s true that the cops and emergency service providers will have the advantage, standing, as they already do, at the head of the line. But will the public stand for library or park closures in order to fund these people? The RINO mantra of “public safety” can only take its chanters so far. Sooner or later reality demands a check.

And hovering in the back of the room, like the chorus in a Greek tragedy is the specter of municipal bankruptcy, Vallejo-style – the game changing possibility that all public administrators and employees should want to avoid like a plague. But the public may have reason to be more ambivalent about that prospect.

So cheer up!

That’s my emphasis there near the end; that’s my colorful double emphasis for that last line.  Fullerton could always go bankrupt — “so cheer up!”  Whaaaa’?

(2) One commenter has on several occasions cheerily discussed municipal bankruptcy without challenge:

First, if Fullerton cannot pay for the pension obligations they can easily get out of it! Really? Yup! A good ol municipal bankruptcy will work wonders. Then its up to a judge to decide how the assets of the city are divided up and what liabilities to dump! The judge may be of the municipal union persuasion, after all this is California. In that case, pensions will be considered more important to save than streets, sewer, water, fire, and other services.

Or, the judge may be an Orange County type where it won’t bother him or her to chop pension obligations down to a more reasonable level.

So Fullerton is looking at bankruptcy in the next 10 years due to the pension excesses of the dithering dinosaurs!

No one seems to have batted an eye at this.

(3) Candidate Travis Kiger’s article “Ballot Challenge: Does Fullerton Really Have $500,000,000 in Pension Debt?” is built around the assertion that

Has Fullerton’s pension debt really risen to half a billion dollars?

Yes. According to the CalPERS pension system’s own analysis in this OCRegister article, the lump-sum payment to close out all of Fullerton’s pension liabilities (debt) right now is somewhere between $456,000,000 and $540,000,000.

Candidate and FFFF columnist Greg Sebourn commented in response to the story:

The fact remains that Fullerton is on the hook for $1,000,000,000.00 in unfunded pension liability and redevelopment debt.

Actually, the Register article only addresses the cost to Fullerton if it leaves CALPERS:

Last month, the fund’s board decided to recalculate the unfunded liability of any agencies that want to leave the system, using a discount rate of 3.8 percent instead of 7.75 percent.

That means that a city that believes it owes a bajillion dollars will be told it owes something closer to four bajillion if it tries to leave.

Be that as it may, though, this is apparently what Kiger and Sebourn believe.  If true, might the option of municipal bankruptcy look good to them?  (But, if municipal bankruptcy is the drastic cure, are they right about the disease?  It looks to me like Kiger’s assertion depends on the presumption that Fullerton will leave CALPERS; has he even campaigned on that?)  Either way, if they see municipal bankruptcy as an appropriate option given this admittedly daunting (if accurate), shouldn’t this be an issue discussed in the campaign?

(4) I’m not sure whether FFFF has 100 regular commenters or 10 of them using 10 names apiece, so I don’t know if this is someone mentioned above or someone different, but here goes:

Bankhead, McKinley and Jones will be the pro-union pension trifecta that will bankrupt Fullerton. That’s the only way we’ll ever get out from under these pensions.

This was in response to Kiger’s article, in which he states:

The commitments we’ve made to current employees cannot be changed without a bankruptcy. The only lever we really have left salary and to a lesser extent, contributions. Cut salaries, raise employee contributions… or go broke.

(5) A commenter responds to an eager-seeming question here

Yes, … things have crashed as you put it and there isn’t enough money….what to do, file bankruptcy perhaps and start over?

with a reasonable point:

Bankruptcy is a bad option for cities. It’s a last resort, no way to save the city option. Most cities will be able to balance their budgets and survive just fine. Most have. Bankruptcy also doesn’t just let cities off the hook for retirement pension funds. That’s why you have heard of what, maybe 2 cities go the bankruptcy route?

Later in the comments section, someone disagrees:

“[Police engage in] dangerous public service”…..blah blah blah

I would rather protect myself and have my grandchildren have a bright fiscal future.

We just need to file bankruptcy and start over.

Someone save us from these heroes who start retiring at 50, just pitiful.

(6) Here’s a nice exchange on the topic under this post back in June 2010:

The only way out of this extortion is to declare bankruptcy and let a court renegotiate pensions with retirees.

To this, one commenter added:

This is the ONLY answer… Ca. BANKRUPTCY!!!

But another commenter objected:

You bankruptcy fans: Please keep current on things, will you! You should have learned by now that the State of CA cannot claim bankruptcy, and for cities and counties, bankrupty is no magic route to disbanding pensions. The only three entities in the State to ever go bankrupt, Desert Hot Springs, Orange County, and Vallejo still have fourishing public employee pension plans. Otherwise, Vallejo is still in the dump overall and will be for years to come. Any citizen wishing to see their own entity go bankrupt should be tried and found guilty of sedition.

I stopped a few pages into the Google search, but there’s more.  (I’ll also skip, for now, the time in the past few months where I have asked Tony and others from FFFF whether they really did think that municipal bankruptcy was a legitimate option for the city to consider — and unless I’m forgetting something, I don’t think that I’ve gotten a reply.  I have to leave something for the follow-up.)

(Note also: the State of California has recently passed legislation that made it harder for municipalities to pursue bankruptcy — and an even tougher bill has been introduced.  If you want that background, read the story and some interesting comments here. )

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I am not ascribing the views of FFFF commenters regarding municipal bankruptcy to Kiger, Levinson, Sebourn or other candidates who frequent or are positively discussed on FFFF.  I don’t presume a single thing about their own views, although I am very much looking forward to hearing what they are.  The above list exists simply to make a point:

Yes, people who are obsessed with Fullerton’s pensions are discussing this possibility.

It’s up to the recall candidates — not just the three I name above, but all 13 of them (and I suppose the three incumbents as well) to either acknowledge that they are “ruling this in” or else give an ironclad commitment to rule it out to address this issue one way or the other or to be called out for chickening out.  I think that Kiger and Sebourn are dramatically overstating Fullerton’s realistic current pension obligations — but they don’t!  If the problem is this dramatic, then how dramatic of a potential cure do they envision?

I’m rooting for them to say “no, we would never do this” — which would make me sleep a little more easily about the prospect of their election.  But if that’s not where they come down, then don’t voters have a right to know? Shouldn’t this be part of what Fullerton voters discuss?  With such potential stakes, isn’t it not only responsible for the media to ask, but irresponsible for the media not to ask?

So the question is simple:

“Would you ever consider exploring municipal bankruptcy as a viable possible response to Fullerton’s pension obligations and other liabilities?”

I’ll list the names of each of the 13 candidates below and I’ll add their “yes or no” answers here and in comments as they arrive.

Don Bankhead’s seat:

Rick Alvarez —

Jane Rands — NO (4/30)

Greg Sebourn — MAYBE (4/30) see here.

Paula Williams —

Dick Jones’s seat:

Dorothy Birsic —

Glenn Georgieff — NO (4/30)

Michael Hakim —

Travis Kiger —

Roberta Reid —

Pat McKinley’s seat:

Doug Chaffee —

Barry Levinson —

Sean Paden — YES (5/1)

Matthew Rowe — A long, very thoughtful and reluctant MAYBE. (5/4)

About Greg Diamond

Somewhat verbose attorney, semi-disabled and semi-retired, residing in northwest Brea. Occasionally ran for office against jerks who otherwise would have gonr unopposed. Got 45% of the vote against Bob Huff for State Senate in 2012; Josh Newman then won the seat in 2016. In 2014 became the first attorney to challenge OCDA Tony Rackauckas since 2002; Todd Spitzer then won that seat in 2018. Every time he's run against some rotten incumbent, the *next* person to challenge them wins! He's OK with that. Corrupt party hacks hate him. He's OK with that too. He does advise some local campaigns informally and (so far) without compensation. (If that last bit changes, he will declare the interest.) His daughter is a professional campaign treasurer. He doesn't usually know whom she and her firm represent. Whether they do so never influences his endorsements or coverage. (He does have his own strong opinions.) But when he does check campaign finance forms, he is often happily surprised to learn that good candidates he respects often DO hire her firm. (Maybe bad ones are scared off by his relationship with her, but they needn't be.)