California's San Bernardino seeks job, service cuts while in bankruptcy

Wed Aug 29, 2012 9:57pm EDT

* Pre-bankruptcy budget looks to cut costs by 30 percent

* Across-the-board cuts from mayor's office to IT department

* Plan will likely face union opposition

By Tim Reid

Aug 29 (Reuters) - Officials in the California city of San Bernardino, which filed for bankruptcy this month, presented a plan on Wednesday to slash its budget by 30 percent and eliminate more than 100 jobs and cut services.

The 71-page plan, presented to the city mayor and council in a special closed session - and unexpectedly released publicly on Wednesday evening - asks for the elimination of over 100 full-time city jobs, from the mayor's office, through city departments and in the fire and police services.

Many other vacant jobs will not be filled and some part-time jobs will be eliminated. The plan also looks at cutting funding for the public library, and evaluations of whether to close the city cemetery and various community and senior centers.

San Bernardino is the third Californian city to file for bankruptcy protection since June, following Stockton and Mammoth Lakes. Analysts believe more cities will likely follow given the severity of California's budget crisis.

When San Bernardino, a city of about 210,000 people 65 miles (105 km) east of Los Angeles, filed for Chapter 9 bankruptcy protection on Aug. 1, it cited a $45.8 million budget deficit and a general fund - used to pay its employees and fund other essential services - essentially depleted.

The city has been without an official operating budget for this fiscal year. It approved a short-term emergency plan last month that expires in four weeks.

The budget presented on Wednesday by the city manager's office will serve the basis for a "pendency" plan that will serve as San Bernardino's operating budget through the bankruptcy proceedings, which could take many months.

Although the plan's authors acknowledged the severity of the proposed cuts, they also conceded they will still not solve the city's fiscal crisis.

They said the job cuts, together with other savings like the consolidations of departments, will lead to savings of over $22 million, but "do not close the $45.8 million gap for this fiscal year."

Further, they wrote, the cuts do nothing to address last year's $18 million cash deficit or begin to fund the more than $300 million in unfunded liabilities.

By far the biggest unfunded liability facing the city is its pension obligations for its public employees, especially its police and firefighters. Successive councils since the 1990s have awarded those workers ever more generous retirement benefits.

According to the city's bankruptcy filing, its unfunded pension costs to California's public retirement system are $143.3 million.

The three California bankruptcies are being closely watched by markets as they will be test cases for how far cities can reduce or eliminate their obligations to bondholders and pension funds.

The plan will likely face opposition from employee unions, particularly those representing the police and firefighters.

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