* Bankrupt city forced to hike salaries because of old
* Mayor decries "autopilot" wage increases during bankruptcy
* City due in federal court on Thursday
By Tim Reid
LOS ANGELES, March 19 The bankrupt city of San
Bernardino, California, approved over $1 million in pay
increases for police and firefighters despite claims it can
barely make payroll, let alone afford the salary hikes.
Monday night's pay increases, for a city that appears before
a federal judge again this week to plead for bankruptcy
protection, are a result of its charter. It mandates that pay
for safety workers must be tied to salary levels for 10 similar-
sized California cities, all of which are wealthier than San
The bankruptcy of the city 65 miles east of Los Angeles is a
national test case on whether the pensions of government workers
take precedence over other payments in a municipal bankruptcy.
It is a high-stakes issue for pension plans and their
beneficiaries, and for Wall Street bondholders who lend money to
Moves to have the city charter overturned, so the city can
set its own pay levels, have failed to get the majority needed
on the city council in the past year.
Council members opposing a charter change have received
campaign contributions from police and fire unions in past
elections. They argue that police and firefighters would leave
San Bernardino if they were not paid wages similar to other
In a largely symbolic vote because of the charter mandate,
the council voted on Monday night to approve $156,841 in
compensation for a few police and fire managers.
That followed a vote last week in which nearly $965,000 in
pay increases for rank-and-file police and firefighters - again
because salary levels for safety workers are set by a formula
calculated on wage levels set by 10 other cities.
Most of those cities have tax bases and property values
significantly higher than San Bernardino's - and none are in
bankruptcy. Average home values in other California cities
considered by the charter, such as Irvine or Pasadena, are three
times San Bernardino's.
Most California cities also have the power to set salary
levels for their own workers. Another California city currently
in bankruptcy - Stockton - has the power to set wage levels for
its safety workers.
San Bernardino filed for bankruptcy on August 1, citing a
$46 million deficit for the current fiscal year and little
leeway to meet day-to-day expenses, including payroll.
Fred Shorett, one of two council members to cast a symbolic
"no" vote on the pay increases as a way to protest the city
charter, said it was madness for the city to have wage levels
tied to wealthier cities.
"This ties our hands during these very difficult times,"
Pat Morris, San Bernardino's mayor, said during last week's
vote that during the city's bankruptcy, it was "remarkably
unwise" to be "on autopilot on our most expensive single item" -
that is, police and firefighter pay.
A federal bankruptcy judge has yet to rule on the city's
eligibility for bankruptcy protection.
The bankruptcy court proceedings are still in an early
stage, with the city and its creditors - notably Calpers, the
public employee retirement system and America's biggest pension
fund - wrangling over the production of financial records. The
next hearing is set for Thursday.
San Bernardino halted its twice-monthly pension payments to
Calpers in August, an unprecedented step for a city. Calpers
argues that it has primacy over other creditors in the
bankruptcy, a claim Wall Street bondholders dispute.