City retirees suing Stockton over health benefit cuts

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Newsroom more American cities are on the brink of bankruptcy or already flat broke.

Now some folks who live in those places are fighting back saying it's not their fault.

Retired public workers are suing Stockton California the largest American city ever to file for bankruptcy.

Stockton is making those retirees start paying premiums or lose their health coverage.

The workers say the city promise them benefits for life.

Stockton is the largest of three cities in California to file for bankruptcy and over the last two weeks.

Similar story in Scranton Pennsylvania the police and firefighter unions have filed suit.

After the -- slashed salaries to minimum wage.

He says it's the only way to cover the nearly seventy million dollar deficit.

And it's not just public workers feeling the squeeze Scranton mayor has proposed a 78%.

Property tax hike over three years.

To pay off the city's -- Trace Gallagher in our West Coast news hub and it turns out Trace cities all across the country -- in a lot more debt -- we realize.

-- and don't forget these cities are obligated -- to pay their pensions that's always a huge chunk of city revenue and now Moody's investors which is the credit agency of Wall Street.

Has looked at the pension funds of all fifty states -- -- and 8500.

Cities and counties.

And they have found that they are 2.2.

Trillion dollars.

Underfunded.

And here's why the city's invest their pension funds.

And they bank -- getting between seven and a quarter and eight and a quarter percent return but there -- getting between four and 5% so look at that.

-- for example if your pension liability is ten billion at 8% it jumps to thirteen point five billion at five point 5% which is a big gap listen.

They keep assuming they're gonna return 78% a year.

Even the stock market's been flat for the last ten years so the fact that they continue to assume such high returns he's only gonna put them further into debt.

-- goes up revenue goes down and the credit ratings also go down -- and losing that credit rating makes everything more expensive.

Just like if your credit rating went down in my went down we have to pay more for loans there are a lot of cities around the country that are having to take out loans to cover those pension costs and we look at this map right here.

Four cities already have had multiple agencies downgrade their credit we're talking about Detroit Littlefield Texas Woonsocket, Rhode Island.

East Providence, Rhode Island 22 other cities have been downgraded by at least one credit agency and that list will grow listen.

This is just spiraling effect because as their financials get worse movies -- -- downgrading them and keep seeing interest rates go higher and higher eventually again you're at a point where you're out of money and yet to claim bankruptcy.

And Moody's by the world would get adjusting their ratings sometime late summer early fall -- Trace Gallagher in Los Angeles -- -- -- doubt clue.

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City retirees suing Stockton over health benefit cuts

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