This is a rush transcript from "Your World," August 2, 2012. This copy may not be in its final form and may be updated.
ERIC BOLLING, GUEST HOST: Drowning in debt, another California city taking the plunge into bankruptcy.
San Bernardino becoming the third to go bust since June.
On the phone with us now, the city's Democrat mayor, Pat Morris.
Pat, thank you very much for joining us.
Tell us -- today was a bad day, I guess, right?
PATRICK MORRIS (D), MAYOR OF SAN BERNARDINO, CALIF.: Well, actually, it was yesterday, Eric.
MORRIS: We filed an emergency petition for Chapter 9 bankruptcy, yes.
BOLLING: And why did you have to do that, sir?
MORRIS: Well, we could not pay our bills, essentially.
We had a shortage of cash at the bank to pay our wages and to pay for essential services. And so we had to seek the protection of Chapter 9 to allow us to do that and defer certain obligations to enable to us pay the bills.
Let's talk a little bit. If I can, can I just walk you through this a little bit? It's a bankruptcy. We should know about it. What are your revenues, annual revenues, sir?
MORRIS: One hundred and twenty-one million.
MORRIS: One hundred and sixty-five million.
BOLLING: So you're $45 million in the hole each year.
What about your pensions? What part of that is pensions?
MORRIS: A substantial commitment we have to pensions, that is probably 13 percent. It’s rising to 15 percent in the next two years and it is going to go up every year substantially.
BOLLING: All right. Mayor, what has this bankruptcy allowed to you do? Why declare bankruptcy?
MORRIS: Well, it allows us to work with our creditors to rearrange our financial affairs.
There are some things we can do and some things we can't do. What we can do is extend long-term obligations. We do not have a great many of those, quite honestly. Our essential problem relates to our labor, the cost of labor.
BOLLING: Cost of labor being the cost of labor, current cost of labor and cost of labor in the form of pensions, right?
MORRIS: That is right.
So, now, will it allow you to renegotiate what you pay people who have -- they will say, look, we did our 20 years or whatever we did. We deserve this.
What does that allow you to do? Does it allow you to change the deal going forward to them?
MORRIS: We can change the deal going forward. We can't change the deal that has been.
MORRIS: I say going forward.
MORRIS: With new employees, we set the bar higher. We set a higher retirement age. We set a more modest set of expectations with regard to retirement benefits. We have those employees share in the burden of the retirement, which has historically not been the practice around here.
There are a whole bunch of new opportunities that arise as a result of bankruptcy and the negotiations that will take place under the course of...
BOLLING: Mayor, has Governor Brown talked to you about this? The state of California is in at least a similar situation with CalPERS and unfunded liabilities in California and budgets that are exceeding revenues.
Has he spoken to you about maybe looking to do the same thing for the state?
MORRIS: Well, I don't -- no, he hasn't.
Quite honestly, he has got his hands full with the budget deficit that is soaring right now. And he has got a plan to fix that. It includes new taxes. Whether it will pass in November is the open question. But, currently, he has a plan at least to balance the state budget.
But he doesn't have a plan right now -- actually, he does have a plan. The legislature has not acted on his plan to begin to address the issue of pensions and benefits and health care. He put out last October a 12-point program for California which would substantially alter for all public employees in the state, state employees, county, city, special districts, a whole set of new parameters which are quite impressive, if we would but adopt them as state mandates.