“I’ve concluded the pension could be adjusted,” said U.S. Bankruptcy Judge Christopher Klein, in a federal ruling on Stockton’s bankruptcy, in what could be a harsh precedent for California’s struggling public pension system (CalPERS) to cope with. The LA Times has the details:
Stockton does not want to reduce its pension payments, but Klein ruled that option could be on the table in the bankruptcy proceeding. The judge must still rule whether to accept Stockton’s bankruptcy plan, which does not include cuts to pension payments.The decision came after a large creditor of Stockton, which filed for bankruptcy protection in 2012, asked the judge to reduce the amount the city owes to the California Public Employees’ Retirement System, the nation’s largest public pension fund.
CalPERS’ lawyers immediately got in front of the story, claiming that they don’t believe the ruling is setting a precedent. While it’s true that the judge has yet to rule on Stockton’s own public pension-friendly proposal for bankruptcy, the fact that a federal judge has ruled that bankruptcy law supersedes California’s own statutes on pensions certainly counts for something. Public pension managers across the United States just sat up and took notice.