The celebration can’t rival that of the World Series Champion San Francisco Giants, but California pension fund CalPERS also won big this week: A federal judge ruled today that the city of Stockton’s bankruptcy plan passed muster, and workers’ pensions wouldn’t be touched. The LA Times reports:
A federal bankruptcy judge approved the city of Stockton’s bankruptcy recovery plan, allowing the city to continue with planned pension payments to retired workers. […]On Thursday, [Judge Christopher M.] Klein said that workers had already taken hits in the bankruptcy. He said Stockton’s salaries and benefits for workers had been higher than those at other cities, but that workers had agreed after the bankruptcy filing to take big cuts, including eliminating the free medical care they received in retirement.“It would be no simple task to go back and redo the pensions,” Klein said Thursday.
This case has had workers and politicians all over the country in a state of suspense:
If Judge Christopher M. Klein had rejected Stockton’s plan and forced the city to slash its payments to CalPERS, it could have opened the door for other cities struggling with escalating pension costs to follow suit.
Most notably, Klein ruled earlier this month that workers’ pensions could be reduced during bankruptcy, just like the city’s other debts. This is exactly what every pension fund is afraid of: that U.S. bankruptcy laws trump the protections cities have set around their pensions. But with pension costs continuing to mount for cities throughout the country, it’s safe to say that pension funds have only won Game 1 (if that) of a long and difficult series.