Dan Walters

By Dan Walters
dwalters@sacbee.com
Published: Monday, Sep. 17, 2012 – 12:00 am | Page 3A

The public pension reform legislation that the Legislature and Gov. Jerry Brown adopted very carefully avoided any changes of current pensioners’ benefits and those of future recipients now on state and local payrolls.

Not only would that have been politically impossible, but it’s widely assumed that pensions are protected by the state constitution’s ban on “impairing the obligation of contracts.”

Therefore, all of the pension benefit changes apply only to future employees.

But is the legal barrier to changing current pension promises absolute?

Or could Stockton’s municipal bankruptcy filing punch a hole through it?

Under bankruptcy protection, Stockton wants those who hold millions of dollars in city-issued bonds – or their insurers – to take a haircut, but it doesn’t reduce the $29 million it pays each year to the California Public Employees’ Retirement System. That doesn’t sit well with the bond insurers.

Assured Guaranty Ltd., which insured many of those bonds and could lose over $100 million, complained in a bankruptcy court filing that Stockton “targeted its bondholders and left CalPERS and serious labor concessions off the negotiating table.”

Another insurer, National Public Finance, added, “Rather than face the hard realities imposed by its unbearable liability to Cal-PERS, the city takes a pass.”

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