Dan Walters

By Dan Walters
dwalters@sacbee.com
Published: Monday, Nov. 5, 2012 – 12:00 am | Page 3A

As financially troubled cities suspend their payments to California’s pension fund, federal bankruptcy judges may have the final word on the long-assumed inviolability of retirement benefits.

Neither Vallejo nor Stockton mentioned pension rights of current or retired employees when they filed for bankruptcy protection, even as they sought relief from holders of bonds and other creditors. But companies that had insured hundreds of millions of dollars in Stockton’s bonds mounted stiff resistance, contending that if they had to take a financial haircut, the city’s retirees should as well.

The California Public Employees’ Retirement System geared up for legal war, insisting that pensions are sacrosanct.

That issue is still pending, but the Sacramento bankruptcy judge handling the Stockton case ruled in a related issue that Stockton’s contractual health care obligations to its retirees could be voided under federal bankruptcy law, thus heightening legal uncertainty about pensions.

Then San Bernardino filed for bankruptcy protection, listing CalPERS as its largest single creditor at more than $140 million, and stopped making pension fund payments.

Once again, CalPERS geared up for legal war and asked the judge handling the San Bernardino case to reject the bankruptcy petition, saying the city was trying to improperly renege on its pension debts.

That issue, too, is still pending.

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