By Dale Kasler
Published: Sunday, Dec. 16, 2012 – 12:00 am | Page 1A
Last Modified: Sunday, Dec. 16, 2012 – 7:09 am

The bland bureaucracy that dispenses pension checks to half a million Californians has taken on a new identity: fierce and unyielding champion of government retirees.

Facing an unprecedented legal fight over the cash it receives from member cities and counties, CalPERS has come out swinging. It has gone to court to keep the dollars flowing, while portraying itself as the only thing standing between helpless retirees and greedy Wall Street types and irresponsible politicians who would grab their pensions.

“If we do not stand up for our members, then who will?” CalPERS declared on its website last week.

CalPERS’ aggressive posture stems from the twin bankruptcy filings of Stockton and San Bernardino. The pension fund maintains that both cities are legally obligated to keep up their annual contributions to CalPERS – more than $20 million apiece.

That stance has prompted legal protests from the cities’ bondholders. They say CalPERS, in its zeal to get paid, is illegally trying to jump ahead of other creditors in the bankruptcy cases.

San Bernardino itself has joined the fray against CalPERS, saying it literally could be forced out of business if it doesn’t get a breather on its pension obligations. Not surprisingly, the city’s retired workers have weighed in on CalPERS’ behalf.

No decisions are expected in either case until sometime next year, said CalPERS general counsel Peter Mixon.

Final resolution, in fact, could take years. Karol Denniston, an expert in municipal bankruptcy law, said the fight over CalPERS could reach the U.S. Supreme Court.

Denniston said CalPERS has no choice but to insist on getting paid. If Stockton or San Bernardino’s payments to the pension fund are cut back, then other member cities in financial distress could be tempted to try to reduce their contributions.

“It’s going to open the doors to everybody else,” said Denniston, a San Francisco lawyer who helped write a year-old state law on municipal bankruptcy. “It’s big stakes.”

The California Public Employees’ Retirement System says it’s simply standing up for the little guy.

“Our responsibility is to look out for the members and their pensions,” board President Rob Feckner said in an interview. “Nobody else seems to look at that – they’re looking at their own interests.”

Claims of scapegoating

Besides the state, CalPERS handles the pensions of about 2,000 cities, counties and school districts.

CalPERS officials say retirees are being scapegoated for problems caused by foolhardy local officials who overspent their budgets and Wall Street bondholders who should have understood that lending money to municipalities carries the risk of not getting repaid.

“The members did their jobs,” Feckner said. “They came to work and were promised ‘X’ when they retired.”

A $245 billion heavyweight, CalPERS has helped shape the very structure of public employee benefits in the state. It has the unilateral authority to set annual contribution rates from the state and participating local governments.

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