By Marc Lifsher
November 2, 2014

Stockton employees and retirees avoided pension cuts when a federal judge last week approved the San Joaquin Valley city’s plan to emerge from bankruptcy.

U.S. Bankruptcy Court Judge Christopher M. Klein opted to protect pensioners’ payouts despite ruling earlier that Stockton, population 298,000, could break a contract with the California Public Employees’ Retirement System.

But that doesn’t mean that municipal employees — in California and across the country — have nothing to worry about if their governments seek protection from creditors.

All they have to do is look to Detroit, the nation’s biggest town to go bust, to see what could happen to retirees’ monthly checks. A bankruptcy judge Friday is expected to approve a Motor City plan to end its bankruptcy that pares pensions by 4.5%.

The different rulings in Stockton and Detroit “are two test cases for local government insolvency,” said Michelle Wilde Anderson, a Stanford Law School professor. “Retirees … are watching them closely.”

Meanwhile, voters in another bankrupt city, San Bernardino in the Inland Empire, vote Tuesday on a ballot measure that would change the way that police and fire pay is calculated.

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