Calpers

The California Public Employees’ Retirement System’s headquarters is in Sacramento. (Carl Costas / For The Times)

By Melody Petersen
March 17, 2015

As millions of private employees lost their pension benefits in recent years, government workers rested easy, believing that their promised retirements couldn’t be touched.

Now the safety of a government pension in California may be fading fast.

Feeling the heat is the state’s huge public pension fund, the California Public Employees’ Retirement System, known as CalPERS.

The fund spent millions of dollars to defend itself and public employee pensions in the bankruptcy cases of two California cities — only to lose the legal protections that it had spent years building through legislation.

The agency’s most significant setback came in Stockton’s bankruptcy case. The judge approved the city’s recovery plan, including maintaining employees’ pensions, but ruled that Stockton could have legally chosen to cut workers’ retirements.

In his written opinion, U.S. Bankruptcy Court Judge Christopher M. Klein blasted CalPERS as “a bully” for weighing in on the proceeding to insist — wrongly — that the city had no choice but to pay workers their promised pensions.

Karol Denniston, a public finance lawyer at Squire Patton Boggs, said Klein’s ruling was “critical for every municipality in California.”

“Next time we see a Chapter 9 bankruptcy filing,” she said, “pensions will be up for negotiation just like every other creditor.”

The skyrocketing bill for pensions is a problem for cities across the state. Californians now owe nearly $200 billion for pensions promised to state and local government workers, according to an analysis by Adam Tatum, research director at California Common Sense, a nonprofit think tank.

Rising pension costs are eating up money needed for things such as fire trucks and street repairs, Tatum said.

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