US Bankruptcy Court

By Dale Kasler
01/20/2015 8:58 PM

A bankruptcy judge Tuesday dismissed an effort to keep Stockton mired in bankruptcy while a creditor challenges a decision that lets the city pay its CalPERS pension bills in full.

U.S. Bankruptcy Judge Christopher Klein dismissed an attempt by bondholder Franklin Templeton to suspend his October decision approving Stockton’s debt-repayment plan. The plan calls for the city to pay CalPERS in full, keeping its pension plan intact, while paying Franklin Templeton just 12 cents on the dollar for a $36 million bond debt.

Earlier in the case, Klein ruled that Stockton had the legal right in bankruptcy to scale back its CalPERS payments, which run about $29 million a year. But by agreeing a few weeks later to the city’s plan to continue making full payment to CalPERS, the judge was acknowledging that public pensions in California are for all practical purposes untouchable, according to several legal experts.

Franklin Templeton is appealing the October ruling to the 9th Circuit Bankruptcy Appellate Panel in Pasadena.

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