Thursday, March 19, 2015

California public workers may be at risk of losing promised pensions

The California Public Employees' Retirement System's headquarters is in Sacramento. (Carl Costas / For The Times)
By MELODY PETERSENcontact the reporter
Judge says cities in bankruptcy are free to cut pension obligations in the same way they can cut other debts Two firms in San Bernardino bankruptcy say it's illegal for city to keep paying CalPERS while they get nothing

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.

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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."

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