It’s between CalPERS and Wall Street over Stockton’s decision to skin Wall Street but leave CalPERS pensions untouched.
The city may have chickened out against CalPERs (or picked other battles strategically) but Wall Street, with all its money and lawyers, is mobilized ”to match CalPERS brief for brief,” says this informative analysis.
The Thompson Reuters News and Insight article also says the city and CalPERs may be on the losing side. When the federal bankruptcy judge refused to grant retirees an injunction stopping elimination of lifetime retiree medical, he rejected the retirees’ argument that the city was violating the Contracts Clause and California law.
“The Contracts Clause, he said, bans a state from passing a law that interferes with contract obligations but doesn’t block the U.S. Congress from such action. “This asymmetry is no accident,” wrote Klein, who proceeded to explain that the whole purpose of federal bankruptcy laws is to permit the impairment of contracts … (italics mine).”
The stakes in this case are enormous. If Wall Street prevails, then Gov. Brown and the legislature won’t have to pass pension reforms; Stockton will have paved the way for involvent cities to do it themselves.