CalPERS, whose pensions are burdening cities, is suing to challenge San Bernadino’s eligibility for bankruptcy. The pension giant wants the city to pay up.
Just one problem: San Berdoo has pitched off the cliff into uncontrolled default. CalPERS is suing a stone for blood. Nevertheless, CalPERS evidently wants to argue before a federal judge why the state pension system should be above federal bankruptcy law.
If a federal judge writes a ruling explaining why CalPERS contracts can be impaired under federal law, the case will cast light on Stockton’s bankruptcy proceedings. It may bolster the efforts of bond insurers to force Stockton to share the pain with CalPERS and cut pension payments here (the city wants to leave pensions untouched).
If the Stockton is forced to cut pension payments, expect more police to quit, and other employees, too. That would spell trouble.