The Showdown Begins: Calpers Sues Bankrupt City

[Valin]

Via Meadia:

11/28/12

 

The showdown between bankrupt San Bernardino and the Calpers pension fund we discussed last month is now underway.

 

Sam Bernardino, now bankrupt, has suspended payments to Calpers, the largest government worker pension fund in California and the county. The city is already so broke it is having trouble paying for normal services and is worried that it will be completely unable to meet its other obligations if Calpers insists on being paid in full and on schedule.

 

But Calpers wants its money anyway. In effect, it is demanding that pensions trump not just other creditors but also the city’s responsibility to provide vital services like police, fire, and education. Anxious to avoid setting a precedent that would allow other bankrupt cities to suspend their payments, Calpers is suing the city in a state court. Reuters reports:

 

(Snip)

[clearvision]

Like it. Unions pension versus people getting their water and trash picked up.

[Valin]

Judge Orders Calpers to Get in Line

12/22/12

 

San Bernardino just scored a victory in court in its struggle with Calpers, California’s state pension system. After entering bankruptcy this summer, San Bernardino had ceased payments to the pension fund, claiming that it doesn’t have the money to meet its pension obligations and still pay salaries for essential city services. In response, Calpers took the city to court demanding that the pensions be paid in full, bankruptcy or no.

 

On Friday, a federal bankruptcy judge ruled decisively in favor of the city, rejecting Calpers’ argument that pension obligations supersede any decision made by bankruptcy courts. Reuters reports:

 

(Snip)

 

San Bernardino has won the first round, but this fight is far from over. Calpers has already pledged to take its case to the Supreme Court if need be to claim its money. There’s a lot at stake—if this judge’s decision stands there will be nothing stopping every seriously strapped city in California, and there are many, from cancelling their payments as well.

 

(Snip)