Stockton Closely Watching San Bernardino’s CalPERS CaseDecember 3, 2012 – In The News
Stockton’s bankruptcy may grow into a mammoth fight over public employee pensions with reverberations felt throughout California and the nation. But Stockton may be taking a back seat as the California Public Employees’ Retirement System, which manages Stockton’s pensions, battles to the bitter end with Wall Street creditors and bond insurers.
“This is potentially the kind of issue that will go to the U.S. Supreme Court,” said attorney Michael Sweet, a partner at Fox Rothschild LLP. “CalPERS will be well represented in that fight.”
Upon filing Chapter 9, Stockton its strategy, which leaves intact its contract with CalPERS, the nation’s largest public employee retirement fund and the city’s largest creditor. While the city isn’t cutting CalPERS, it chose not to pay many of the creditors.
Those creditors are now challenging Stockton’s right to file for bankruptcy, arguing in part that the city didn’t negotiate in good faith by failing to ask CalPERS to take a hit.
That rising costs paid from the city’s coffers may agitate resident of Stockton and other communities, Sweet said, because there is no tangible value.
“It doesn’t fill potholes, keep libraries open or put another cop on the street, he said. “It’s really hard for folks to swallow.”