Stockton bankruptcy judge: “Straighten me out before I make some dramatic boneheaded mistake” on pensions. http://t.co/6blAtgbNYu
— Rich Saskal (@RichSaskal) July 9, 2014
Although the Detroit bankruptcy case gets the lion’s share of media attention, the bankruptcy proceedings in Stockton, California might have longer-term implications for muniland.
Detroit’s federal bankruptcy judge Stephen Rhodes quickly determined in his eligibility ruling that the city may reduce retiree pensions. But Stockton’s judge, Christopher Klein, has been making his way to a decision about the legality of cutting pensions for two years. Klein has set October 1 as the next date to possibly rule on the issue.
In Detroit there are essentially two parties involved in a reduction of pensions: the city and the retirees. Technically there are also service corporations, but in reality these are just legal shells to pass the city’s pensions payments through.
In Stockton there are three parties involved in the pension issue: the city, the retirees and a powerful state retirement system [CalPERS]. CalPERS has fought against a reduction of pensions in Chapter 9 bankruptcy proceedings in three California cities: Vallejo, Stockton and San Bernardino. CalPERS has even gone so far as to file an amicus brief for an appeal in the Detroit case.