Judge rules loss could be imposed on Calpers in Stockton bankruptcy

Reuters ^ | October 1, 2014 | BY ROBIN RESPAUT

[Oldeconomybuyer]

The U.S. bankruptcy judge overseeing Stockton, California's municipal bankruptcy trial on Wednesday ruled that the state's public employee retirement system, known as Calpers, could be forced to absorb losses along with other creditors.

U.S. Bankruptcy Judge Christopher Klein said the city's contract with the California Public Employees' Retirement System could be rejected.

While the judge ruled the city may impose losses on Calpers, he has not yet ruled that it must do so as part of its financial restructuring.

[House Atreides]

This ruling COULD lay the groundwork for some good news for Stockton taxpayers in the city’s bankruptcy.

[aMorePerfectUnion]

1st shot over the bow of Gov’t pensions. I read that there are $22 trillion of unfunded Gov’t pension obligations (all levels of Gov’t). They will not be paid when the crisis hits.

[kingu]

Mind, this is a multi-billion dollar question here. If Stockton does not have to repay CALPERS for all the dot boom bust investments, then there will be a stampede to bankruptcy court by cities and counties in California.

At the moment, the way CALPERs has been handling it is just requiring cities to pay the INTEREST that WOULD have been earned had those losses not happened, and not a penny of the principle... Since CALPERs generally promises a 15% return on investment, this is FAR higher than any normal interest rate that would be applied to a city backed loan.