Breaking news from the city of Stockton: A federa bankruptcy judge has approved the city’s plan to repay its creditors and keep its pensions in tact, avoiding what could have been a landmark ruling in federal pension law.
U.S. Bankruptcy Judge Christopher Klein approved the city’s plan during a hearing in Sacramento on Thursday, rejecting complaints from an investment firm that wanted the city to slash pension benefits to free up more money to pay other creditors.
Earlier this month, Klein sent shockwaves through the municipal government world when he ruled that the city could tap into its pension plans to settle its debts. But today he approved a Stockton plan that doesn’t touch pensions, enabling CalPERS and pro-pension union advocates to breathe a little more easily.
“It makes the (Oct. 1) ruling less significant,” CalPERS General Counsel Matthew Jacobs told the Sacramento Bee, though he added: “It still exists.”
While not the blockbuster many pension watchers were bracing for, it remains to be seen going forward just how important the Stockton case becomes in the annals of national pension law.
The central questions remain somewhat unanswered – what rights to cities that have declared bankruptcy have to reduce promises made to workers? And to what extent to unvested benefits comprise a guarantee? Are pensions different than other contracts that are typically renegotiated in bankruptcy proceedings?
The resolution of the Stockton case stopped short of providing definitive answers to many of these questions. But they will be fought in legal battles in the months and years ahead, as cities continue to struggle and workers continue to fight for their retirement security.