CalPERS must be shuddering at Detroit judge’s words

The California Public Employees Retirement System (CalPERS) has no doubt been watching the Detroit bankruptcy proceedings closely, and it cannot be pleased by what the judge ruled. Yes, Detroit can cut its pension plans. According to the Sacramento Bee, “The ruling by U.S. Bankruptcy Judge Steven Rhodes could help bankrupt San Bernardino in a potential legal showdown with CalPERS over the sanctity of employee pensions. According to the Detroit News, the judge said pensions are essentially the same as any other contract, and ‘it has long been understood that bankruptcy law entails the impairment of contracts.’” CalPERS contends that pensions are sacred and cannot be touched no matter what — as opposed to everything else, which can be slashed and burned after a city spends itself into despair. It’s only a matter of time before the courts see it more rationally. Figures that the good news comes from outside California.


Comments (11) Add yours ↓
  1. Mike Tardif

    And who was that moaning that government pensions were inviolable to me a couple of years ago? Oh yes, you Mr. Greenhut. A positive step indeed.

    December 4, 2013 Reply
  2. Tough Love

    BravoJudge Steven Rhodes.

    Will some one please get CalPERS a diaper !

    December 4, 2013 Reply
  3. SkippingDog

    You folks continue to amuse me. One bankruptcy court judge in Detroit rules that “everything is on the table” in order to put pressure on all of the parties to negotiate a work-out plan, and you somehow think it’s a harbinger for everywhere else in the country.

    It’s not even clear that the decision will survive appellate review yet. Once we have a review by the District and Circuit Courts, we’ll all have a far better idea of what the parameters of the decision really are.

    December 4, 2013 Reply
    • Donkey

      The walls are coming down SKdog, it was only a matter of time, the greed of the RAGWUS feeders is unsustainable!! :)

      December 5, 2013 Reply
    • Tough Love

      Skippy, I figured you would show up soon enough, and as expected, you would be minimizing the impact of this HISTORIC decision.

      Oh ………..this is just the first inning……….hopefully San Bernadino will now look for (not a restructuring of the amounts not paid to CalPERS), but an outright repudiation of that debt, seek a material reduction in their unfunded liability for PAST Service accruals, and approval to either freeze future growth in the current DB Plans or materially reduce future service accruals by 50+%, ..

      Happy Holidays … decisions like THIS are making it better and better….for the TAXPAYERS !

      December 5, 2013 Reply
    • Tough Love

      Skippy, Well maybe YOU don’t think Detroit’s Bankruptcy and the Judge’s ruling that Detroit retiree’s pensions CAN be reduced is a big deal, but just about everyone else does.

      Headlines from Today’s “Pension Tsunami”……ENJOY !

      Government Pensions Are No Longer Sacred (editorial – U-T San Diego)
      The Pension Issue Is Everywhere (Joel Fox / Fox & Hounds)
      Detroit Judge’s Ruling Could Help Stockton, California Cut Pensions in Bankruptcy (with video – Steve Large / CBS Sacramento)
      Detroit Bankruptcy Ruling on Pensions Could Reverberate in San Bernardino and Other California Cities (editorial – San Bernardino Sun)
      Detroit Bankruptcy Case Has Major Implications for California (with audio – Phil Matier / CBS San Francisco)
      Detroit Bankruptcy Ruling Could Impact California; Pensions Are No Longer Untouchable (Chris Roberts / NBC Bay Area)
      US Judge’s Ruling in Detroit Bankruptcy Could Be Felt in California (with audio – Ben Bergman / KPPC Radio)
      Detroit Chapter 9 Bankruptcy Sends Warning to Other Cities, Bondholders (Nathan Bomey / Detroit Free Press)
      In Detroit Ruling, Threats to Pension Promises and Assumptions (Mary Williams Walsh / New York Times)
      Detroit Wins: Discussion of the Judge’s Decision to Let the Motor City Proceed With Bankruptcy. (video – James Freeman / Wall Street Journal)
      Detroit Bankruptcy Judge Rules That Public Pension Haircuts Are OK; Unions Whine (blog – Mike Shedlock / Mish’s Trends)
      How Much Will Detroit’s Pensions Be Cut? (blog – John Bury / Burypensions)
      EDITORIAL CARTOON: Detroit’s Bankruptcy Baggage (Lisa Benson)
      In Detroit Bankruptcy Ruling’s Aftermath: A Timely Free Webinar This Afternoon on Public Pensions (E.J. McMahon / Public Sector Inc.)
      ‘The Best Interests of Creditors’: Q&A With David Skeel on What’s Next for Detroit (Steve Eide / Public Sector Inc.)
      In Detroit Bankruptcy May Be the Hidden Elixir of Pension Reform (op-ed – Nick Dranias / Daily Caller)
      Detroit’s Painful Pension Lesson: Defined-Benefit Plans Are Subject to Economic and Political Risk (editorial – Wall Street Journal) $$
      Detroit Is the Wake-Up Call for American Cities (John W. Schoen / CNBC)
      Why Detroit Needs Bankruptcy (Stephen Eide / Politico)
      Who Really Betrayed Detroit: The Pension-System Trustees and the Municipal Unions (Steven Malanga / City Journal)
      Detroit Bankruptcy Risks Pensions as Cuts Ruled Possible (William Selway and Steven Church / Businessweek)
      Detroit Goes Down (column – Megan McArdle / Bloomberg)
      Fitch Comments on Detroit Bankruptcy Ruling (Enquirer Herald)

      December 5, 2013 Reply
  4. legalscholar

    Read Judge Rhodes opinion. He states that Michigan law does not provide any “extraordinary” protection for government pensions, but treats them like any run of the mill contract. This is a critical distinction from California law. California law does provide “extraordinary” protection for government pensions. California law, unlike Michigan law, does not treat the government pensions as simply another contractual obligation. Read the long line of California court opinions and you will see that pensions are a sui generis class of “extraordinary” contractual obligations stemming from a unique relationship between a government employer, a government employee, and CalPERS — an arm of the state.

    Bottom line: Even putting aside the fact that Judge Rhodes’ opinion is subject to many layers of appellate court review, on its face (because of the difference between California and Michigan law regarding the protection afforded government pensions) it is simply irrelevant to California pensions in general or CalPERS pensions in particular.

    December 6, 2013 Reply
    • Tough Love

      Quoting ….. “This is a critical distinction from California law. California law does provide “extraordinary” protection for government pensions. ”

      Seems like you just don’t get it….

      Federal Bankruptcy Law preempts ALL of CA’s laws ,regs.,Constitutional provisions,, Case-law,etc…. ALL of it.

      I suspect the new Union UN-Friendly Council in San Bernadino will be pursuing such Pension cuts as part of their Plan of Adjustment..AND the Bankruptcy Court will approve them..

      P.S………..You sound like a Union-brainwashed Public Sector worker desperate to find a life-boat.


      After which the many OTHER Cities and towns with the Public Sector pension noose around their necks will be lining up for similar reductions.

      December 7, 2013 Reply

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