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California municipal bankruptcies threaten public pensions

The coming battle in public pensions is between CalPERS, the biggest public pension fund in the country, and bond insurers who want pension payments made by bankrupt municipalities to CalPERS cut. This could mean that pension contracts made with bankrupt cities could rendered void.

Public pensions in California are supposed to be sacrosanct and untouchable. The assumption is that public pension agreements are unalterable. However, recent California municipal bankruptcies now threaten public pension contracts and perhaps could even break them. If that happens, then any struggling municipality could target public pension agreements and benefits. We are at the beginning of a serious battle between deep-pocketed players to determine who is first in line for money from bankrupt cities and what cities must do to fulfill their bankruptcy plan.

Morris Consulting

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