Stockton, CA's bankruptcy

In a completely-surprising turn, Judge Klein ruled what Judge Rhodes did: contracts with retirement funds are rejectable in a bankruptcy proceeding, just like any other contract.

http://www.bloomberg.com/news/2014-1...ankruptcy.html

What makes this interesting is that Stockton didn't even ask. Their plan of reorganization has no cuts to pensions. The judge volunteered his position on motion of a lender-creditor, signaling a desire to have the parties sit down and get some consensual result.

What does this mean for Detroit? Since our plan is just about wrapped up, nothing more than is already known. But again, Detroit leads the way for the country, because the California statute was very, very specific, and it was nonetheless subject to rejection in Bankruptcy Court. There are some very large municipalities [[Chicago) and states [[New York, New Jersey, Illinois) with vastly underfunded pensions.

San Bernandino has not filed a plan yet, but when it does, it will have significant cuts to CALPERS, and this may yet get to the US Supreme Court. It just won't from Detroit's case.

This proves again that the concept of putting together a consensual plan, rather than litigating, was the best choice, especially for pensioners.

Quote:

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Originally Posted by BankruptcyGuy

In a completely-surprising turn, Judge Klein ruled what Judge Rhodes did: contracts with retirement funds are rejectable in a bankruptcy proceeding, just like any other contract.

http://www.bloomberg.com/news/2014-1...ankruptcy.html

What makes this interesting is that Stockton didn't even ask. Their plan of reorganization has no cuts to pensions. The judge volunteered his position on motion of a lender-creditor, signaling a desire to have the parties sit down and get some consensual result.

What does this mean for Detroit? Since our plan is just about wrapped up, nothing more than is already known. But again, Detroit leads the way for the country, because the California statute was very, very specific, and it was nonetheless subject to rejection in Bankruptcy Court. There are some very large municipalities [[Chicago) and states [[New York, New Jersey, Illinois) with vastly underfunded pensions.

San Bernandino has not filed a plan yet, but when it does, it will have significant cuts to CALPERS, and this may yet get to the US Supreme Court. It just won't from Detroit's case.

This proves again that the concept of putting together a consensual plan, rather than litigating, was the best choice, especially for pensioners.

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Thanks for posting. That is really interesting.

Regardless of whether you agree, the good thing going forward is that decisions like this put a burden on current employees to be concerned for the financial health of their city. Doesn't mean they have to give up asking for benefits, but they also have to know that if they go too far, they might pay the price in their retirement.

BG, keep us posted.