A federal judge who ruled earlier this month that a bankrupt California city’s pensions can be cut like any of its other debts is set to consider a contested exit plan that doesn’t contain pension cuts on October 30.
U.S. Bankruptcy Judge Christopher Klein ruled on October 1 that Stockton’s pension obligations aren’t more sacred than any other debt the city owes, clearing the way for potential cuts. But city leaders argued in court that they don’t want to cut pensions, fearing that cuts would impact the city’s ability to retain and recruit workers.
New assumptions about how long public workers will live, what they’ll earn and when they’ll retire are expected to mean bigger pension bills for the City of Alameda.
The California Public Employee Retirement System, or CalPERS, board voted in mid-February to adopt the new assumptions and with them, cost increases for the nearly 3,100 public agencies that pay in to the pension system, the nation’s largest. The rate increases for local agencies will be phased in over five years beginning in 2016 – instead of the 15-year track increases are on now – while the state will begin paying higher rates later this year.