On September 12, 2012, CalPERS' general counsel released a public statement setting forth CalPERS' legal position on the limitations of the power of the bankruptcy courts to interfere with the relationship between the state of California and its municipalities regarding the payment of retirement and other benefits to state employees.
Pensions and other benefits remain at the forefront of the municipal financial crisis in California, and it appears that CalPERS may be setting the stage for forthcoming legal battles in the Stockton case, and perhaps others. CalPERS has previously proudly boasted that Vallejo did not take CalPERS on with respect to pension benefits, but only healthcare retiree benefits.
For months, commentators have predicted a looming constitutional battle over pension benefits. The acuteness of the pension crisis was made plain in a Stanford Institute for Economic Policy Research Report, published earlier this year, which concluded that aggregate pension costs have expanded at a rate of 11.4% per year and pension expenditures represent 10.1% of total municipal spending.
Whether Stockton, San Bernardino or another municipality will undertake a war of attrition against CalPERS over pension benefits remains to be seen.
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