Groundbreaking Ruling on Public Sector Pension Plans by Detroit Bankruptcy Judge Could Lead to Other States and Municipalities Cutting Retirees’ Pensions, Freezing Existing Pension Plans, and Shifting Workers into New Plans
Such dogma “encourages dysfunctional strategies,” wrote the judge, Christopher Klein, chief judge of the United States Bankruptcy Court for the Eastern District of California. He said Calpers’s legal arguments were invalid, and he concluded that it lacked standing to dominate the courtroom discussion the way it had. Stockton did not even seek permission to freeze its pension plans, but the judge nevertheless wrote that it was entitled to do so and went on to cite steps that struggling cities in general should take to trim their pension costs legally.
“The bully may have an iron fist, but it also turns out to have a glass jaw,” he wrote.
“This is one of those things where there’s a learning curve,” said Karol K. Denniston, a bankruptcy lawyer with Squire Patton Boggs in San Francisco who represented a local taxpayer group in Stockton’s case. “People will try things that don’t work quite right at first, then build on them. We’ve added to the municipalities’ tool kit.”