Taking a swipe at CalPERS and the millions spent on public employee pensions, two firms owed millions by the city of Stockton are challenging the legitimacy of the city's bankruptcy filing.
In papers filed in U.S. Bankruptcy Court in Sacramento, the two firms complained that they're about to get clobbered in Stockton's proposed debt restructuring, while Stockton is continuing to pay millions each year to CalPERS for employee retirement plans.
The challenges, by National Public Finance Guarantee Corp. and Assured Guaranty Corp., make it increasingly likely that Stockton could be the scene of an epic legal showdown over whether pension promises made to public employees can be broken.
The city's plan to cut costs "targeted its bondholders and left CalPERS and serious labor concessions off the negotiating table," Assured Guaranty said in papers filed today. Assured stands to lose $103 million in Stockton's bankruptcy.
The city pays CalPERS around $29 million a year, according to the pension fund's records.
City officials weren't immediately available for comment.
CalPERS indicated it would fight any effort by bondholders or other creditors to tinker with pension obligations. "We remain committed to safeguarding the constitutionally protected pension benefits of the city's employees and retirees, many of whom have spent their entire careers in public service," the pension fund said.
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