CalPERS is facing a new challenge from insolvent San Bernardino, which is proposing to renegotiate its debts to the pension fund.
San Bernardino already halted payments to CalPERS after filing for Chapter 9 bankruptcy in August. The city is $6.9 million behind on its CalPERS payments.
Now, in a budget plan released this week, the city said it wants to "negotiate repayment over time" of its debts to the California Public Employees' Retirement System.
According to the plan, San Bernardino wouldn't resume payments to CalPERS until the new fiscal year beginning next July 1. The city also wants to renegotiate future payments in order to yield a saving of $1.3 million a year.
San Bernardino outlined its CalPERS strategy as part of a budget plan aimed at reducing a $45 million deficit. The city has said it simply can't afford its CalPERS bills right now. It's taking a different tack than other California cities that have gone into bankruptcy protection, such as Vallejo and Stockton, which continued to make their full payments to CalPERS.
CalPERS has always taken the view that cities and counties must pay their bills in full, and San Bernardino is no exception. The pension fund filed a formal challenge last month to San Bernardino's right to go bankrupt, saying the city is using Chapter 9 as an inappropriate tool to avoid paying its debts.
On Tuesday, it repeated its stance that San Bernardino must pay.
"If the city proposes a plan that does not include the resumption of payments to CalPERS, the system will take appropriate action to protect the pension plan," said spokesman Brad Pacheco.
CalPERS ultimately could terminate San Bernardino's pensions. The city's retirees would be relegated to a CalPERS-run fund that would provide them with less-generous pension benefits than they were promised.