SAN BERNADINO, Calif., Thu Aug 30, 2012 – A high-stakes showdown pitting California’s public employee pension fund against Wall Street bond firms in bankrupt San Bernardino, California, could be further complicated by wildly disparate estimates of how much the city owes for its retirees.
San Bernardino, a city of about 210,000 near Los Angeles that filed for bankruptcy on Aug. 1, has listed the California Public Employees’ Retirement System (Calpers) as its largest creditor, with unfunded pension obligations totaling $143.3 million. But Calpers, in response to an inquiry from Reuters, pegged the debt at $319.5 million.
Experts say the dramatically different calculations of San Bernardino’s debt to Calpers will likely lead to litigation between the two entities, unless the city quickly agrees to the retirement system’s figure.
Calpers is the largest pension system in the U.S. and serves many California cities and counties, including the city of Stockton, which is also in bankruptcy. It has long argued that pension contributions cannot be touched even in a bankruptcy.
But firms that insure municipal bonds have strenuously objected to the idea that pension payments should come ahead of bond payments. They have already gone to court on the issue in Stockton and are expected to do the same in San Bernardino.