CalPERS fires back against Detroit pension ruling

When a federal judge ruled today that Detroit could legally cut pensions as part of its bankruptcy proceedings, it was akin to putting a bullseye on the back of pension funds that had previously been heavily protected by constitutional and contract law.

It didn’t take long for the nation’s largest public pension fund to weigh in on the matter: California’s Public Employee Retirement System (CalPERS) has taken the unmistakably forceful stance that the Detroit ruling is not only misguided, but that it doesn’t affect their system at all.

From a CalPERS statement released just hours after the ruling:

“The Detroit court failed to recognize the difference between a two party contract and the unique nature of a state public employee retirement system…In California, our members’ vested rights to their pensions are protected by the California constitution, statutes and case law.”

The statement goes on to state why CalPERS is confident the ruling doesn’t apply to its system:

“Unlike Detroit, CalPERS is not a city pension plan. CalPERS is an arm of the state and was formed to carry out the state’s policy regarding public employees. The Bankruptcy Code is clear that a federal bankruptcy court may not interfere in the relationship between a state and its municipalities. The ruling in Detroit is not applicable to state public employee pension systems like CalPERS.”

Although Michigan’s ruling isn’t legally binding in California, the judge’s decision sets the precedent that cities in bankruptcy proceedings can “impair” pensions just as they can traditional contracts, constitutional provisions not withstanding.