Perhaps recognizing that it needs to take action before other cities use bankruptcy as a way of shirking their pension obligations, California's state-wide public retirement body has threatened to sue the city of San Bernardino for its missed pension payments.
According to Bloomberg, the California Public Employees Retirement System is attempting to sue the city, located to the east of greater Los Angeles, as it has so far missed $5 million in payments to the state pension fund.
San Bernardino filed for bankruptcy proceedings in August, claiming that a $46 million budget shortfall was partially brought on by the mounting costs associated with its employee pension obligations.
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The community was the third major California city to declare bankruptcy in 2012. At present, its unfunded pension liability is over $140 million.
CalPERS and other creditors, notably bond companies who may lose their investments as part of the bankruptcy, have petitioned the bankruptcy court to block the claim until the city can demonstrate a better formulated financial plan.
The CalPERS system, the largest in the country, says that missed obligations from cities including San Bernardino will cripple the already strained pension administrator. Similar motions were filed to protest bankruptcy efforts by the city of Stockton and Compton
"If participants in the CalPERS system fail to timely make payments, then CalPERS will be unable to provide an actuarially sound retirement system," the fund said in a court filing.
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