May 1 (Bloomberg) — The California Public Employees' Retirement System said a ruling by a judge in Detroit that federal bankruptcy law takes precedence over state law may threaten the soundness of public pension systems as a whole.
Calpers, the largest state-run pension system in the U.S., filed a friend-of-the-court brief today in the federal appeals court in Cincinnati, which has been asked to consider a challenge to Detroit's eligibility for bankruptcy protection.
U.S. Bankruptcy Judge Steven Rhodes ruled last year that Detroit was entitled to creditor protection under Chapter 9 of the U.S. Bankruptcy Code and could try to alter the terms of workers' pensions. The decision, which would let a bankrupt municipality fail to meet its pension obligations in spite of state prohibitions, was "wrong on several levels," Calpers said.
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