(March 30 -- By Peter Mixon, Special to The Bee)
The criticism of CalPERS by The Bee's editorial board, "CalPERS isn't a white knight in Stockton's bankruptcy" (March 27), demonstrates a fundamental misunderstanding of Chapter 9 bankruptcies and the relationship between the city of Stockton, its employees and CalPERS.
The pension system is supporting the city's request for bankruptcy eligibility; in other words, the right of the city to reorganize its finances under the protections afforded to debtors in bankruptcy court. Like all debtors in bankruptcy, the city would like breathing space to make changes to its debt structure.
Unlike the city of San Bernardino, Stockton has put forth a viable plan consistent with California law governing municipalities. The Bee recently dismissed the support by the California Public Employees' Retirement System as an "artful marketing ploy." Nothing could be further from the truth.
Stockton has decided that it is necessary to continue to provide pension benefits to its employees through CalPERS. Why? Because the city needs qualified police officers, firefighters and other public workers to continue to provide public services. Without a CalPERS pension, the city believes it will be unable to attract and retain qualified public workers to provide services.
In bankruptcy court, the bondholder creditors - and their insurers - are seeking to use the power of the federal government to invalidate this decision of the city. These creditors have argued that federal bankruptcy laws allow the court to ignore California law and to impose a type of "pension reform" on the city, against its will.
The legal dispute is not over the level of benefits provided to city workers; instead, it will turn on a much broader issue: the ability of the federal government to invalidate laws enacted by California that govern its cities, their pension plans and the pension benefits provided to public workers. The Bee ignores this issue and instead calls CalPERS "inflexible."
CalPERS is a public pension plan governed by the California Constitution and other state laws. These laws provide the types and level of benefits provided to employees and retirees of the city as well as the manner and means of changing them. Labeling CalPERS "inflexible" in administering the city's pension plan simply misses the point - the people of this state, the Legislature, and the governor have decided how CalPERS shall administer the pension system. In the face of the attacks made by the bondholder creditors, CalPERS is defending these laws and the integrity of the system in bankruptcy court.
We also shouldn't ignore the inherent danger in accepting the arguments made by bondholders and their brethren insurers. If the bankruptcy court can invalidate state laws governing pensions, then why not other state laws? For example, why not Proposition 13? Of course, raising taxes would be in the interest of these creditors and they have argued that the city should be thrown out of bankruptcy court because it failed to increase taxes.
Far from a marketing ploy, the mission of CalPERS remains the same: protecting the soundness and integrity of the pension plan that provides benefits for the city's employees and retirees.
Peter Mixon is general counsel of the California Public Employees' Retirement System.