Corona POA President Jason Perez Defeats CalPERS Board President

CalPERS has reported that Corona Police Officers Association President Jason Perez defeated incumbent CalPERS Board of Administration President Priya Mathur with 56.78% of the vote to her 43.22%.  His term will begin in January.  Perez ran on a platform of maximizing investment returns and putting an end to using CalPERS investments to advance unrelated social and political causes.

The Board of Administration is a 13-member board of elected, appointed, and ex-officio officials charged with overseeing and directing the management of CalPERS.  The executive leadership of the Board is elected from among its members. 

CalPERS Investment Return Exceeds Forecast For Second Straight Year

CalPERS reported an impressive 8.6% return on its investments over the last fiscal year.  That's on top of the 11.2% CalPERS reported for fiscal year 2016-17.  CalPERS investment return brings the total fund up to 71% funded, meaning CalPERS has that percentage of the funds it needs to pay out its obligations.  CalPERS recently reduced its predicted returns, triggering higher contributions into the system.  Continued successful investment returns is good news for California labor unions and public employers in the CalPERS system.

WATCH NOW! DAVID E. MASTAGNI DISCUSSES LOOMING THREATS FACING PUBLIC EMPLOYEE PENSION PROGRAMS

On April 24, 2018, David E. Mastagni participated in a two-person panel discussion entitled: “Pensions: The Problems, Perspectives and Possibilities." The event was held at the Richard Nixon Presidential Library and Museum.

Click the link below to watch David’s discussion with Scott Ochoa--City Manager of Ontario California.

  

https://www.youtube.com/watch?time_continue=1096&v=CT4wG-GBTF4

Mastagni Holstedt Appeals Alameda County Deputy Sheriff’s Association PEPRA Decision to Supreme Court

David E. Mastagni and Isaac S. Stevens petitioned the California Supreme Court to review the First District Court of Appeals’ decision in Alameda County Deputy Sheriff’s Associationv. Alameda County Employees’ Retirement Association (“ACDSA”). The petition asks the Court to reverse the appellate court’s holding that detrimental changes to employees’ pension benefits need not be offset by comparable new advantages to be constitutional.

This case arose from the enactment of the Public Employees’ Pension Reform Act (“PEPRA”). On behalf of the ACDSA, we sued the Alameda County Employees Retirement Association (“ACERA”) in December 2012, after it announced plans to begin excluding forms of leave cash out and other pay items from ACDSA members’ pension calculations, supposedly to comply with PEPRA’s changes to the definition of “compensation earnable.” “Compensation earnable” is the pay used to calculate employees’ pension benefits.  The lawsuit alleged that, by excluding these pay items from members’ pension benefits, PEPRA infringed on members’ vested pension rights. The case was eventually consolidated with cases from Contra Costa County and Merced County asserting similar claims.

The trial court largely ruled against employees and unions in the case. According to the court, there was no vested right to pension that included terminal pay, and there was no basis for using the doctrine of promissory estoppel to require ACERA to continue including terminal pay in retirees’ pension benefits. We appealed.

While the case was on appeal, the First District issued a decision in a case raising issues very similar to ours, MarinAssociation of Public Employees v. Marin County Employees’ Retirement Association (“MAPE.”) The MAPE case also challenged the legality of excluding terminal pay from pension benefit calculations pursuant to PEPRA. In MAPE, the First District appellate court ruled that a detrimental change to vested pension rights did not need to be offset by a new advantage to survive scrutiny, so long as the remaining pension benefit was reasonable. Shortly thereafter, the First District issued a decision in Cal Fire v. California PublicEmployees Retirement System (“CalFire”), affirming the MAPE court’s decision that comparable new advantages were required when pension benefits were reduced.

The MAPE represented a radical departure from decades of case law protecting pension benefits from being reduced. In Allen v. City of Long Beach (1955) 45 Cal.2d 128, the Court ruled that the Constitution required any changes to vested benefits be material to the theory of a pension system, and any detriment resulting from such a change should be offset by a comparable new advantage. This principle is often referred to as the California Rule. Over the years, the courts repeatedly affirmed the validity of this rule, and required detrimental changes be offset by new advantages to survive constitutional scrutiny. By turning the requirement for a new advantage into a mere suggestion, the MAPE court made public employees’ pension benefits vulnerable to reductions in the future. Indeed, Governor Brown himself acknowledged that, when the next recession comes around he will “have the option of considering pension cutbacks for the first time in a long time.”[1]

The California Supreme Court granted review in the Cal Fire and MAPE cases while the ACSDA case was still pending in the appellate court. In granting review in MAPE, the Court ordered further proceedings in that case deferred until our case was decided.

The appellate court in ACDSA ruled on our appeal in early January.  The court issued a lengthy ruling, finding the trial court failed to include a vested rights analysis, and its analysis of PEPRA’s impact on the pensions of legacy members was incorrect.  In the ruling, the court cited the MAPE decision approvingly, ruling that PEPRA’s changes to employees’ pension benefits did not need to be offset by corresponding new advantages to be constitutional.  Beyond merely agreeing with the MAPE decision, the court in ACDSA went so far as to describe MAPE’s evisceration of California vested rights case law as “not controversial.”

While the court determined that legacy PEPRA members could be entitled to have the excluded pay items included in their pension calculations under a theory of promissory estoppel, it left the door open for the State to continue reducing employees’ pension benefits in this future. We appealed the decision to ensure the California Supreme Court had an opportunity to overturn the First District’s efforts to erode public employees’ pension rights.

The petition for review we filed this week asks the Supreme Court to review the appellate court’s ruling on the comparable new advantage issue, while leaving the estoppel ruling intact. As discussed in our petition, review is necessary to reverse the First District appellate court’s efforts to overturn decades of vested rights case law and protect public employees’ pensions in the future.

The State of California has also petitioned the Supreme Court for review, seeking to overturn the appellate court’s ruling on whether retirement associations had the authority to agree to include the pay items at issue in employees’ pension benefits to settle disputes over benefit calculations after the Court’s landmark ruling in Ventura. The State’s appeal thus challenges the appellate court’s ruling on promissory estoppel, while leaving its destruction of the California Rule intact.

By appealing the appellate court’s decision, the appeal ensured that the ACDSA has a seat at the table when the Supreme Court considers the First District’s ruling, and an opportunity to defend our clients’ rights to receive the pensions they spent decades working for. The Court will address this issue when it considers the MAPE and Cal Fire cases, and an adverse ruling on those appeals could supersede the appellate court’s decision in the ACDSA case. By appealing, the ACDSA ensured its objection to the First District’s attack on the California Rule would be heard. For similar reasons, we filed an amicus brief on behalf of the ACSDA and public safety associations across California in the Cal Fire case, asking the Court to affirm the continued existence of the California Rule. Be sure to check the blog to keep up to date on what happens. 

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[1] http://www.sacbee.com/news/politics-government/the-state-worker/article194434479.html

CalPERS Changes Eligibility Rules for Industrial Disability Retirement

The California Public Employees’ Retirement System (CalPERS) posted Circular Letter 200-018-17 on March 30, 2017. Among other things, this Letter addresses changes to the eligibility determinations for certain local safety members applying for industrial disability retirement. 


In the past, CalPERS relied on the employer’s recommendation to verify eligibility of any member for industrial disability retirement. However, CalPERS will now independently evaluate whether certain members are eligible. The employer must obtain CalPERS’ determination of a member’s eligibility to apply for disability retirement before the employer starts the process of a disability determination for any of the following circumstances:

• Disciplinary process underway prior to the member’s separation from employment.

• The member was terminated for cause.

• The member resigned in lieu of termination.

• The member signed an agreement to waive his or her reinstatement right as part of a legal settlement (i.e., Employment Reinstatement Waiver).

• The member has been convicted of or is being investigated for a work-related felony.

The Letter also imposes a requirement for local agencies to re-evaluate eligibility determinations for disability retirees under the voluntary service retirement age. The purpose is to verify whether the recipient remains physically or mentally disabled from the position which they disability retired for the condition(s) that they were approved for.

The Letter requires employers to provide all relevant personnel documents and medical records to CalPERS. This information will be used to conduct the second evaluation of a member’s medical incapacity and employment status.  However, providing such information to CalPERS creates a conflict for safety employers. For example, Penal Code section 832.7 prohibits employers from disclosing peace officer personnel records without the peace officer’s written consent or a Pitchess motion. Employers are also prohibited from disclosing medical information without written authorization from the employee.

CalPERS Restoration of Service Credit and Compensation Earnable Upon Reversal of Termination for CalPERS School and Local Agency Members

Assembly Bill (AB) 2028 applies to all active California Public Employees’ Retirement System (CalPERS) school and local agency members. This recent legislation was introduced by Assembly Member Jim Cooper. AB 2028 allows active CalPERS school and local agency members who were wrongfully terminated to recover service credit and compensation earnable if their termination is reversed. This bill fixes a significant inconsistency in previous law, which treated school and local agency members differently than other state employees.

AB 2028 applies to members who were subject to a wrongful termination effective on or after January 1, 2017. Members who are reinstated by administrative or judicial order following the termination may now receive retirement benefits as though they were never terminated. Restoration of these benefits ensures that such members will be made “whole” following their disciplinary appeal.

Prior to AB 2028, school and local agency members could receive these benefits retroactively if they retired following the wrongful termination, but were later reinstated. This retirement condition was inconsistent with how other state employees were treated in the same situation. AB 2028 eliminates the inconsistency by making school and local agency members eligible to seek these same benefits, regardless of retirement.

AB 2028 provides that reinstatement of benefits will be effective as of the date from which salary is awarded. Employers are required to notify CalPERS within five days once an employee being reinstated after he or she had been wrongfully terminated.

Peace Officer's Employer May Not Condition Reinstatement From Disability Retirement

A peace officer who recovers from the injury that led to their industrial disability retirement is entitled to reinstatement without any conditions, according to the recent court ruling in Department of Justice v. CalPERS.

Angelita Resendez was employed by the California Department of Justice as a peace officer until her industrial disability retirement in December 2008. She developed a spine condition as a result of several on-the-job injuries. But in September 2009 she applied to CalPERS for reinstatement. Based on a medical evaluation of Resendez, CalPERS notified her in 2010 that she was eligible for reinstatement. DOJ then offered Resendez reinstatement on the condition that she complete medical and psychological exams and submit to a background check. Resendez rejected DOJ’s offer.

Next, DOJ made multiple appeals to overturn CalPERS' determination about Resendez. But these appeals were denied. The Superior Court also ordered DOJ to provide Resendez backpay to 2010 when CalPERS determined she was eligible for reinstatement. DOJ then appealed to the Court of Appeal.

On October 13, 2015, the Court of Appeal ruled in favor of CalPERS and Resendez. CalPERS was correct to limit its analysis to whether Resendez had recovered from the injury that caused her disability. The law requires CalPERS to order a medical exam and then determine if the employee is fit to return to duty. And Government Code section 1031 sets the minimum standards for peace officers. But CalPERS is not authorized to identify new conditions that might disqualify the employee; it must stick to the original disability.

The court also ruled that Government Code section 21193 creates a two-step process for reinstatement. First, CalPERS must determine the employee is fit to return to duty. Second, the employee's former employer must offer reinstatement.

Here, CalPERS properly determined Resendez was fit to return to duty. So DOJ had a mandatory duty to offer Resendez reinstatement. It had no authority to condition her reinstatement on medical exams and background checks. However, once DOJ has reinstated Resendez it may terminate, demote, or transfer her for failing to meet the minimum standards set by Government Code section 1031.

This ruling provides strong protections for peace officers who have been forced into disability retirement by on-the-job injuries. Once a peace officer recovers from such an injury they are entitled to reinstatement with their former employer. An employer has a mandatory duty to offer reinstatement and may not put conditions on the offer.

CalPERS Pension Benefits Generate Over $30 Billion in Economic Activity

The California Public Employees' Retirement System (CalPERS) released a study today demonstrating retirement benefits paid out by CalPERS generated $30.9 billion in economic activity across the State. For every one dollar of public funds invested in CalPERS, the fund returns $9.64 of economic activity throughout the state. CalPERS benefits paid directly to members have large impacts in the housing, restaurant, and health care industries. CalPERS also invests $25.7 billion dollars in California businesses, supporting millions of jobs across the state. The report breaks down the economic impact by state congressional district so tax payers can see how CalPERS benefits their local economy.

For eight decades, CalPERS has built retirement and health security for State, school, and public agency members who invest their lifework in public service. CalPERS serves more than 1.7 million members and administers benefits for more than 1.4 million members and their families in the health program. CalPERS is the largest defined-benefit public pension in the United States. The current market value of the CalPERS general fund is approximately $304 billion dollars.

Judge Approves Stockton Bankruptcy Plan - Saves CalPERS Investment

In a decisive win for public employees, Judge Christopher M. Klein today ruled in favor of Stockton's bankruptcy plan of adjustment, preserving the city's contract with CalPERS. The judge noted that the bankruptcy cuts had already reduced compensation below market. Hopefully this ruling will help stabilize police recruitment and retention in Stockton which has been unable to fill vacant police positions and has experienced a loss of nearly half its veteran officers over the last 3 years.

Earlier this month, Judge Klein had ruled that bankruptcy law preempted state law barring the impairment of CalPERS pensions in bankruptcy. City officials acknowledged that if the pensions were impaired they would experience a further exodus of police officers and city employees, who would have to obtain employment in another CalPERS or reciprocal agency within six months to retain their classic employee pension status under PEPRA. Judge Klein noted that re-doing the entire pension system would be no simple task. To even compete in the labor market, the City would also have to establish a new similar pension system that might be more expensive than CalPERS.

Judge Klein also held that PERS is not the creditor that would suffer the impairment. He found that the employees would receive the pension cuts, not PERS, and that employee compensation must be considered as a whole, including pension obligations. Many Stockton employees, including the police department, had made considerable sacrifices to keep the city afloat. These sacrifices included eliminating retiree health care completely, cutting salaries for current employees by 20-30%, reducing pensions for new hires, and requiring employees to contribute to their pensions. The Judge held that these changes were the result of long, difficult negotiations between labor organizations and the city. Judge Klein held that labor agreements cannot easily be set aside and recognized the importance of those negotiations and post-bankruptcy labor agreements.

Judge Klein concluded his ruling by issuing a stern warning to other public entities considering Chapter 9 bankruptcy. As the City's attorneys fees alone totaled nearly $14 million, Judge Klein stated that the high costs exceeded expectations and present a sobering lesson why municipalities should not file for bankruptcy. The objecting creditor, Franklin Templeton's, attorney told Judge Klein:  "Obviously, we're disappointed by your ruling. We will evaluate our next steps."

Stockton Bankruptcy Ruling May Not Have Practical Affect on Employee Pensions

During Stockton bankruptcy proceedings on Wednesday, October 1, 2014, Judge Klein stated the City could reject the CalPERS contract under the bankruptcy code. Pension reform supporters overstate Judge Klein's oral ruling as a major blow to public employee pensions. In reality, this ruling may not affect Stockton employee pensions.

Judge Klein heard oral arguments from the City and its creditors about whether the contract between CalPERS and the City could be rejected in bankruptcy. The City's proposed bankruptcy plan maintains the City's CalPERS obligations and preserves employee pensions. One of the City's creditors, Franklin Templeton Investments, argued it was unfair for the City to maintain its contract with CalPERS at the expense of other creditors. State law provides that CalPERS contracts may not be impaired in bankruptcy. However, the state law contradicts the bankruptcy code, which allows impairment of contracts that have not been fully performed. Judge Klein ruled the City could cut ties with CalPERS under the bankruptcy code and impair employee pensions to allow more money for other creditors.

While this ruling suggests pensions may be vulnerable during municipal bankruptcies in the future, it is unlikely to affect pensions in this case. Judge Klein's oral ruling is not yet binding. He is scheduled to rule on the City's proposed plan on October 30, 2014. If he confirms the plan, this issue is avoided altogether because the current plan does not impair the CalPERS contract.

Even if the City has the option to reject the CalPERS contract, the City recognizes doing so would be highly impractical. The costs of losing the CalPERS contract greatly outweigh any potential benefits. This would force Stockton to join another retirement system, such as the San Joaquin County Employee Retirement Association, or create its own retirement system. Both options would likely cost at least as much as maintaining its CalPERS contract. 

If the City lost its contract with CalPERS, it may not be able to offer pensions to employees. The City estimated it could only recover 60% of the money necessary to fund its employees' pensions if CalPERS terminated its contract. Losing employee pensions would make the City unfit to compete in the labor market. This would inevitably cause a mass exodus of employees from the City and make it extremely difficult to attract new employees. Under PEPRA, Stockton employees would have to start working for another CalPERS contracting agency within six months after CalPERS terminates its contract with the City to avoid being treated as "new employees" and subjected to significantly worse pension formulae and cost-sharing rules.

Terminating the CalPERS contract would also throw the entire bankruptcy proceeding back into chaos. It would breach most, if not all, labor agreements as well as the settlement the City negotiated for retiree medical. The City would be forced to revise its current plan and reallocate the available funds. Additionally, it would give CalPERS a claim in the bankruptcy worth well over $1 billion.

In short, while the ruling is disconcerting, there is a significant chance this will not have any practical affect on Stockton employee pensions.

CalPERS Fights for Retirement Security in Detroit

The California Public Employees' Retirement System ("CalPERS") filed an amicus brief in the United States Court of Appeals to support the Committee Retirees of the City of Detroit and others in appealing the bankruptcy court's determination that Detroit is eligible for bankruptcy.  Specifically, CalPERS seeks to reverse the bankruptcy court's ruling that, once a state authorizes a city to file for Chapter 9 bankruptcy, state laws and constitutions no longer control the city's actions.  The bankruptcy court's decision holds that a city can impair the rights of a public pension system in bankruptcy despite state laws prohibiting such impairment. 

In the amicus brief, CalPERS argues the bankruptcy court erred by providing an improper advisory opinion.  The bankruptcy court advised that retirement pensions may be impaired in a manner consistent with the 10th Amendment.  CalPERS argued the bankruptcy court should not have ruled on the constitutional issue when it was unnecessary to the court determining whether Detroit was eligible for bankruptcy.  CalPERS asserted the constitutional issue was not "ripe" for review, meaning it was not ready for the court's consideration.  Federal courts may not enter into a controversy before it has solidified, or before all other available remedies have been exhausted.

CalPERS also argues the bankruptcy court's decision nullifies Bankruptcy Code section 903, which expressly preserves state laws governing municipalities during bankruptcy.  Lastly, CalPERS argued the court's analysis was problematic because the court improperly created a presumption in favor of eligibility in interpreting the good faith filing requirement.  CalPERS seized the opportunity to weigh in on these critical issues affecting the retirement security of more than 1.7 million CalPERS members.

Court of Appeal Re-Affirms Standard for Public Safety Officers’ Industrial Disability Retirement

Public safety officers face the threat of work-related injury every day. Many officers are forced to seek industrial disability retirement if work-related injuries prevent them from performing the required tasks of their positions. Recently, the Court of Appeal recently re-affirmed the legal standard used to determine qualification for industrial disability retirement in Beckley v. Board of Administration of California Public Employees’ Retirement System (CalPERS).

In Beckley, CalPERS deviated from the legal standard when it denied California Highway Patrol Officer Perry Beckley’s application for industrial disability retirement. CalPERS measured Beckley’s application for disability retirement against his usual duties as a Public Affairs Officer, rather than the “14 critical tasks” required of all CHP officers. But the Court of Appeal held an officer’s application for disability retirement must be measured against the officer’s job classification, not the officer’s last job assignment.

CHP has “14 critical tasks” an officer must be able to carry out to perform his or her duties. In 2006, doctors concluded Beckley's injuries prevented him performing the “14 critical tasks”. These tasks include safely extracting a 200-pound victim from a vehicle and lift, carry, and drag the victim 50 feet; physically subdue and handcuff a combative subject; change a flat tire; drive for extended periods of time; and run up and down stairs. Beckley applied for industrial disability retirement, but CalPERS denied his application. CalPERS measured Beckley’s application against his usual duties as a Public Affairs Officer, rather than against the “14 critical tasks”. 

The Court of Appeal found CalPERS applied the wrong standard for two reasons. First, the Court said “[t]ying an applicant’s entitlement to disability retirement to his last specific assignment would tend to lead to highly inconsistent results for persons in identical job categories who suffer from identical disabilities.” Second, California law requires a CHP officer to be able to perform the full range of duties of the position, and does not allow permanent limited duty positions. Thus, the Court ruled CalPERS had to honor the officer's disability retirement application.

CalPERS Reports Huge Investment Gains

CalPERS posted another huge increase in its investments which grew by 16.2% in 2013.  That's more than the 12.5% CalPERS reported in July 2013 and the 13.3%it earned in 2012.  CalPERS has continued to grow its assets since 2011 when a 20.7% return prompted CalPERS to declare "We are back."  According the the Sacramento Bee, "the latest investment performance by CalPERS last year was the best since 2003."

CalPERS Does It Again, Posts Double-Digit Investment Return

CalPERS posted impressive preliminary investment returns of 12.5% on its investment portfolio for the most recent fiscal year, including a 19% return on its stock market assets.  According to CalPERS, "When things got rough we didn’t panic. We stuck with our exposure to growth assets and applied the lessons we learned from the past. The numbers show us that our approach is working."

CalPERS impressive investment return follows up on last year's remarkable 20.7% gain and is well above the 7.5% the fund uses as a projection in its formula for the employers' share.  As it stands, CalPERS average annual investment return since 1988 is 8.5%, well above the level promoted by some critics.

CalPERS Posts Retiree Information Database Online

CalPERS announced it is posting a searchable database containing information about all retirees in the system.  The database includes retirees's names,  monthly gross warrant, base allowance, Cost of Living Adjustment, years of service, retirement date, benefit formula, final compensation and last employer.  CalPERS explains its making the database available online because these features are public records and many news outlets have requested the information.  You can view and search there database here starting later today.

Court Issues Injunction, Statement of Decision Affirming Constitutional Protection For Pensions

In May, the Monterey Superior Court overturned a voter initiative that tried to impair police officers' pensions.  The judge in that case, Pacific Grove Police Officers Association et al. v. City of Pacific Grove, has now issued a permanent injunction and statement of decision.  The injunction prohibits the city from "taking any action to implement, enforce, or give any effect" to the initiative.

The statement of decision explains the Court's ruling.  The Court explained the initiative violated the California Constitution by capping the City's contribution toward police officers' pensions.  "The employees were told that they were to receive retirement benefits under a CalPERS administered plan with an employee cost set at a fixed percentage of their salary.  The fluctuating portion would be borne by the employer."  The City violated the constitutional prohibition on impairment of contracts by effectively flipping those roles.

The Court stressed employees' vested rights.  The Court said, "the Court reiterates that what is vested in the employee is the right to earn a pension on the terms promised to him or her upon employment."  As a result, "no subsequent legislation by the city, whether by Charter amendment, ordinance, or Council resolution, or voter initiative, can take these rights away once given..."

The Court also explained officers' pensions could not be decided by initiative and therefore the "Citizen's Initiative is invalid because it delegates the responsibility of the ultimate decision for fixing compensation to the voters."  The Court said under the city's Charter, which mirrored the general law, the city council had to set all compensation.

The Pacific Grove Police Officers Association and Police Management Association were represented by Mastagni Law attorney Jeffrey R. A. Edwards in the matter.

Court Rules Pension Impairments Unconstitutional Under Contract Clause

In a major ruling with statewide implications, the Monterey Superior Court ruled Friday that the City of Pacific Grove’s 2010 voter initiative and charter amendment capping the City’s contributions to CalPERS are unconstitutional. The Court’s ruling follows a challenge to the measures brought by the Pacific Grove Police Officers Association and Pacific Grove Police Management Association and supported by PORAC LDF. The Court also ruled that the measures violated the City Charter and the general law because voters cannot set employee compensation by initiative.

According to Pacific Grove Police Officers Association President Jeff Fenton, “Today’s ruling is about fairness. We went to court to ensure the City keeps the promises it made to employees and today the court said they have to.” The Court struck down the ordinance and charter amendment because they violate the Contract Clause of the California Constitution. The Contract Clause requires local governments to keep the promises they make to public employees. It also forbids them from impairing contracts with labor associations.

The case has major implications statewide because it establishes that cities and counties can’t go back on the pension promises they made to employees.  PORAC LDF contributed significant resources toward the police officers’ efforts. “We are deeply thankful for the help from our brothers and sisters in the law enforcement community and PORAC LDF toward achieving this victory,” Fenton said.

The Pacific Grove Police Officers Association and Police Management Association were represented by Mastagni Law attorney Jeffrey R. A. Edwards in the matter.

CalPERS Back in Black After Record-Breaking Investment Gains

CalPERS has recovered more than $97 billion is value since the great recession battered its assets.  CalPERS' investment portfolio recently reached $261.7 billion, breaking CalPERS' pre-recession record on $260.5 billion in October 2007.  CalPERS still needs to grow to improve its funded status, but the returns are good news to public employees and employers.

Court: Stockton Doesn't Have to Impair CalPERS Pensions for Bankruptcy Eligibility

The U.S. Bankruptcy Court in Sacramento ruled today that the City of Stockton is eligible for bankruptcy protection.  The ruling follows a trial when Wall Street bondholders challenged the City's bankruptcy, claiming the City should have to stop payments to CalPERS.  The Court said nothing in the federal Bankruptcy Code requires impairment of CalPERS benefits for a city to be eligible for bankruptcy. The Court also indicated it would be unconstitutional for the City to impair its contracts in any way except bankruptcy because the Constitution protects creditors.

In a press release, CalPERS praised the Court's decision, noting "Today’s action gives the City the opportunity to propose a forward looking plan of adjustment in the bankruptcy case that will allow them to restore long term financial stability and to provide essential services to the Stockton community through the City's valued public employees." CalPERS' also committed to continuing to protect and defend the integrity and soundness" of employees' pensions. Today's ruling clears the way for bankruptcy, but leaves open future challenges to the City's plan to pay back its debts.

CalPERS Sees Huge 13.3% Increase is Assets

The Sacramento Bee reports CalPERS beat forecasts and had another big year in investment returns, increasing the value of its portfolios by 13.3%.  The Bee reports CalPERS' stocks gained 17.2%, its real estate holdings went up 12.8%, and its private equity portfolio saw a 12.2% return.  CalPERS has been recovering strong from 2008-2009 when it saw significant losses because of the economy.  The 13.3% increase follows CalPERS' impressive 20.8% increase in 2011 and greatly exceeds the 4.5% estimate that Stanford relied on to make dire projections in December 2011.