The City of Stockton has officially gone bankrupt. But it is still paying pensions. The other creditors are complaining. What entitles pensioners to get paid, when no one else is getting paid? The judge overruled them.
But if Stockton gets away with this, the California pension system will be in trouble. Cities will stop contributing as much.
The city is a disaster. But it has always been a disaster: a crime-ridden city. Its crime rate has been two times higher than the nation’s for as long as City-Data has kept records.
It is cutting services even more.
The city borrowed to make payments into the California Public Employees Retirement System (CALpers). These lenders just got stiffed. So, who will be the next victims?
Stockton owes CALpers $900 million. It is not alone.
The other creditors will appeal the ruling against them.
CALpers is in big trouble. It is in the hole $87 billion out of $255 billion in assets.
Lots of other cities are unfunded.
This will drag on for years.
When the checks from Washington bounce, state and local pension programs will go under.