Judge Napolitano on Stockton, California Bankruptcy Case: Could Retired Workers See Their Pensions Cut?
April 1, 2013
Judge Andrew Napolitano sat down with Stuart Varney on FBN this morning to discuss an expected court ruling that could set new precedent for public employee pensions and bankrupt municipalities. The city of Stockton, California, has filed for bankruptcy and it will be up to a federal judge to decide who will take the losses – retired workers, bondholders, or both.
Here’s more back ground from AP:
SACRAMENTO, Calif. — For the people of Stockton, a federal judge’s anticipated decision Monday on the city’s bankruptcy petition will affect their day-to-day lives for decades to come.
But the Chapter 9 bankruptcy case also is being closely watched nationally for the potential precedent-setting implications: whether federal bankruptcy law trumps the California law that says debts to the state pension fund must be honored.
After a three-day trial last week, U.S. Bankruptcy Judge Christopher Klein is to decide whether Stockton becomes the most populous city in the nation to enter bankruptcy, despite the objection of creditors who argued the city failed to pursue all other avenues for straightening out its financial affairs.
If it receives bankruptcy protection, the city begins a months-long process of negotiations over debt repayment that some say could end up in the U.S. Supreme Court.
Judge Napolitano said this is actually “virgin legal territory” and went on to explain the issues at play. He said if the federal court rules that retired city workers must have their pensions reduced, the case will ultimately be decided by the Supreme Court.
Napolitano said the bottom line is that the city, and many others around the country, have “negotiated deals that were too good to be true.”