The California Public Employees Retirement System (CalPERS) said that 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, Bloomberg News reported yesterday. CalPERS, the largest state-run pension system in the U.S., filed a friend-of-the-court brief yesterday in the federal appeals court in Cincinnati, which has been asked to consider a challenge to Detroit’s eligibility for bankruptcy protection. 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.
