The city of San Bernardino, Calif., is expected to learn on Wednesday if it is eligible for bankruptcy protection despite the opposition of California's powerful public pension system, Reuters reported yesterday. Most observers expect Bankruptcy Judge Meredith Jury to rule that cash-strapped San Bernardino, 60 miles east of Los Angeles, is eligible for chapter 9 protection, a year after it declared bankruptcy having effectively run out of cash to meet its day-to-day obligations. In an unprecedented move, San Bernardino halted its biweekly payments to the California Public Employees' Retirement System (CalPERS) for an entire year after declaring bankruptcy last August. San Bernardino has now resumed payments to CalPERS, America's biggest pension fund and San Bernardino's largest creditor, but no city has ever halted employer payments to CalPERS before. The $260 billion pension fund is the only party objecting to San Bernardino's bankruptcy, saying that pension funds should not be treated like other creditors. If the judge rules that the city is eligible for bankruptcy, CalPERS may appeal the decision.
