A mutual fund heavyweight and the largest public pension fund in the U.S. are clashing over whether public pensions should be protected in municipal bankruptcy, a major test that has implications for workers, investors and distressed cities across the country, the Wall Street Journal reported today. Payments into pension funds are usually considered sacrosanct, but fights are breaking out around the U.S. over who gets priority when a municipality seeks protection from creditors. The latest battle involves the bankruptcy of Stockton, Calif., and pits Franklin Templeton Investments against California Public Employees' Retirement System (CalPERS). The firms disagree on whether Stockton's retirement contributions should be reduced to free up money for a loan repayment. U.S. Bankruptcy Court Judge Christopher Klein could rule on the dispute as early as Tuesday.
