The California Public Employees’ Retirement System (CalPERS) said that the dwindling town of Loyalton, Calif., had 30 days to hand over $1.6 million, more than its entire annual budget, to fund the pensions of its four retirees, the New York Times reported today. Otherwise, Loyalton stood to become the first place in California — perhaps in the nation — where a powerful state retirement system cut retirees’ pensions because their town was a deadbeat. Patsy Jardin kept Loyalton’s books for 29 years, and she retired in 2004 with an annual pension of about $48,000, but because of Loyalton’s troubles, CalPERS is threatening to cut that to about $19,000. Of all the states, experts say, California has the most protective pension laws and legal precedents. Once public workers join CalPERS, state courts have ruled, their employers must fund their pensions for the rest of their careers, even if the cost was severely underestimated at the outset — something that has happened in California and elsewhere. The showdown in Loyalton is raising the possibility that California’s pension promise is not absolute. There may be government backstops for bank failures, insurance collapses and pensions owed to workers by bankrupt airlines and steel mills — but not, apparently, for the retirees of a shrinking town.
