- Associated Press - Wednesday, May 13, 2015

SAN BERNARDINO, Calif. (AP) - A judge has dismissed a lawsuit from creditors challenging the city of San Bernardino’s decision to make its full payments to the California Public Employees’ Retirement System.

The Sacramento Bee reports (https://bit.ly/1PjLQpD ) that U.S. Bankruptcy Judge Meredith Jury ruled from Riverside Monday against the two disgruntled bond creditors, Ambac Assurance Corp. and a Luxembourg bank named EEPK.

San Bernardino filed for bankruptcy protection in 2012 and said it would pay its $24-million-per-year CalPERS bill in full.

The two creditors said the arrangement wasn’t fair; they’re owed more than $59 million in the bankruptcy. Their attorneys couldn’t be reached for comment.

Though San Bernardino hasn’t filed its complete repayment plan, it’s likely that many creditors would receive only a portion of what they’re owed.

CalPERS applauded the ruling, saying the judge ruled appropriately.

“Now the city can turn its attention to the more pressing matter of completing its plan of adjustment for exiting bankruptcy,” CalPERS said in a statement.

Dave Low, chairman of the union-backed advocacy group Californians for Retirement Security, said the ruling’s “another big win in court for middle-income working families who play by the rules and earned their retirement security over the interests of Wall Street.

“The courts have made it clear that California law protects the promises made to firefighters, police, school employees, teachers and other public employees about their benefits.”

Public pensions remain a contentious political issue.

While Gov. Jerry Brown signed into law a pension-reform package for newly hired workers that took effect in January 2013, former San Jose Mayor Chuck Reed and former San Diego City Councilman Carl DeMaio are pushing for a new reform initiative for next year’s election ballot.

Details haven’t been released but Reed has been outspoken about wanting to rollback pension benefits for current employees.

Still, Monday’s ruling is the second big legal victory in a matter of months for CalPERS and public employee pensions.

Last fall, a bankruptcy judge ruled that Stockton had the legal right to reduce payments to CalPERS. But the judge also blessed its repayment plan, in which it continues paying CalPERS in full.

Experts say cities are essentially obligated to pay CalPERS the full amount or otherwise suffer the consequences of triggering a complicated legal mechanism that significantly slashes benefits to current and future retirees.

Stockton officials say benefits in such a situation would drop by 60 percent and that city employees would leave for other jobs.

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Information from: The Sacramento Bee, https://www.sacbee.com

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