The California Public Employees Retirement System, called “Calpers,” is the pension fund for employees of the State of California. The fund has received a disappointing judgment in court regarding its position as a creditor in the San Bernardino, California municipal bankruptcy, as reported by Thomson Reuters News and Insight on December 21, 2012.

Calpers has $241 billion in its coffers, making it the largest pension fund in the country. The problem Calpers faces is that the City of San Bernardino owes it over $8 million. The city is under bankruptcy protection. It is the third city in California to file for bankruptcy protection this year. The first two cities made their payments to Calpers during their bankruptcies, but a bankruptcy judge says that Calpers cannot recover San Bernardino’s public pension debt. The judge reasoned that allowing Calpers to become a priority creditor that could collect money under the bankruptcy would be too harmful for the city—San Bernardino would have no cash to pay for its daily operations.

Calpers’ lawyers are still willing to defend their client and are willing to go to the all the way to the U.S. Supreme Court. Their argument is that state laws say that the pension fund is allowed to collect during this type of bankruptcy even though federal laws say the opposite.

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