CalPERS was able to avoid Vallejo’s bankruptcy process by intimidating the city to continue making its payments. A similar approach in Stockton has resulted in other creditors suing the pension giant for preferential treatment. And now, an effort to receive preferential treatment by the Courts has resulted in creditors fighting the pension fund once again.

San Bernardino has halted its payments to creditors – all creditors, including CalPERS. Since payments stopped flowing, the City has missed $6.9 million behind its previous commitment of $24 million per year. So far, the City has said only that payments are not expected to restart until the start of the next fiscal year, and it hopes to restructure its payments.

Bankruptcy is intended (in part) to protect insolvent institutions from being sued by creditors. Other municipal creditors are adhering to that protection. But CalPERS has asked the Courts for permission to sue the City and go after its missed payments. In the eyes of the pension fund, the payments are part of employees’ vested rights and cannot be altered.

Creditors are arguing that would be preferential treatment and should not be allowed.

Read the full story at the Sacramento Bee.