Stockton people will think the financial aftermath of years later, a federal judge Monday ruled that make the city become the most populous country into bankruptcy.
But the situation is being closely watched because it can answer the major issues, who was the first by a financially strapped city - retirement fund or pay creditors.
"U.S. Bankruptcy Judge Christopher Klein said:" I do not know whether you can back up the pension spikes, while making a ruling. "The law is very complex and difficult problem, I can see on the horizon."
In the case of Stockton potential constitutional issue is whether federal bankruptcy law must pay better than California law, saying that the money owed to the state pension fund.
In his ruling, Klein does not agree with the creditors that Stockton failed to seek ways straighten out the financial transaction.
"It was obvious to me the city will not be able to fulfill its obligations to public safety as well as other citizens fundamental basic government services without federal bankruptcy law contract damages muscle power capabilities," Klein says:
Creditors issued a statement saying, group "respectfully disagrees with the Court's ruling." For those creditors, declined to say whether the legal team will ask for leave to appeal the decision - Klein bankruptcy law requirements.
Stockton had tried to cut through employment, labor contract renegotiation, and cut workers' health benefits, some of the debt restructuring. Libraries and entertainment capital reduced by half, scaled Police Department respond to emergency situations only progress. The city's crime rate among the highest in the country.
Assets can not be realized due to the city, those who declare bankruptcy creditors must come up with plans to forgive part of the debt.
Insurance holding Stockton debt $ 165 million bond issued by the city in 2007 to keep up with payments to the California Public Employees' Retirement System during the recession plunged the largest portion of property taxes.
Stockton CalPERS now owe about $ 9 million to cover pension commitments, currently the city's largest financial obligations. Many California cities are struggling in the same situation.
So far, Stockton has been working with pension payments, while abandoning other debt, it needs to maintain a strong pension plan, retaining its reduction of the workforce.
Creditor's lawyer believes that this is for their customers to accept reduced payments unfair flushing time to negotiate, while pensions unchanged. They believe that employees share the wealth in good times to bow to endure some pain to cut their pensions.
Legal observers expect creditors to actively challenge Stockton proposed repayment plan, in the next phase of the process.
"That is, it will be a precedent," Carroll said Denniston, municipal restructuring expert monitoring tests. "Bankruptcy Law apply to CalPERS or not? If insolvency law is better than national law, it is huge, it has a huge impact, other cities in California what will happen next."
National Pension Scheme manages $ 25.5 billion of assets in 2011 from $ 8.7 billion U.S. dollars, but the lack of funds, the last time was calculated. Spokesperson Amy Norris said, CalPERS is in the process of setting new rates close responsibilities.
These changes may be further strained financially strapped at least 24 other cities, including Fairfield, San Bernardino, San Jose, Compton, Watsonville, Atwater.
"Almost everyone has an unfunded liability," Norris said.
First-ever questioned Chapter 9 bankruptcy laws state pension obligations are expected to decide whether to appeal rights observers state is more powerful than the federal bankruptcy law amendments to Article 10
Even Judge Klein, who was first inclined to approve the bankruptcy without a trial, hearing that he was going to say, Monday's close create an appellate record.
Now, nearly 30 million people in the city began a months-long negotiation process debt. Stockton has spent 200 million dollars and up to $ 5,000,000 mediation eligibility case, DEIS said Bob Stockton city manager.
"What's to celebrate bankrupt," he said. "But it is a vindication of what we have been saying for nine months."
 
 



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