CalPERS sues Compton over missed payments

Published Tuesday, Oct. 30, 2012 - The Sacramento Bee

A second California city has fallen behind on its payments to CalPERS, prompting a lawsuit by the big pension fund.

Compton owes $2.7 million to the California Public Employees' Retirement System, the pension fund said Monday.

CalPERS sued the city in Sacramento Superior Court after Compton failed to make its required payments for September.

Harold Duffey, the city manager, said Monday that Compton is experiencing a short-term cash-flow problem and expects to clear up the debt before the end of the year.

Compton has been facing significant financial problems and publicly flirted with a bankruptcy filing over the summer.

Still, Compton's troubles represent yet another challenge to CalPERS and the durability of public pensions in general, as cities cope with severe revenue shortfalls.

San Bernardino, which filed for bankruptcy protection in August, is $5.2 million behind on its payments to CalPERS.

The fund has tried to get the bankruptcy case tossed out, saying the city is using the bankruptcy law unfairly to get out of paying its bills.

In Stockton, another city in bankruptcy protection, two creditors are trying to keep the city from paying its CalPERS bills. The creditors, a pair of bond-insurance companies which are owed millions, say their claim shouldn't take a back seat to CalPERS.

Skipping payments to CalPERS, the nation's largest public pension fund, was once considered unthinkable. Vallejo considered scaling back its pension benefits after its bankruptcy filing in 2008 but backed off after getting a warning from CalPERS.

Duffey said Compton submitted a payment plan to CalPERS, promising to "catch up in December." But the pension fund filed the court case anyway.

"Contributions are required by law and if they're not paid, we do intend to pursue all obligations," said CalPERS spokeswoman Amy Norris.

The unpaid bills include payments for pensions and health insurance, she said.