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Pension issue in Stockton, Calif. bankruptcy

SACRAMENTO, Calif. (AP) — On its first official day in bankruptcy, the city of Stockton now must grapple with the hard part of reorganizing its financial affairs — how to share the financial burden equitably among creditors while meeting its state pension obligations. Stockton's biggest creditors insured $165 million in bonds the city issued in 2007 to keep up with CalPERS payments as property taxes plummeted during the recession. Stockton now owes CalPERS about $900 million to cover pension promises — by far the city's largest financial obligation. Whether federal bankruptcy law trumps the California law that requires pension fund debts to be honored has implications across the state and nation. Stockton's creditors say the pain should be shared equitably. Nearly two dozen California cities in fiscal emergencies are looking at pension obligations.

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