The judge overseeing the Stockton, Calif., bankruptcy on Wednesday ruled the state's huge pension system, Calpers, can be impaired as part of the city's financial restructuring.
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U.S. Bankruptcy Judge Christopher Klein said the city's contract with the California Public Employees' Retirement System could be rejected.
The ruling follows a similar determination in the city of Detroit's bankruptcy case, in which that judge ruled that pensions could also be made to absorb losses along with other creditors.
(Reporting by Robin Respaut; Editing by Bernard Orr; Writing by Dan Burns)