Last week a federal judge approved the request from San Bernardino, California, to enter bankruptcy protection. The ruling comes at the expense of the California Public Employees’ Retirement System (CalPERS), which vigorously opposed the ruling. During the run-up to the ruling San Bernardino, unlike Stockton, suspended payments to CalPERS. The implications of the ruling are far reaching because it challenges the notion that pension systems are exempt from being treated on par with other creditors. The ruling could be an important test in Detroit’s bankruptcy because of its material pension payment costs. Furthermore, the ruling brings up questions about the future CalPERS funding ratios. If San Bernardino is able to restructure or reduce its pension obligation, it begs the question of how CalPERS will fill in the funding gap and whether other weak municipalities will follow suit. Long-term, CalPERS could face serious funding constraints, which would be a credit negative for all parties involved in the pooled statewide pension plan. These questions, while esoteric, are some of the issues we analyze and measure when performing credit analysis.