"Larger questions remain, however, from the judge's first-of-its-kind ruling that CalPERS pensions can be cut in a municipal bankruptcy, even though in this case Stockton chose not to do so. Will CalPERS appeal the pension ruling or let it stand unchallenged, possibly clouding the sense of security of state and local government employees, encouraging future bankruptcies and giving management leverage in labor negotiations? And does Stockton's decision not to cut pensions in bankruptcy risk future insolvency, as Moody's credit rating service warned a year ago, possibly putting the city on a path to future budget deficits, which Vallejo has faced since its bankruptcy?"

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