A federal ruling on April 1 has ensured the city of Stockton is eligible for bankruptcy protection. The debt-laden city has failed to carry its financial burden since June 2012 when it collapsed under its crippling debts. The city had to make serious cutbacks to health-care benefits, renegotiate labor contracts, limit employment and stop bond payments.

Today, Stockton’s bankruptcy claim will mean the creditors will have to wait longer for their money. Naturally, they are fighting against the claim. In their opinion, the city can come up with more money and avoid filing for bankruptcy. The creditors may be right. There is one sector that was not touched by the city during its cutbacks.

Back in June, as the city worked to try and minimize its payments, and draw in more revenue, it didn’t touch pension plans. The California Public Employees Retirement System (CalPERS) is the city’s largest financial obligation, coming in at $900 million. This is what has put the creditors up in arms. During the ruling on Monday, U.S. bankruptcy judge Christopher Klein said, “It’s no secret (creditors) have CalPERS in the crosshairs of the dispute.”

Stockton officials insist they keep up with pension payments and put other debts aside because a strong pension plan is needed to hold on to its workforce. All the while, state jobs are being cut left, right and center because of a lack of funding.

Back in 2007, Stockton’s creditors insured $165 million in bonds, just to keep up the CalPERS payments. As a result of these “patch-up” solutions, the city of Stockton now owes CalPERS about $900 million to cover these promises.

Negotiations broke down between Stockton officials and creditors after Stockton refused to include cutting pension payments in its reorganization plan. Mr. Klein left the possibility for CalPERS to be further negotiated in a later phase of the case.

Up to this point, there has never been a major test between federal bankruptcy law and California’s law that requires CalPERS to be funded.

Pensioners may have legitimate cause for concern if federal law trumps state law in this case. If the city of Stockton, which holds the second-highest crime rate in the U.S., was willing to cut its police force by 25 percent in order to pay off debts, how much will it cut pensions? There may also be implications that spread from Stockton to other cities across the state.

The fear is that if Stockton can cut pension programs, what is to stop other cities doing the same? “The fear is that there is going to be a run on the bank,” said bankruptcy attorney Michael Sweet. “Everyone is going to be cutting CalPERS” if Stockton is given the green light.

The immense pension plans that California foolishly agreed to when times were prosperous are now having a widespread impact as cities face tough economic times. Almost two dozen cities in California are now facing bankruptcy or financial emergencies. The state pension funds are racking up obligations from the state government that are becoming more and more impossible to pay back, sending the state deeper and deeper into financial crisis.

With a population of 300,000, a geographical, political and economic landscape similar to many cities in the state, Stockton is a decent barometer for the rest of California. When a city can’t pay its way, chances are the state is cash-strapped as well. Such is the case with California.

A report issued by state auditor Elaine Howle that covers the fiscal year ending June 2012 said the net worth of the state was negative $127.2 billion. During that year, the state’s general fund spent $1.7 billion more than it received in revenue. The report listed the long-term obligations of the state to be $167.9 billion. As large as the sum is that California now owes to creditors, the report didn’t include the unfunded liabilities for pensioners, or the retiree health-care liabilities that are estimated at $60 billion. According to Moody’s, a major bond credit rating house, if these figures were added, California would be several hundred billion dollars further into the negative.

As Stockton is a sign of where things are heading for California, so California is a sign of how the U.S. manages to pay for pensions. It doesn’t. CalPERS is a $225 billion system that is underfunded by $87 billion. There are more payments due to retirees than there is money to spend.

In 2012, the Congressional Joint Economic Committee said that unfunded pension obligations nationwide amounted to more than $2.8 trillion, with some estimates as high as $4.4 trillion. California is just one case out of 50. Every state is affected. From the city, to the state, to the national level, officials are running out of money. It is not all as a result of exorbitant pensions, but they are a major contribution to the lack of funds on the city level.

That leaves the moral question: do we cut pensions now, at the hurt and expense of retirees—or do we continue cutting other areas such as our police force, sending crime rates through the roof, paying off creditors and neglecting civil responsibilities, leaving the task up to our debt-laden children? Karol Denniston, a municipal restructuring expert, said, “There is not one thing that will fix the pension system.”

In a way, Mr. Denniston is right. There is no way that the problem with the pension system can be solved. For the past 6,000 years man has tried his hardest to govern himself, often with the greatest intentions to benefit society. Yet even systems as well-intentioned as the pension plans are fundamentally flawed because they are put in place by the governments of man. The day is coming soon when man’s rules and regulations will be done away with and a new system of government will be put in place. It will be God’s system. That day will not come until after we see the governments of men collapse. That is where our hope lies. As we see the current city, state and national governments fail, we can rest assured that a perfect system is soon on the way and will bring joy to the lives of all people! Read The Wonderful World Tomorrow to fully understand the universal abundance and joy that will soon fill this Earth.