My heart bleeds for all those poor pensioners who were promised an impossible thing.

NOT.

A high-stakes legal battle has intensified as the largest U.S. pension fund filed court papers denouncing the financially troubled city of San Bernardino for what it called a "sham" bankruptcy and accused the city of "criminal behavior" in withholding payments to the pension plan.

Criminal behavior eh?  Not paying that which you don't have is "criminal behavior"?

San Bernardino is broke and can barely make payroll, city officials have said. It has not made its $1.2 million biweekly payments to CalPERS since the bankruptcy filing and now owes at least $8 million, in addition to a long-term debt to the fund that the city pegs at $143 million.

CalPERS argues that under California law it has primacy as a creditor, asserting that it is in essence an "arm" of the state and must continue to be paid in full, even in a bankruptcy.

Then CalPERS officials should all go to prison right now.

Why?

Because an agreement to do an impossible thing is no agreement at all.  If you and I contract for me to jump over the Empire State Building we have no actual contract, since what we contracted for is a physical impossibility.

It is mathematically impossible to continue to run a ponzi scheme in perpetuity -- and all exponential growth systems are ponzi schemes.  As such any promise to maintain one without a definite end date is a contract to do an impossible thing and is thus void ab-initio.

The city cannot do an impossible thing.  Both parties entered into an agreement to do the impossible, and both must face this.  That, in turn, means that CalPERS must accept that it will not be paid, as it negotiated its "agreements" in bad faith, either with knowledge or negligence as to the impossibility of fulfilment, as did the city, with both engaged in making an agreement they knew could not be fulfilled.

Declare it void, move on, and tell the people who you screwed the truth.