CalPERS poised to start cuting retiree pensions in tiny Sierra town

Of the three, Loyalton faces the biggest bill if it wants to protect its retirees. It owes CalPERS a hefty termination fee of $1.6 million.

That's equivalent to about $2,100 for each of the town's 750 or so residents. It's a sum that far exceeds the city's resources, said Loyalton City Councilman and at-risk retiree John Cussins.

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Around the state, other local governments are watching how CalPERS handles Loyalton. It's regarded as a bellwether for how the fund may work with financially distressed cities that cannot keep up with their pension obligations. The ranks of those cities may grow as CalPERS acts to shrink a funding gap between what it pays out every year and what it earns from its member agencies and its investment returns