STOCKTON (CBS/AP) — A bond insurer said lenders are losing millions in Stockton’s bankruptcy while the city continues to fund pricey pensions.

Bermuda-based Assured Guaranty said the city was giving preferential treatment to employees and CalPERS in what the bond insurer calls a contortion of the bankruptcy process.

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The Assured Guaranty’s statement this week suggests that Stockton was the new battleground in the fight over retirement promises made to government workers.

CalPERS attorney Peter Mixon said pension obligations take precedence over unsecured lenders, including bondholders, under California law.

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Still, the sanctity of pension promises was increasingly being called into question.

Voters in San Jose and San Diego recently approved ballot initiatives to trim pension benefits for current employees.

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