Scott Shackford on Detroit’s Bankruptcy and the Future of Public Pensions

That a judge would rule in favor of Detroit
entering bankruptcy to restructure its debt was inevitable. But
when Judge Steven W. Rhodes summarized his lengthy ruling, he also
made it clear that the pensions of Detroit’s public employees were
to be treated like every other contract with the city. Michigan’s
constitutional protection of municipal pensions did not cover
cutbacks or renegotiations that may result from federal bankruptcy
proceedings.

Reason’s Scott Shackford notes that because Detroit isn’t the
only American city struggling with bankruptcy right now, other
municipalities and states should pay attention. Potential pension
cutbacks can be used as ammunition by reformers who want to push
cities and states into savings programs instead.

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