Hit & Run

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


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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.