Two stories yesterday thrust pension reform in the front of the political news. In Michigan, a judge declared that Detroit could consider bankruptcy to deal with its debt crisis and that public pension obligations can be treated like any other contract under bankruptcy law. In Illinois, the state legislature passed a public pension reform that supporters say will save $160 billion and fund the retirement system over 30 years by reducing benefits for workers and retirees.
Both actions await the inevitable lawsuits promised by the public employee unions that don’t want to see members’ benefits reduced. Both stories have meaning to California cities that are struggling with fiscal problems that are wrapped around pension and health care liabilities.