Pensions and Detroit
For decades, California city employees and their unions have been operating under the assumption that public pensions were untouchable. No matter what budgetary problems might befall their employers, municipal workers believed their retirement benefits were protected by the state constitution and couldn’t be altered or reduced, even if the city went bankrupt.
That was then. Recently, a federal judge ruled in the Detroit bankruptcy case that municipal-worker pensions were not protected under the state constitution and could be reduced during bankruptcy, like any other city contract obligation. While it’s not a given that the court would rule the same way in California, the case sends a message to public employees here and across the nation.
In a state where San Bernardino, Stockton and Vallejo have declared bankruptcy and many other cities continue to struggle, that message needs to be heard and understood: Full payment of municipal pension benefits depends on the fiscal solvency of cities, and public employees and their unions need to work to ensure sound fiscal practices and negotiate sustainable benefits packages. If they fail to do that, they cannot count on the courts for protection in the event of a Detroit-style meltdown.