With pensions looking like fair game, looks like this is going to be watershed moment for other municipalities that is in dire financial situation in the future.

[quote=harvey]Although I’m not surprised by this ruling, it’s difficult to say to what extent it can be used to predict the outcome of California’s pension crisis. States cannot file for bankruptcy, and many of our municipal pensions are legally entangled with the state pension system.
[/quote]

States can’t declare bankruptcy but they can default. Look at how the state resorted to paying bills in IOUs a few years back. What if the state just skips a pension payment, and then another every time it doesn’t have the money. You’ll never get that missed payment back because the payments stop when you die. What if they pass a special pension income tax. We honored the promise we just paid for it by taxing the recipients.

The net result is the same. Even if we get the inflation solution that some here like to claim is a solution. They will play with the CPI numbers so that your payment won’t go up as much as the inflation. Bottom line is most public employee pensioners are not going to get the 60%+ of highest salary in purchasing power during retirement. They’ll likely get something unless the current beneficiaries and courts decide the pension fund balances need to be zeroed before doing something.

If the city of L.A. would just adopt anti pension spiking rules and make them retro-active they may be even OK.

But that is unlikely.

Most likely outcome is to not do anything until the fund balance is zero, and then go negative for several years before the above happens.

From the OP link:

The judge made it clear that public employee pensions are not protected in a federal Chapter 9 bankruptcy — even though the Michigan Constitution expressly does protect them.

“Pension benefits are a contractual right and are not entitled to any heightened protection in a municipal bankruptcy,” he said.

Seems that any claim that the state has an obligation to pay was dismissed by this ruling.

Agree that it’s far from over, but if I were a former Michigan public employee on a pension, I’d be cutting back on my Christmas shopping this year.

I don’t see anywhere where it says the state has any obligation to pay Detroit’s debts.

If it were just a question of the state cutting the check vs. the city, I don’t think the creditors and pensioners would be as concerned as they appear to be.

[quote=harvey]I don’t see anywhere where it says the state has any obligation to pay Detroit’s debts.

If it were just a question of the state cutting the check vs. the city, I don’t think the creditors and pensioners would be as concerned as they appear to be.[/quote]

Michigan constitution has an awkwardly worded section:

§ 24 Public pension plans and retirement systems, obligation.
Sec. 24. The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.

This can be read to mean that pensions of political subdivisions {cities} are an obligation of the state. I’d be lying if I said this is clearly what it says. But neither do I think that it’s clear that it says something different.

[quote=SK in CV][quote=harvey]I don’t see anywhere where it says the state has any obligation to pay Detroit’s debts.

If it were just a question of the state cutting the check vs. the city, I don’t think the creditors and pensioners would be as concerned as they appear to be.[/quote]

Michigan constitution has an awkwardly worded section:

§ 24 Public pension plans and retirement systems, obligation.
Sec. 24. The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.

This can be read to mean that pensions of political subdivisions {cities} are an obligation of the state. I’d be lying if I said this is clearly what it says. But neither do I think that it’s clear that it says something different.[/quote]

Supremacy clause of the constitution states that federal law (i.e. bankruptcy law) supersedes the state constitution:

“The Supremacy Clause reads “This Constitution, and the Laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the constitution or laws of any state to the contrary notwithstanding”. This clause can be interpreted as saying that a federal court has the power to supersede a state law or even a state constitutional provision.”

http://msue.anr.msu.edu/news/what_is_at_stake_for_pensioners_in_municipal_bankruptcy