Pensions at risk
The Detroit bankruptcy filing has raised fears that pensions for police and other city employees could be at risk. We know it’s hard to believe, but it’s true. Here’s a quote from the Detroit News: “A bankruptcy judge could trump the state constitution by slashing retiree pensions, ripping up contracts and paying creditors roughly a dime on the dollar for unsecured claims worth $11.45 billion.” That’s because the bankruptcy will be heard in a federal bankruptcy court. The California Constitution has similar clauses. California’s pension funds insist that, no matter what, the pensions are sacrosanct; that state law trumps federal bankruptcy law. The Detroit bankruptcy could provide an answer and it may be one no one wants to hear. Read this for more details on this scary situation.