Detroit Warning: Reform Needed to Save Pensions
“They are going to take away your pension!” is a common scare tactic used by Pennsylvania government union leaders to oppose pension reform (even though private school unions have agreed to pension reform).
Such a scenario is no longer fiction for workers in Detroit. Yesterday a federal bankruptcy court ruled the City of Detroit has the ability to renegotiate pension benefits, like any other contract with the city’s 100,000 plus creditors. The dramatic development has widespread implications across the country—including Pennsylvania, where unfunded local and state pension liabilities surpass $50 billion.
Ironically, union officials’ refusal to consider reform has endangered the very pensions they claimed they were protecting.
We’ve noted before the desperate municipal situations in Scranton, Pittsburgh, Allentown and Harrisburg. Government union leaders’ unwillingness to compromise and ignore fiscal reality have put these cities on Detroit’s destructive path—harming taxpayers, residents and government employees.
Only by depoliticizing government pensions with 401(k)-type plans will state and local workers be able to keep their pension and create a system that’s fair to new workers and taxpayers.