For years, taxpayers in flat-broke municipalities have been faced with a crushing burden: No matter how far they and their governments fell, they’d still be on the hook for every dime of promised pension benefits to current and retired public-sector workers.
In deciding Tuesday that Detroit could move forward with its historic Chapter 9 filing, Judge Steven W. Rhodes declared that pension benefits “are not entitled to any heightened protection in a municipal bankruptcy.” The ruling, like the Detroit bankruptcy itself, breaks new ground.
Bankruptcy is for entities that have no chance of ever repaying all their debts and desperately need to start over. But it’s impossible for governments to reboot if huge obligations are bulletproof. Considering states and local governments have trillions of dollars in unfunded pension liabilities, this ruling is long overdue.
The idea that taxpayers should absorb all the hurt when their elected officials make financial promises that can’t possibly be kept is outrageous — and a judge agrees. The Detroit case is now a warning signal to public-sector unions and their elected sponsors: Start making difficult decisions now or face painful consequences later.