For state and local governments in Massachusetts and across the nation, Detroit’s declaration of bankruptcy last month should signal the beginning of the end of an all-too-common practice — letting benefits payable in the distant future become the distinguishing feature of public employees’ pay.
The pension and retiree-health promises that Detroit politicians made to city workers long ago aren’t the sole reason, or even the main reason, why the Motor City has as much as $20 billion in debts and unfunded liabilities. But there’s no solution to the current crisis that leaves those benefits intact while also leaving the city in a position to serve its dwindling populace adequately. Detroit can’t jack up its taxes, which are already sky high, without scaring even more residents and businesses away. Even if the city stiffs its lenders — who must be prepared to accept some cuts to their payments no matter what — it still has an estimated $9 billion in unfunded pension and health care liabilities to current and retired employees. To meet its required annual contributions to pension funds in recent years, the city has been borrowing, thereby digging itself deeper and deeper.