Yes, govt. pensions can be completely canceled

May 15, 2013

By John Seiler

We’re constantly told that California governments have a “constitutional obligation” to pay for the pensions of public-sector employees.

Except when there’s no money left. If a city, county or even the state goes absolutely flat broke, then nothing will be paid. That’s happening in Detroit:

“DETROIT (AP) — The first report by Detroit’s emergency manager declares that the city is broke and at risk of running completely out of money — a financial meltdown that could mean employees don’t get paid, retirees lose their pensions and residents endure even deeper cuts in municipal services.”

I remember total bankruptcy actually happened to the Michigan city of Highland Park 30 years ago. All pensions were completely canceled. People who paid into the system for 30 years got nothing.

But the Highland Park employees had only themselves to blame. As in California, their union bosses, which the rank-and-file voted into office, manipulated the system to put in power union-friendly city officials. Those officials then went on wild spending sprees, including on generous pay, perks and pensions for the employees.

Which was great for them until everything went belly up and they got nothing.

It could happen again in Detroit — and California.