Pension Battles Loom Across the U.S.

When companies go bankrupt, the Pension Benefit Guaranty Corp. (PBGC) steps in to cover most defined-benefit pension promises. The PBGC took over 110 plans in 2007, the latest year for which figures are available, paying a maximum benefit of $51,750 a year to eligible retirees. But the PBGC does not cover municipal or state retirement plans.

The little-known Chapter 9 of the bankruptcy code allows cities to reorganize and renegotiate all contracts and promises. Chicago attorney James Spiotto of Chapman and Cutler says the law can be murky: "There are varying levels of protection, ranging from strict constitutional rights to general statutory provisions, that might allow for some renegotiation of benefit levels in light of adverse conditions affecting the pension fund."

In other words, if a government body attempts to renege on pension promises, there will be a huge court battle.

The stage is set. If the generous state and local pension promises negotiated by unions are to be kept, it will be up to taxpayers to come up with the money, either through higher tax levies or lower service levels. That debate is coming soon to a taxing body near you! And that's the Savage Truth!