Both cities were spurred to act by the risk of credit downgrades and by a recent accounting change
that calls for cities to calculate the number of years before their pension funds will run out of money — a once-unthinkable catastrophe that has come to pass in Prichard, Ala.; Central Falls, R. I.; and now Puerto Rico.
Illinois, California, Oregon, Pennsylvania and Kansas are among the states where, by law, public pensions
cannot be reduced — not even the pensions that current workers hope to earn in the future.
Just six months ago, the mayor of Dallas, Michael S. Rawlings, was warning
that his city might need to declare bankruptcy after a panic led stampeding retirees to pull half a billion dollars out of its pension fund for police officers and firefighters.
Importantly, the new law for Dallas also bans the kind of big, one-time withdrawals
that caused last year’s run, in which retirement-age police and firefighters stripped about $500 million out of their pension fund, leaving it tattered almost beyond repair.
“The key to all this is, not one retiree’s pension check is going to be reduced
one penny,” said Ray Hunt, the president of the Houston Police Officers Union.
