Don’t open floodgates

The tragedy of Detroit’s bankruptcy is a lesson for other governmental entities, be they local, state or federal.

The sight of a retired 26-year veteran of the Detroit Police Department telling television reporters that it appeared he would be losing his pension was heartbreaking. Like many government workers, he is ineligible for Social Security and his pension was supposed to fund his retirement.

We have praised Gov. Neil Abercrombie for facing Hawaii’s unfunded liabilities problem head-on. He has pledged to work with the Legislature to make sure that public workers’ pension and health benefits are fully funded within 15 years.

The truth of the matter, though, is that most states have not even begun to get their fiscal house in order. At a recent Maui Chamber of Commerce gathering, Gov. Abercrombie said Illinois is floating bonds just to pay for its operating budget.

“You can’t operate like that,” the governor said, shaking his head.

It is interesting to note that Illinois’ largest city – Chicago – suffered a slashing of its credit rating on the heels of the Detroit bankruptcy filing. According to, Moody’s Investment Service cited Chicago’s gigantic pension liability as justification for the lower bond rating.

Moody’s said Chicago has set aside only 22 percent of the amount needed to meet its pension liabilities. The city contends that it is “only” underfunded by $19 billion – Moody’s says it is almost double that, or $36 billion.

It is interesting to note that in private industry, companies that have defined-benefit plans must pay a penalty to the Pension Benefit Guarantee Corp. if they fall below 80 percent of full funding.

The problems of Chicago and Detroit may be extreme examples, but they also may be just the tip of the iceberg. Again according to, 34 of the 50 states fall below 80 percent funding of pension and health liabilities.

The question becomes: If Detroit can’t pay its liabilities, who does? It would be our guess that Michigan representatives are going to ask Washington to bail them out. If the feds help Detroit, it will open a floodgate.

States and municipalities must be forced to pay for their own pension and health care promises.

* Editorials reflect the opinion of the publisher.