Detroit’s historic bankruptcy filing will be a test case for how far a major U.S. city can go in dealing with a chronic problem facing many local and state governments: unsustainable pension costs, the Wall Street Journal reported on Saturday. Emergency manager Kevyn Orr has said all city workers, both current and retired, could see pensions cut to help resize Detroit's finances. Of the city’s $18 billion in long-term liabilities, $3.5 billion is now owed to city pensions, while another $6.4 billion is owed to fund other employee benefits, largely retiree health care. The gap became even more acute in the last decade as the city struggled to pay its pension obligations using financial swaps. But instead of alleviating Detroit's debt burden, the complex deals further tied the city’s hands and eventually cut off access to millions of dollars in casino revenue.
