As the city of Detroit’s financial condition deteriorated, its employee-pension funds made hundreds of millions of dollars in bonus payments to retirees. Those extra checks swelled the city’s retirement debt and played a role in the Motor City’s eventual bankruptcy. Yet Detroit’s struggles haven’t stopped the retirement systems of other cities and states—including some with severely underfunded pensions—from continuing to dole out bonuses.
(Related, Stephen D. Eide, Manhattan Institute: "California Crowd-Out: How Rising Retirement Benefit Costs Threaten Municipal Services".)
Some of the worst public-sector pension problems in America are playing out in states and cities where legislation or local court rulings have granted extraordinary protections to workers’ retirement benefits—far beyond those enjoyed by private-sector employees.