Odd that both these occurred on the same day. The federal bankruptcy judge ruled that Detroit's bankruptcy can proceed. The city is $19 billion in debt due mostly to public employee pensions, granted over time and approved by the politicians at the time. With the population of the city shrinking to the 700,000 level, there simply isn't enough incoming revenue to continue running the city and paying the pension obligations. Everybody gets a haircut on this one.
The bankruptcy judge said that Detroit could have, and should have, filed for BK earlier.
On a more positive note, the Illinois legislature passed pension reform, lowering the cost-of-living increases for state public union workers, requiring them to pay more into their pensions or swap to 401K-type plans, and retire later. The measure is designed to reduce the $100 billion debt that Illinois has due to public worker pensions.
Not surprisingly, the unions in both Detroit and Illinois are threatening to appeal and sue.
The Illinois measure does nothing for the city of Chicago, which must pass its own set of pension reform measures to avoid the same fate as Detroit.
Here in CA, the pension reform measure proposed by San Jose mayor Chuck Reed has been opposed by a consortium of mayors, including, if you can believe it, mayor Jean Quan of Oakland. If there was any city that could benefit by diverting some of the money now going to pensions to its police department, it would be Oakland.