Bone up for those cocktail party conversations about the Detroit bankruptcy by remembering everything you learned in law school about the Contract Clause of the U.S. Constitution. In a long piece at the Reason Foundation, Sasha Volokh explains why:
The future of pension reform ... depends heavily on this constitutional issue. On the one hand, it seems right that a state shouldn’t be able to violate its contracts whenever they seem too expensive, even if the contracts were ill-advised to begin with, and even if this will cost the taxpayers. After all, the state can’t take private property without paying for it (obviously, at taxpayers’ expense); why should it be able to “take” a contract right for free? If public employment is really so expensive, perhaps state officials will learn next time not to make promises that are too generous. On the other hand, in most states, a great many pension-related promises aren’t contractual, especially ones that only relate to future periods of work. This seems to give states substantial leeway in crafting pension-reform bills that will withstand constitutional scrutiny.