Pensions may bankrupt Dallas (Reason)

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Dallas Mayor Michael S. Rawlings said in November that he believes the city is "walking into the fan blades," in large part because of unsustainable pension promises made to the city's police officers and firefighters. The fund that is supposed to pay for retired cops and firemen is more than $5 billion in the red. Credit rating agency Moody's believes the fund will be out of money within 20 years, and recent retirees have taken notice: Many have started pulling their money out of the system by the millions (an ill-advised provision in the plan allows this), which is hastening the coming default.

Municipal bankruptcies, though rare, are bound to happen from time to time. But they are not supposed to happen in places like Dallas, where the population and the economy are both growing. If poorly designed pension plans are capable of wrecking an otherwise thriving city, it's time to revise our view of what places are exposed to these risks.

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In some ways, the Detroit bankruptcy was a unique event. With the collapse of the domestic auto industry, the city's population eroded at a rate that's practically without equal outside places that were bombed or beset by a natural disaster.

The underlying story in Dallas couldn't be more different. Over the same 60 years that saw Detroit's population diminish by more than a million people, the Texas city's population almost tripled, going from 434,000 in 1950 to nearly 1.2 million at the last census. With more people than ever paying into the system, Dallas should be sitting pretty.

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