Nightly News   |  December 03, 2013

Pensions at risk in Detroit – and elsewhere in US

Now that Detroit is unable to pay its $18 billion in debt, it may not be able to fund its pension obligations. Pensions are at risk in other states as well – in Illinois pension funds cover only 45 percent of their obligation. NBC’s John Yang reports.

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>>> and it is both sad and ironic the day we learn the november sales for detroit 's automakers were especially strong, on the same day the city became the largest in the u.s. history to officially declare bankruptcy. detroit is unable to pay its $18 billion in debt, including billions promised to pay pensions that are now at risk of being cut. and it is a sign of problems for funding retirement benefits to government workers across this country. our report tonight from nbc's john yang .

>> reporter: for his 29 years as a detroit city worker, donald smith gets an $888 a month pension which he now fears will be cut.

>> all i'm asking is that somebody give me what i earned. i'm not asking for a handout.

>> reporter: smith, whose jobs included being an emt, sometimes has to choose between food and medicine.

>> if they take a dollar from me it is going to impact my life.

>> reporter: in his ruling today, the first time a court has ruled pensions could be reduced despite a state constitutional ban, federal judge steven rhodes said this once proud and wealthy city cannot pay its debts. it is insolvent. rhodes added they would not cut pensions lightly or casually, a report echoed by the city's manager.

>> we're going to try to do this in a very measured and thoughtful way, but it has to be done.

>> reporter: it is not just aging cities like detroit where pensions are at risk, chicago's credit rating is downgraded because of a $19 billion shortfall. it is a problem for states, too, in 34 states, pensions cover less than 83% of the retirement eligibility. illinois has the worst in the nation, today, the lawmakers passed a measure to cut the retirement funds, among other things, analysts say they gave them bigger pension benefits instead of pay raises.

>> money that you have to pay years from now seems a lot cheaper than money you have to pay today.

>> reporter: the retirees in detroit intend to fight the judge's ruling in this once proud symbol of american industry. john yang , nbc news, chicago.