Retired Detroit firefighter: "My pension is what I was promised"

[alcibiades_mystery]

27. The point is not that protection of the pensions is absolute

but rather that pensions take priority over bondholders, which is a different point altogether. The article you cite contemplates a reduction in pension benefits due to the bankruptcy. That's possible, to be sure. Whether a federal bankruptcy court can determine that payouts to bondholders take priority over the pension contracts is another question, and one not addressed in the cited article (for good reason: they cannot, except through gross violation of the state constitution).

Bankruptcy requires pay outs in tiers, or rather, cuts off debt in tiers. If you are on the lowest tier, you'll get nothing, next highest, maybe pennies on the dollar, etc. The Michigan constitution simply says that pensions are on a higher tier than debt securities when it comes to determining bankruptcy payments (or cessation of payments). So, pensions might lose some value in the bankruptcy, but that cannot lose value because bondholders gain value. Pensions take priority, but that doesn't mean that they're absolutely protected from bankruptcy judgments.