"State and local governments face unmet pension fund obligations of as much as $4 trillion according to some studies, possibly jeopardizing their ability to provide essential services and meet their debt service payments. Moves by Coventry and a few other towns around the country have sparked fears in the municipal bond market that the situation could unravel.
By the end of that painful case, retirees' pension payments were slashed in half, but bondholders escaped unscathed after state legislators passed a law."