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“There’s been a belief in the public sector that these pension promises are safe no matter what,� says finance professor Robert Novy-Marx of the Simon School of Business at The University of Rochester. “They viewed them as deferred compensation that was theirs. They have a right to it.� But a ruling in federal bankruptcy court in favor of Detroit would change all that. “It is possible this is potentially an important precedent-setting case,� says Novy-Marx. Some generous public sector pensions are seriously under-funded, “I think that what happened in Detroit may make this crisis happen much sooner.�
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