Like many jurisdictions, Stockton, California dug itself a hole in the late 1990’s by assuming that a few banner years’ return on pension investments would continue forever—so why not skip or cut back on pension contributions to pay for other things?  Wrong!  Facing a financial cliff, Stockton then bit on a Wall Street firm’s sales pitch to reduce its pension debt by rolling it over into new, lower interest loans that were a good deal as long as the economy grew steadily, a very bad deal if it did not, which happened, bankrupting Stockton.   http://www.nytimes.com/2012/09/04/business/how-a-plan-to-help-stockton-calif-pay-pensions-backfired.html?smid=pl-share