For many states and municipalities, the reality seems clear and ugly: figure out a way to reduce growing pension obligations or file for bankruptcy. 

In Rhode Island, state treasurer Gina Raimondo used the power of her office to suspend cost-of-living increases to retirees, lengthen the time required before workers can earn a pension and offer an alternative 401(k) plan to state workers, one that significantly reduces the amount the state has to contribute.

In Louisiana, Governor Bobby Jindal helped create another kind of new 401(k) plan for state workers hired beginning in 2013. This new approach would create an investment account for new hires instead of requiring the state to make a traditional monthly contribution to a retirement plan. The change would save the state money and make Louisiana the only state plan in the country to put workers in a cash balance plan.