First the airlines then GM and Delphi. The public employee unions are next. These municipalities have caved to striking employees for years. I know in some states it is illegal for striking public employees to strike. The punishment for which should be dismissal.
Regardless of contracts, towns, states and cities will simply have to walk away from these unreasonable guarantees of all sorts of goodies for people who do not work for the towns and states anymore.
Another argument for the 10K "birth benefit" account proposed by Tres Sec Snow that can accumulate interest over a persons lifetime...and to which they can contribute.
Level playing field at the start, people will be responsible for their own care when they retire, and it takes full advantage of the miracle of compound interest.
Estimated cost 40 bpy, versus some 700 bpy for medicare alone.