Riordan: Cities need federal help

Cities and states are in terrible shape, and their only way out is to get help from Washington, the former L.A. mayor tells Bloomberg News. But any bailout money, Riordan notes, should be conditioned on reforming the pension, health care and education systems.

Riordan envisions incentives modeled on President Barack Obama's "Race to the Top" aid to school districts. To receive funds, state and city officials should be prodded to cut public- employee pension benefits, renegotiate union work rules and add charter schools to improve student performance and save on costs, he said. Riordan said the need for federal help will be unavoidable and when it comes Obama will have to demand concessions from unions. "I think he would have zero chance of getting reelected if he didn't," Riordan said.

Good luck getting the unions to budge on pension benefits for current retirees. Those payments are pretty much set in stone (barring a bankruptcy filing). That's the big problem with pensions - most of the proposed reforms would involve new hires and that doesn't deal with the massive amount of existing obligations.