Local and municipal govts. can go into bankruptcy and discharge those contracts with retired public employees. A bankrutcy judge has the power to restructure the retirement package, so the retired employees should just play ball and share the pain.
States can't go into bankruptcy and discharge or restructure their debts. California's approaching insolvency is a test case for the nation. This is unknown territory. It's like being at a high stakes roulette table in Las Vegas. Fascinating to watch.