Dallas is about to go broke: Detroit's pension bankruptcy may not have been a special case after all.

• Author: Boehm, Eric
• Position: POLICY - Dallas, Texas and Detroit, Michigan

ONE CITY WAS made wealthy by Americans' love of the car and dragged into ruin by that industry's collapse. Another got rich by being a hub for companies that provide fuel for those cars, and its economy is still booming. Yet Dallas could be the next major American city to follow Detroit into the throes of bankruptcy.

Dallas Mayor Michael S. Rawlings said in November that he believes the city is "walking into the fan blades," in large part because of unsustainable pension promises made to the city's police officers and firefighters. The fund that is supposed to pay for retired cops and firemen is more than $5 billion in the red. Credit rating agency Moody's believes the fund will be out of money within 20 years, and recent retirees have taken notice: Many have started pulling their money out of the system by the millions (an ill-advised provision in the plan allows this), which is hastening the coming default.

Municipal bankruptcies, though rare, are bound to happen from time to time. But they are not supposed to happen in places like Dallas, where the population and the economy are both growing. If poorly designed pension plans are capable of wrecking an otherwise thriving city, it's time to revise our view of what places are exposed to these risks.

It's well understood that in Detroit, which filed for Chapter 9 bankruptcy in July 2013 and became the largest American city to ever do so, the problems were systemic. The city's public sector failed to shrink as the population of what was once America's fourth largest city dwindled away. Because pension costs are always deferred--you're promising to pay employees later for work they're doing now--they tend to lag behind demographic changes. A sharp decline in the number of taxpayers means promises made years ago must be borne by a smaller group of people. Unless the pensions are properly funded for decades in advance, that's going to cause serious problems.

In some ways, the Detroit bankruptcy was a unique event. With the collapse of the domestic auto industry, the city's population eroded at a rate that's practically without equal outside places that were bombed or beset by a natural disaster.

The underlying story in Dallas couldn't be more different. Over the same 60 years that saw Detroit's...