State sovereignty has always been the limiting factor to the Contracts Clause. The State can, within reason, adjust its own obligations, subject to Michigan's Constitution. The scope of the State's rights would likely be resolved by the state Supreme Court.
If the issue came before the judge [[which, again, I don't think either side really wants to have this fight), I would imagine that Chapter 9 allows for the readjustment of pension obligations, just like any other obligation. In my mind, it's a state law conflict in hiding--one state law [[Sec 24) does not allow for the adjustment of pensions, while another [[permitting the filing of Chp 9) doesn't rule it out. You could reconcile those by saying that, in Michigan, a municipality can file for Chapter 9, but not adjust pensions. That is, in the end, what the pensioners will argue [[if it ever gets there).
I think "thereby" refers to "state and its political subdivisions," but I guess the question is "which one?"
I guess the pensioners will affirmatively name the state in a suit after they get a plan they don't like. Suing the state in state court for a determination of the meaning of the state constitution might yield a result that the pensioners don't want, though.
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