>>> now to detroit and the largest city bankruptcy? i u.s. history , which is now being watched so closely by cities across this country because there's a problem a lot of them share, huge gaps between the amount of money they have already set aside for pensions and the amount of money they have actually promised retired city workers. nbc's john yang reports.

>> reporter: john day was a detroit cop for more than 26 years. he worked long hours and went years without raises in return for the promise of reliable retirement income. now that pension, $2900 a month, is at risk.

>> if these cuts go through it will destroy my retirement. i have to try to find a full-time job with benefits that, you know, aren't in abundant supply.

>> reporter: like many state and city workers across the country, he is not eligible for social security . in bankruptcy court , day and other retirees are just another creditor fighting for a piece of a very small pie.

>> i feel betrayed. i think all the retirees feel betrayed.

>> reporter: problem's not limited to detroit . like a lot of households, states and cities don't always set aside enough money for the future. a new boston college study finds that nationwide, state and local governments have promised workers about $1 trillion more in retirement benefits than they are able to pay.

>> a lot of cases, these increased costs, these poor-funded ratios are a product of poor funding in the past and not so much that plans promised exorbitant benefits.

>> reporter: according to the pew research center , 34 states have pension fund short shortfalls of 20%er. the worst, illinois, which has left les than half what it needs. the same day detroit filed for bankruptcy, the bond rating service you can moody's, downgraded chicago 's credit rating to negative. among the reasons, extremely underfunded pension plans and the political barriers to pension reform .

>> what chicago gets from detroit is the opportunity to see what happens when you don't address the problems when you still have a chance.

>> reporter: something that leaders in states and cities across the nation will likely look at very closely. john yang , nbc news, chicago .