NEWARK, New Jersey (Reuters) – When a New Jersey family with an autistic child walks into the state office seeking help, Norlande Perpignan is often the first person they see.

A clerk making $41,082 a year at the Division of Developmental Disabilities, Perpignan, 40, is also on the front lines of a national debate about public spending, taxes and a fiscal crisis facing local governments.

With the sluggish economy constricting tax revenue, many states, counties and local governments are fiscally distressed, adding unprecedented volatility to the traditionally safe, $2.8 trillion municipal bond market.

New Jersey Governor Chris Christie has called the state's long-term pension obligations "fairy tale promises" that are unsustainable," saying the state's unfunded pension liabilities -- $46 billion and growing -- threaten the system with collapse.

As a result, state worker benefits are being targeted by budget-cutting politicians and resentful taxpayers whose defined benefit pensions disappeared a generation ago and whose retirement savings shrank in the financial crisis.

But state workers of modest means are asking why they are being asked to pay for the mistakes of Wall Street, which inflated the bubble with easy credit and big bets on risky mortgages and then got bailed out with hundreds of billions of dollars in taxpayer money after the crash of 2008.

"There's more stress because you don't know when they're going to call you in and give you a pink slip (dismissal notice)," said Perpignan, a single mother and 20-year employee suddenly faced with reduced benefits. "I'm always stressed, wondering if 20 years means anything to them. I have a child in college plus two other kids."

Christie, whose aggressive budget-cutting has made him a national star in the Republican Party, wants to help balance the budget by paring the benefits of employees like Perpignan.

Without reform, New Jersey's unfunded pension liabilities would grow to $181 billion in 30 years, he says.

PENSION POLITICS

Under Christie's plan, Perpignan would pay an extra $5,700 a year in contributions toward her pension and health care benefits -- another 14 percent of her pretax salary -- on top of the $2,875 she pays now.

In addition, she would have to work another 10 years before retiring -- at age 65 instead of 55 -- and would collect a $15,800 annual pension, nearly $3,000 less than what she has been promised since she was hired 20 years ago.

Public sector workers recognize that they often have more secure retirement plans than their private sector counterparts and reputations as lazy underperformers who have been rewarded by politicians courting favor with public-sector unions.

They may suffer from association with cases of politicians collecting generous pensions despite being convicted of crimes.

Some of them are fighting back.

"Even if you are at your worst, you have to try your best, because there are families coming in, and there's nothing else you can do but be your best and greet them with dignity," Perpignan said.

A DEAL IS A DEAL

Many pensioners who retired under one set of rules are now facing reductions years after they stopped working. Their unions typically negotiated more modest salary packages in exchange for better retirement benefits.

"It's ridiculous the way they're attacking the pensions," said Dennis Ahern, 69, a retired New York City transit police officer who had a gun pulled on him twice and lost seven friends who were killed on the job. "They have us on the beach of Bermuda because we have a pension. No. You're paying your bills. I live modestly. I can buy a Hyundai."

In 21 years on the job, Ahern said he never made more than $36,000 a year and retired in 1987. He collects a pension of $26,000 a year plus a variable supplement that amounted to $12,000 last year. Mayor Michael Bloomberg wants to eliminate that supplement.

"That isn't fair. That wasn't the agreement. It wasn't a bonus. We paid for it. It was negotiated. It's fair and square," Ahern said.

Christie last year skipped a $3 billion payment to the fund, meaning the contribution will have to be made up in the future or asset prices will have to rise dramatically for the fund to meet future obligations to pensioners.

Critics fault a series of governors who chose not to make employer contributions.

"What really is at issue here is an ideological theory that says that the individual should take care of his retirement economic security and any pooling of resources into a pension fund is ideologically unacceptable," said Denis Hughes, president of the New York State AFL-CIO and a former chairman of the Federal Reserve Bank of New York's board of directors.

"Private sector employees had defined benefit pension funds for many years and they suffered the same problem that the public sector has now, where employers didn't fund them."

(Additional reporting by Joan Gralla; Editing by Eric Walsh)

NEW YORK/WILMINGTON, Delaware (Reuters) – Borders Group Inc filed for bankruptcy protection and said it would close about one-third of its bookstores, after years of shriveling sales that made it impossible to manage its crushing debt load.

The long-expected Chapter 11 filing will give the second-largest U.S. bookstore chain a chance to try to fix its finances and overhaul its business in an attempt to survive the growing popularity of online bookbuying and digital formats.

But the chain still faces questions about its longer-term survival in the face of competition from larger rival Barnes & Noble Inc and discounters such as Wal-Mart Stores Inc and Costco Wholesale Corp, as well as from Web retailer Amazon.com Inc and from Apple Inc in electronic books.

Borders President Mike Edward said his chain "does not have the capital resources it needs to be a viable competitor." He said the bankruptcy was essential for Borders to restructure its debt and still operate.

Borders, which was founded in 1971 and bought by Kmart in 1992, had liabilities of $1.29 billion and assets of $1.28 billion as of December 25, according to documents filed on Wednesday with the U.S. Bankruptcy Court in Manhattan. Borders has had net losses totaling $680.6 million since the beginning of its 2007 fiscal year.

The pioneer of book superstores plans to abandon some of its highest profile locations, closing a store in its hometown of Ann Arbor, Michigan, as well as one on Manhattan's Park Avenue.

All 200 closings will be superstores, and about 6,000 jobs will be affected, the company said. It has the option of closing up to 275 in all, according to court documents. It said the stores it wants to close lose a combined $2 million a week. The closings will start by Saturday. The company said it will honor gift cards.

Borders operates 642 stores, including about 500 superstores as well as more than 100 smaller Waldenbooks locations. Almost all of the stores closed by the company in recent years were Waldenbooks locations.

"Waldenbooks really is a specialty retailer," said Mark Freiman, a retail consultant with Focus Management Group. "Borders is category killer and essentially a category killer in book is going to go away. There is no question about it."

The largest U.S. bookstore chain, Barnes & Noble, has had success with its Nook e-reader and online store, allowing it to stay in contention with online book pioneer Amazon.com. Borders has lagged well behind.

Borders made a major strategic error in 2001 when it handed off its online business to Amazon. It relaunched borders.com in 2008, but in the first three quarters of 2010, online sales made up only 2.3 percent of revenues.

The chain's difficulties have been worsened by the revolving door in its executive suite in recent years. The company has had four chief executive officers in the past three years and two chief financial officers in 2010.

Sales declined by double-digit percentage rates in 2008, 2009 and in the first three fiscal quarters of 2010. During those nine months, sales came to $1.54 billion.

SMALL BOOST FOR B&N?

The bankruptcy could help sales of traditional books at Barnes & Noble, at least temporarily, analysts said. Credit Suisse estimates that 70 percent of Borders stores are near a Barnes & Noble store. Barnes & Noble operates 717 superstores.

But analysts say Barnes & Noble needs to focus on its e-book strategy, through its Nook e-reader.

"Barnes & Noble shouldn't be distracted by Borders' bankruptcy," said Morningstar analyst Pete Wahlstrom. "If they let their foot off the gas even for a second, Apple and Amazon will be ready to take the spoils."

In bankruptcy, stockholders are typically wiped out. Borders' top shareholder is CEO Bennett Lebow, who injected $25 million of his own money last May to try to shore up the bookseller.

Its second-largest shareholder is hedge fund Pershing Square, whose manager, William Ackman, has said Borders was his worst investment ever.

General Electric Co's GE Capital will provide Borders with $505 million in debtor-in-possession financing to allow it to continue operating, contingent on court approval.

The company's largest unsecured creditors include major publishers that provide the books it sells. Borders owes Pearson Plc's Penguin $41.2 million, Hachette Book Group USA $36.9 million, and CBS Inc's Simon & Schuster $33.8 million, according to court documents.

Borders shares were trading over-the-counter on Wednesday afternoon at around 21 cents, down 7.8 percent from their close; the stock had traded on the New York Stock Exchange before the bankruptcy. Barnes & Noble shares rose 1.7 percent.

The case is In re: Borders Group Inc, U.S. Bankruptcy Court, Southern District of New York, No: 11-10614.

(Reporting by Phil Wahba and Tom Hals; additional reporting by Santosh Nadgir; Editing by Derek Caney and Gerald E. McCormick)

NEW YORK (Reuters) – In New York state's debate over public pension reform, the only retirees more unpopular than the double-dippers are the convicted criminals.

As state and local governments consider how to reduce the billions of dollars they will owe to retirees in future, New York is scrutinizing those who "double-dip" -- retiring early from one job in the public sector and hopping to another. Such workers collect a pension and a salary, and may even eventually be eligible for a second separate pension.

There are at least 2,129 New York state public employees, ranging from nurse to investigator, who are double-dippers.

Then there are the crooks.

In the past six years, criminal or ethical violations have driven 13 legislators out of office, up from four in the previous six-year period, according to Citizens Union, a nonpartisan civic group.

"We believe that those who are convicted of a serious crime maybe should not be receiving their full taxpayer-paid pension," said Citizens Union executive director Dick Dadey.

Those who left office under a cloud include the former Democratic comptroller of New York City and New York state, Alan Hevesi, who resigned in 2006 and pleaded guilty to defrauding the government. A wider corruption probe led to another felony guilty plea from Hevesi last year.

Despite the convictions, Hevesi is paid $8,786 a month, or $105,432 a year, according to the state comptroller.

Then there is former Republican Senate Majority Leader Joseph Bruno, who is waiting to see if his corruption sentence will be overturned. Bruno, a millionaire horse-breeder, retired in 2008 and collects a gross monthly pension of $8,007, the state comptroller's figures show.

Another pensioner is former New York City police commissioner, Bernard Kerik, now serving a prison sentence for failing to disclose loans from a developer. Kerik collects $4,441 a month before taxes, a city official said.

Double-dipping invites criticism from fiscal monitors who note that collecting both a salary and a pension is rare in the private sector and argue that public employees should have to work until age 65 before they can retire, instead of 55.

"Many New Yorkers would like the opportunity to retire, collect a state pension, and then also earn state income but they don't have that opportunity," Dadey said. "That raises the question about a different class of citizenship where elected officials feel a certain entitlement that taxpayers don't feel they deserve."

(Reporting by Joan Gralla; Editing by Daniel Trotta and Eric Walsh)