Pensioners in Bankrupt Detroit OK Tough Cuts

Another piece of Detroit's grand bargain fell into place. Another piece of Detroit's grand bargain fell into place. Shutterstock

Late last night, Detroit passed a vote on an agreement that will help city get out of the bankruptcy they filed for a year ago. Workers and retirees in the economically damaged city have voted in favor of pension changes as part of the plan to reduce municipal debt. This comes just several weeks before a trial begins to end the largest public bankruptcy filing in U.S. history. 

The pension change is actually a pension cut, and while there was previous backlash, it was passed with a vast majority. The pension cut for general retirees is 4.5 percent, and they also lose annual inflation adjustments. Still, this was approved with 73 percent in favor. For retired city firefighters and police officers, they will lose only part of their annual inflation adjustment. About 82 percent of this group voted in favor of the cut. The votes took place over 60 days and was organized by a private company. 

The votes will give the judge in the trial, Judge Steven Rhodes, greater insight into Detroit's debt reduction strategy. The judge has $18 billion in long-term debt to consider. This vote triggers an $816 million bailout from the state, local foundations, and the Detroit Institute of Arts. It will also aid in preventing the sale of the city's art collection. However, this is all still pending the judge's agreement on August 14. 

Kevyn Orr, the state appointed emergency manager currently handling Detroit's finances, said, "I want to thank city retirees and active employees who voted for casting aside the rhetoric and making an informed, positive decision about their future and the future of the city." 

Still, regardless of the landslide vote, not all are pleased with this change. The pensions are already quite small. Firefighters take in only $32,000, and other city workers get even less, between $19,000 to $20,000. Michigan Attorney General Bill Schuette believes the state Constitution does not allow pensions to be cut, even though Judge Rhodes ruled that federal law outweighs that provision. However, Schuette will not stand in the way of vote by appealing. "I will respect their decision," said Schuette in a public statement. 

(Image by Susan Montgomery / Shutterstock.com)

NEWSLETTER

Get daily news from Route Fifty

Top stories on how innovation is driving smarter government across the country.

FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

    Download
  • Cyber Risk Report: Cybercrime Trends from 2016

    In our first half 2016 cyber trends report, SurfWatch Labs threat intelligence analysts noted one key theme – the interconnected nature of cybercrime – and the second half of the year saw organizations continuing to struggle with that reality. The number of potential cyber threats, the pool of already compromised information, and the ease of finding increasingly sophisticated cybercriminal tools continued to snowball throughout the year.

    Download
  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

    Download
  • GBC Issue Brief: The Future of 9-1-1

    A Look Into the Next Generation of Emergency Services

    Download
  • GBC Survey Report: Securing the Perimeters

    A candid survey on cybersecurity in state and local governments

    Download
  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

    Download
  • eBook: State & Local Cybersecurity

    CenturyLink is committed to helping state and local governments meet their cybersecurity challenges. Towards that end, CenturyLink commissioned a study from the Government Business Council that looked at the perceptions, attitudes and experiences of state and local leaders around the cybersecurity issue. The results were surprising in a number of ways. Learn more about their findings and the ways in which state and local governments can combat cybersecurity threats with this eBook.

    Download

When you download a report, your information may be shared with the underwriters of that document.