Skip to main content

It's official. It's now okay for public entities to promise workers a decent retirement, then renege.

A federal judge has ruled Detroit should be granted protection from its creditors, marking the largest public bankruptcy in US history.

US bankruptcy judge Steven Rhodes said payments to retired staff, which make up half of the city's liabilities, could be "impaired" as a result.

What about Michigan's constitution, which declares pension benefits sacrosanct?  Hahahah.
((Unions)) had also argued that the Michigan state constitution explicitly protects pension benefits from being cut.

However, Mr Rhodes ruled: "Pension benefits are a contractual obligation of a municipality and not entitled to any heightened protection in bankruptcy."

If I were Detroits pensioners right now I'd be marching towards that courthouse with pickaxes and torches.  But that's just me.  My guess is no one is going to fight very hard for the pensioner getting $19,000 a year, forced to take a cut.  But lots and lots of very well paid lawyers will fight for millionaire bond holders who might be required to get a haircut rather than a life-crushing reduction in their monthly retirement checks.

8:27 AM PT: Oh well, that's a relief.  As long as it's not done "casually or lightly!"

Mr Rhodes tried to reassure those worried about potentially life-altering cuts by saying the court would not "lightly or casually" make changes to existing pensions before exhausting other options.

8:30 AM PT: A tidbit from the Detroit free Press.

The ruling came as a significant surprise to people observing the case. Rhodes previously signaled that he planned to decide the issue of whether the pensions can be cut later in the case. But today he said he changed his mind and deciding that ruling on the issue today would expedite the bankruptcy.

8:32 AM PT: And the justification:

The Michigan Constitution protects public pensions as a “contractual obligation” that cannot be “diminished or impaired.” But the U.S. government allows contract cuts in bankruptcy — and Rhodes ruled that federal law preempts the state Constitution.
8:37 AM PT:

8:43 AM PT: More from the Guardian:

In court Rhodes said the city’s pension liabilities were “complex and confusing.” The city borrowed about $1.4bn in 2005 to eliminate its unfunded pension liabilities. Then it "entered into a wager," Rhodes said that it lost “catastrophically”...

Orr has calculated the city’s debts at $18bn, a figure disputed by his critics, but no matter the real sum Detroit’s bankruptcy dwarfs all other municipal bankruptcy filings. The previous record was held by Alabama's Jefferson County, which filed for bankruptcy with debts in excess of $3.1bn...

Chapter 9 is rarely used and the only one of any real size is Detroit,” he said. “The complexity, expense and uncertainty of these types of filings make them very unattractive.”

Spiotto said that the stigma that bankruptcy causes in capital markets when the city comes to borrow money again would have very real consequences for Detroit. “If you pay 2% more interest for 30 years, that’s 60% more money that you are not spending on employing people, infrastructure. It’s a very expensive business,” he said. 8:57 AM PT:

10:45 AM PT:
“The average Detroit pensioner gets $19,000 a year...

Originally posted to jpmassar on Tue Dec 03, 2013 at 08:24 AM PST.

Also republished by Occupy Wall Street, ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement, Progressive Policy Zone, In Support of Labor and Unions, Motor City Kossacks, and "Progressive Politics:Tennessee Style" (PPTS).

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

Meteor Blades, skybluewater, Bob Johnson, Pat K California, felix19, Thumb, Alumbrados, Joe Bob, Sylv, Alfred E Newman, Bill in Portland Maine, Chi, filkertom, texaseditor, Powered Grace, emal, Bob Love, Shockwave, wu ming, Hesiod, genethefiend, celdd, eeff, xynz, Bryce in Seattle, windwardguy46, hubcap, cfm, Zinman, TracieLynn, cyberKosFan, Einsteinia, BlackSheep1, whenwego, boadicea, roses, retLT, Nate Roberts, fumie, ctsteve, dylanfan, antirove, wader, psnyder, mrkvica, JimWilson, churchylafemme, lcrp, Brian82, dkmich, econlibVA, zerelda, Curt Matlock, Hillbilly Dem, Steven D, vacantlook, furi kuri, eztempo, boran2, sawgrass727, nailbender, Bluesee, marina, 3goldens, tle, LakeSuperior, Tonedevil, chimene, corvo, wallys son, Flint, Simplify, ChemBob, Brooke In Seattle, FutureNow, ratzo, fixxit, eru, Dem Beans, where4art, Burned, blue jersey mom, Steve in Urbana, kaliope, Tool, FindingMyVoice, peacestpete, mightymouse, xaxnar, RJDixon74135, esquimaux, Nance, detroitmechworks, tommymet, Kingsmeg, 417els, Themistoclea, cardboardurinal, cookseytalbott, victoria2dc, AoT, Gottlieb, blueoasis, global citizen, philipmerrill, gooderservice, JVolvo, el cid, ER Doc, doinaheckuvanutjob, middleagedhousewife, Turbonerd, Clive all hat no horse Rodeo, blueoregon, kurt, Johnathan Ivan, ZenTrainer, PatConnors, Aaa T Tudeattack, NonnyO, ammasdarling, Tamar, BeninSC, weneedahero, devis1, ColoTim, FishOutofWater, LillithMc, Mary Mike, Busted Flat in Baton Rouge, Ticonderoga, operculum, sfbob, jayden, Midwesterners, jnhobbs, gchaucer2, cececville, leonard145b, skod, Azubia, Empower Ink, Mighty Ike, MKinTN, Captain C, weegeeone, wayoutinthestix, 6412093, Sixty Something, Involuntary Exile, salamanderanagram, treesrock, tofumagoo, Cassandra Waites, pickandshovel, TokenLiberal, mofembot, petulans, Notreadytobenice, allie123, HarpboyAK, JamieG from Md, billybam, sydneyluv, zmom, DontTaseMeBro, spacecadet1, divineorder, lostinamerica, ewmorr, dharmasyd, Nebraskablue, zaka1, asym, stevenwag, astral66, Amber6541, parse this, FogCityJohn, The Jester, NJpeach, Polly Syllabic, ItsSimpleSimon, Puddytat, NYWheeler, Betty Pinson, ericlewis0, Actbriniel, slice, no way lack of brain, Onomastic, Bluefin, firemage, BlueJessamine, HiKa, Bluerall, Teiresias70, boomerchick, marleycat, BarackStarObama, muddy boots, smoothnmellow, enhydra lutris, peregrine kate, stlsophos, DRo, Mentatmark, bassinduo, No one gets out alive, SuWho, KansasNancy, anodnhajo, IndieGuy, Eric Nelson, oldcrow, a2nite, Horace Boothroyd III, joeschmeaux, belinda ridgewood, geojumper, radical simplicity, Lilredhead, MartyM, BRog, tytalus, terrybuck, Glen The Plumber, George3, peptabysmal, Chaddiwicker, nomandates, Panacea Paola, countwebb, jbob, Thornrose, bogieshadow, aresea, Yo Bubba, Ree Zen, howabout, rosarugosa, akze29, Laura Wnderer, solarbay, ET3117, Hey338Too, Fairlithe, TheDuckManCometh, grape crush, Dodgerdog1, Liberty Equality Fraternity and Trees, ptressel, Joe Calarco, Independent Progressive, Wildfaery, benamery21

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site