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Detroit's public retirees were offered the choice between taking a serious but hopefully not catastrophic cut to their pensions and risking catastrophic cuts in the fight to preserve all of what they earned. Those who voted overwhelmingly chose to take the guaranteed but limited cut:
Under the city’s plan, general municipal retirees could expect 4.5 percent cuts to their pension payments, as well as an end to cost-of-living raises. Retired firefighters and police officers would see no cuts in their monthly pensions checks, but could expect smaller than expected cost-of-living raises.

Among retired and active firefighters and police who chose to cast votes, 82 percent voted in favor of the plan, officials said late Monday. And among general workers and retirees, 73 percent voted in favor. About 15,600 workers and retirees opted to vote from among about 32,000 who could have.

Two major bond insurers plan to fight the deal, saying the retirees getting to keep their modest pensions would be unfair to big-time finance companies. Because being a janitor or clerical worker providing decades of service to a city with part of your pay deferred to provide a pension for your retirement and being a giant bond insurer making a calculated risk are exactly the same thing, right? Alan Pyke offers some of the background that led Detroit's retirees to this point:
Questions remain about the broader bankruptcy process. There is significant evidence that top officials including emergency manager Kevyn Orr were always planning to push the city into bankruptcy court. Workers, pension fund representatives, and even the judge in the case say they were railroaded at various points by Orr, who managed to preserve the narrative that pension cuts were both inevitable and just despite the fact that it was Wall Street and mayoral corruption, not workers, that blew up Detroit’s accounting books. Orr’s numbers on pension shortfalls appeared to be so exaggerated that one municipal financing expert accused him of “pension voodoo” last summer. And Orr’s old lawfirm, Jones Day, is charging the city tens of millions of dollars for work on the bankruptcy case.
In that context, getting away with "only" a 4.5 percent reduction and the elimination of cost of living adjustments to the pensions around which they planned their retirements actually does look like a win for Detroit retirees. A twisted, awful, unjust one, but worlds better than the total destruction it looked like they might be facing.

Originally posted to Daily Kos Labor on Tue Jul 22, 2014 at 12:53 PM PDT.

Also republished by Daily Kos.

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Comment Preferences

  •  Kevyn Orr strikes me as the very embodiment of ... (1+ / 0-)
    Recommended by:
    Mannie

    Kevyn Orr strikes me as the very embodiment of

    a "useful idiot."

  •  note how the deal offered contains differential (5+ / 0-)

    treatment of police and fire-fighters vs. all other public employees....    This is the kind of pernicious thinking of Snyder and his operation that divides and conquers by splitting one group of retirees from the others with differential treatment.

  •  Bond insurers were always going to protest. (2+ / 0-)
    Recommended by:
    Dirtandiron, johnny wurster

    Anything less than 100% payment on the bonds (never going to happen) was going to be met by their objections.

  •  Ending cost of living adjustments is a big loss (2+ / 0-)
    Recommended by:
    Dirtandiron, Darth Stateworker

    considering a person may be retired for 10, 20 or even 30 years.  Even with inflation at 2%, the concession becomes very big.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Tue Jul 22, 2014 at 03:35:04 PM PDT

    •  These folks may be banking (2+ / 0-)
      Recommended by:
      nextstep, Fuzzytek

      on seeing Detroit (and more important, the solvency of its pension trust funds) "turn around" and having those COLAs re-instated down the line.

      Though I doubt that's likely.  Once you give something up, it's awful hard to get it back in todays political environment - and I don't see that changing.

      There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy.

      by Darth Stateworker on Tue Jul 22, 2014 at 04:14:05 PM PDT

      [ Parent ]

      •  Is that part of the... (0+ / 0-)

        ...pension haircut proposal?

      •  In a sane world the city pension obligations wo... (1+ / 0-)
        Recommended by:
        Darth Stateworker

        In a sane world the city pension obligations would have been absorbed into the state level plans......

        Minnesota did some pension adjustments with the market crash where COLA were reduced until actuarial balance was achieved. Now that the funds have improved the COLA will see resumption.

        •  I agree. (1+ / 0-)
          Recommended by:
          HM2Viking

          Here in New York - the only locality that is allowed to even have its own independent plans is New York City itself.  Every other locality is part of the New York State and Local Retirement System and the New York Teachers Retirement System.  This helps tremendously to help maintain solvency.  One floundering city (and/or school district) cannot even come close to putting the trust funds on the brink of insolvency.

          Additionally, as New York state also has constitutional law similar to Michigans that provides for protections of accrued benefits, and the plan is managed and controlled by the state, the tactic used in Detroit to commit retirement theft (declaring bankruptcy and using Federal bankruptcy laws to renege on accrued benefits) doesn't apply, as states cannot declare bankruptcy.  If there was a problem, state government would be legally required to step in and shore it up.  Only NYC really has exposure to that tactic as they run their own plans.  However, I doubt Wall Street would let the pension trust funds from their own city ever tank.  They wouldn't be able to sleep at night as they'd have images of angry NYPD cops, FDNY firemen and civilian city employees rushing to Wall Street with their pitchforks and torches...  And they thought Occupy was bad.

          Finally, that same constitutional amendment that protects accrued benefits also mandates that full payment for the actuarially required amount of principle must be made each year without question, meaning, unlike Detroit and many other states and localities around the nation, politicians cannot use money that should be going into pension trust funds for other purposes, and therefore cannot purposely underfund the trust fund.

          Add all that up and we have one of the best run, best funded, and most solvent plans in the nation.  TBQH, I'd like to see more states do it the way we do.  The entire "Shock Doctrine"-style pension conversation about the need for cuts due to underfunded, mismanaged plans would become moot, as it's hard for anybody  (especially "Very Serious People" type pundits that tend to add faux gravitas the general public laps up) to make such arguments and have the public buy into it when you have a fully funded, well run trust fund so the VSP can't make the "insolvent" argument in the first place.  

          Sure, there's a few right wing think tanks here (an affiliate of the Koch created/funded State Policy Network comes to mind as the noisiest) that do all these scary-sounding (and bogus) infinite horizon projections about "huge trust fund deficits" and gigantic sounding cost projections over an infinite horizon (with no other projections of future revenues ,other types of expenses, or inflation) to add some perspective of what that giant-sounding number really means in the grand scheme of things, but the public for the most part generally recognize it as bullshit and nobody bothers paying much attention to them.  Well, except the tin foil hat wearing right wing nutjobs.  Luckily, we don't have too many of those types here.

          There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy.

          by Darth Stateworker on Thu Jul 24, 2014 at 09:34:16 PM PDT

          [ Parent ]

    •  Yes it is, but no pension is a bigger loss. (0+ / 0-)

      I can't help but thinking they'd have been better off giving up 6 or 7% but keeping COLA, but that's banking on Detroit to be around to pay it.

      Which, they pretty much are doing anyway.

      LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

      by dinotrac on Wed Jul 23, 2014 at 06:28:11 PM PDT

      [ Parent ]

  •  Saw this post and called Mom (1+ / 0-)
    Recommended by:
    jan4insight

    Mom said  that as a retired 911 worker, she is considered to be a civilian rather than "public safety" and, therefore, her benefits are being cut as outlined here.

  •  So what makes this (2+ / 0-)
    Recommended by:
    Dirtandiron, Anika

    plan more 'guaranteed' than the original plan?

    What makes the people think that this plan can't  be revised or abandoned?

    The banks have a stranglehold on the political process. Mike Whitney

    by dfarrah on Wed Jul 23, 2014 at 06:20:42 PM PDT

  •  As somebody with too much experience in wins that (1+ / 0-)
    Recommended by:
    HM2Viking

    would look like losses under any reasonable circumstance, I am happy that Detroit retirees were able to make this deal. I can so easily imagine things being much, much worse.

    LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

    by dinotrac on Wed Jul 23, 2014 at 06:26:18 PM PDT

  •  Part of the deal with the pensioners accepting (1+ / 0-)
    Recommended by:
    WillR

    this plan - is it takes the art at the DIA (Detroit Institute of Art) off the table as a bargaining chip.  There are still some problems with the promised "revenue sharing" from the state that hasn't been paid to the city and would make a big difference in the bankruptcy.

    Gravitation cannot be held responsible for people falling in love. - Einstein

    by moose67 on Wed Jul 23, 2014 at 06:28:10 PM PDT

  •  Unbelievable (9+ / 0-)

    I just can't fathom how we as a country can allow a city, state to file for bankruptcy and get out of their obligations to its retirees. If they can not meet their obligations it fall back to the national/federal (?) level to make sure these public employees are taken care of. It says something terrible about our country that even working for your government doesn't assure you that some corporation won't steal your hard earned benefits. It is equally scandalous that any company should be able to totally relieve itself of already earned benefits of those that have retired. More especially when they have actually contributed to their retirements. I am certain I have expressed myself poorly but I am livid.

    •  Yeah, contracts are sacred, unless it is a (8+ / 0-)

      worker's pension, then it's just another bargaining chip.

      Where are all the jobs, Boehner?

      by Dirtandiron on Wed Jul 23, 2014 at 06:34:36 PM PDT

      [ Parent ]

    •  But G*d forbid we tax a one percenter like Will... (0+ / 0-)

      But G*d forbid we tax a one percenter like Willard Romney so he pays his fair share of the cost of protecting his vast wealth. These retirees are true Americans.

    •  What, then, would... (0+ / 0-)

      ...be the motivation for cities and states to avoid making reckless promises they can't keep? Even without the backstops you propose, this happens -- it seems it would only be worse with such backstops.

      Although, presumably, if such backstops exist, Federal approval would be required of all municipal financial decisions that could, conceivable, have any impact on the ability to pay pensions. So, for example, Federal approval would be required of all state and local Union contracts that include pensions.

      As well, where would the Federal government then be in the hierarchy of creditors? I would presume they would put themselves first (not unlike they do when assuming risk for student loans) which would make it much more expensive for municipalities to raise money for infrastructure projects due to the increased risk of the Federal government taking their cut first.

      It seems a solution is to segregate the pension funds. Payments go to either a Union controlled pension fund or an individual qualified plan (participant's choice). The payments are made regularly (monthly?) so there would be virtually no pension risk in future municipal bankruptcies because the municipality has no long term pension obligations. I assume that since Union members generally rely on Union management's judgement on contract negotiations, most would also trust them to manage the pension fund and, if not, they could have their portion deposited in their own 401(k) like plan.

      •  What you are proposing is actually more expensi... (0+ / 0-)

        What you are proposing is actually more expensive for cities and retirees.

        The DB pensions are actually cheaper for both pensioners and employers.

        The municipal pension funds should be managed as a state level fund.

    •  It's the same process that allows the city to s... (0+ / 0-)

      It's the same process that allows the city to stiff the banks and bond holders.

    •  if... (1+ / 0-)
      Recommended by:
      Teiresias70

      If promises like this can be reneged upon, then -- attention all you gun enthusiasts -- so can the "right" to bear arms.  That, at least, is a positive.  

      On the other hand, it is sickening and sad that our government can be so cavalier about keeping promises it has made.  This applies to the Supreme Court, Congress and state and local government officials.  

      I could understand and accept changing the benefit formula on a prospective basis -- even when the Republicans threatened to cut Social Security, it was for those 55 or under -- but to cut promised benefits to those who are retired or near retirement, who have little or no opportunity to earn funds elsewhere, to prepare for their "golden years," is just unacceptable.

      The only way we can fix things, though, is to cut the salaries and projected/provided benefits of those decision-makers who wield power.  If all our judges, representatives, senators and so on were required to experience the same cuts as those who actually work for a living, there would be no cuts to promised pensions -- and taxes on the wealthy and on corporations would be increased immediately.  

  •  A single word comes to mind more and more often (1+ / 0-)
    Recommended by:
    sandblaster

    "tumbrils"

  •  So The Retiree Suffers (3+ / 0-)
    Recommended by:
    jbsoul, Anika, Teiresias70

    Because the people managing the pension money were incompetent or criminal or both.

    And as the song and dance begins, the children play at home with needles, needles and pins.

    by The Lone Apple on Wed Jul 23, 2014 at 06:56:28 PM PDT

    •  Yep... (1+ / 0-)
      Recommended by:
      The Lone Apple

      ...government's are political and kick the can down the road for short term political benefit rather than addressing real issues with real solutions as soon as possible. It's a lot easier to leave the next guy to handle the problem you created.

      Commonly the rate of return that government worker pension funds assume is absurdly high -- but it allows negotiators (on both the government side and the worker side) to knowingly make unrealistic unfunded promises. The government can claim it costs less than it really will and the Union can promise members future benefits -- both sides get reelected by their constituents -- all is well!

      •  Minnesota uses an 8% discount rate. The discoun... (0+ / 0-)

        Minnesota uses an 8% discount rate. The discount rate has always underperformed actual investment returns.

        The large pension funds can usually achieve better rates due to economy of scale.

    •  Most of the plan's trustees are labor appointed... (0+ / 0-)

      Most of the plan's trustees are labor appointed. That fact might not be popular here, but nevertheless it's a fact

  •  Only in America... (1+ / 0-)
    Recommended by:
    DontTaseMeBro

    Do workers allow themselves to get screwed like this, without breaking out the torches and pitchforks.

    Sorry, it is things like this that make me ask why we limit ourselves to only peaceful protest. It also makes me wonder what our masters hare at Daily KOS would consider the point where advocating violent resistance is acceptable. Do we have to wait until we can see the ovens they are marching us to?

    Workers of the world, unite! You have nothing to lose but your shackles. It is by the picket line and direct action that true freedom will be won, not by electing people who promise to screw us less than the other guy.

    by rhonan on Wed Jul 23, 2014 at 07:32:43 PM PDT

  •  so why are MU & MSU still on 10 limbaugh stations? (1+ / 0-)
    Recommended by:
    sknutson415

    some of them are probably the loudest in the state and have been setting up this scenario for years for the kochs and ALEC and GOP. and they're probably cheering on this shit every day. and most would probably fold without those spartans and wolverines logos giving them community creed and bringing in ad dollars.

    do the students and faculty at those units give a shit?

    This is a list of 76 universities for Rush Limbaugh that endorse global warming denial, racism, sexism, and GOP lies by broadcasting sports on over 170 Limbaugh radio stations.

    by certainot on Wed Jul 23, 2014 at 07:39:17 PM PDT

  •  Consider me an expert, (2+ / 0-)
    Recommended by:
    Albanius, HM2Viking

    or at least, somewhat informed about public employee pensions.
    Kos disclaim: a) I'm comfortably retired from public employ, and b) I was President when Alaska PERS was enacted by the ledge.
    In the '30's when the California Public Employees Retirement System (CalPers) was established two significant factors were included: a) The CalPers Board has a majority of present and retired Public Employees, and b) the Board SETS EVERY AGENCIES MANDATORY CONTRIBUTION, by law. No politician has come up with a way to circumvent the latter. In lovely Cali, you owe it, you pay it, EOS!  
    When the Terminator tried, he discovered two things, a) He would need to amend the Constitution, and b) the single largest consistent voting bloc in California were CalPers beneficiaries. 'Ole Arnie dropped it like a hot rock, but didn't matter that much; he had his ass handed to him on his other 6 "send us back to Oklahoma, without the cost" initiatives anyhow.  
    I now return to my Tequila pal...  

    "the northern lights have seen queer sights, but the queerest they ever did see. Was that night on the marge of Lake Lebarge, I cremated Sam McGee". - Robert Service, Bard of the Yukon

    by Joe Jackson on Wed Jul 23, 2014 at 08:02:04 PM PDT

    •  Minnesota sets it's contributions through statu... (0+ / 0-)

      Minnesota sets it's contributions through statute.

      The legislature passes these changes based on recommendations from the state Board of investment and beneficiaries. (Current and future retirees.)

  •  Sorry, I couldn't help recalling the classic old (1+ / 0-)
    Recommended by:
    DontTaseMeBro

    … Jack Benny joke:

    Thug with gun: "Yer money or yer lfe!"

    Benny: (long pause)

    Thug: "YER MONEY OR YER LIFE!!"

    Benny: "I'M THINKING!"

    That is more or less the choice the Rethug government imposed on the Detroit pensioners -- not funny at all.

    There's no such thing as a free market!

    by Albanius on Wed Jul 23, 2014 at 10:32:47 PM PDT

  •  Vulture capitalism at its finest. (0+ / 0-)

    Vulture capitalism at its finest.

  •  Firefighters and Police should get the (0+ / 0-)

    same damn deal as the rest.

  •  There's little doubt (0+ / 0-)

    that the bankruptcy was a planned result from the beginning. The EM law was reinstated after voters abolished it by ballot initiative. Voices that questioned the iffy conclusions the bankruptcy is based upon were ignored. They wanted to set a pattern of shafting the retirees and the poor rather than placing blame where it belongs: the state's shameful, decades-long record of neglecting it's largest city.

    It's also worth a mention that the bankruptcy judge completely dismissed Michigan's quaint constitutional requirement that public pensions are untouchable, saying bankruptcy statutes trump this basic protection.

    "A lie is not the other side of a story; it's just a lie."

    by happy camper on Thu Jul 24, 2014 at 08:38:20 AM PDT

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