The Herald Bulletin

Morning Update

Nation & World

April 16, 2014

Detroit still needs $350M from state lawmakers

DETROIT — Pressure was building Wednesday for Michigan lawmakers to commit $350 million to Detroit pensions, a day after the city reached tentative agreements with pension funds and a retiree group to reduce payouts.

The city has an $816 million pledge from foundations, philanthropists and Gov. Rick Snyder to shore up pension funds and prevent the sale of city-owned art as part of Detroit's strategy for exiting the largest public bankruptcy in U.S. history.

But the state's share still hasn't been nailed down, and some in the Republican-controlled Legislature aren't sold yet.

"It's not going to be easy because it's so easily demagogued," said House Speaker Jase Bolger, R-Marshall, who supports the plan. "There will be an important balance between ensuring Detroit's success on the positive side and ensuring Detroit doesn't lapse back into trouble on the cautionary side."

Retired police officers and firefighters would see smaller cost-of-living payments but no cut in pension benefits under a deal announced Tuesday. Detroit's other retirees, who have smaller pensions, would get a 4.5 percent cut and elimination of yearly inflation allowances under a separate compromise.

Retirees and city employees who qualify for a pension will get a ballot in a few weeks. If they don't support the plan, the $816 million vanishes and deeper pension cuts are inevitable, Detroit emergency manager Kevyn Orr has warned.

Bolger said the city's unions should put money in the pot — and not just in the form of concessions from members.

"They have profited from these contracts. They have collected union dues. They should step forward and join in mitigating the effects of the bankruptcy," he said.

State aid for Detroit is tricky for the Republican governor and lawmakers who are uncomfortable with talk of a "bailout." Some legislators are worried about the rescue setting a precedent if other cities collapse. Draft legislation is in the works; the money could be diverted from tobacco settlement funds that Michigan receives each year or come from securitizing future payments to get a lump sum up front.

One potential advantage for Snyder is that southeastern Michigan is home to many lawmakers who want to see the city turn a page. Nearly five of every 10 lawmakers represent parts of Wayne, Oakland or Macomb counties. City retirees at risk of significant pension cuts without state aid also live in many of those districts.

But lawmakers outside the region say their constituents have other priorities, such as better roads and schools.

Snyder, Bolger and other leaders in the Capitol are hoping to persuade them that Michigan's long-term health is related to a healthier Detroit. The House returns Thursday, while the Senate is back in session next week.

"I expect it to be tops on the list of items to discuss," said Amber McCann, spokeswoman for Senate Majority Leader Randy Richardville, R-Monroe.

Rep. Greg MacMaster, a northern Michigan Republican from Kewadin who is running for the state Senate, wants to know more about the concessions and what the city is doing to cut costs through competitive bidding.

"I'm not keen on bailing out Detroit. They got themselves into this mess," he said.

The state's conditions for helping the pension funds could include naming independent fiduciaries to manage them after concerns about mismanagement and corruption in the systems and protecting Michigan from lawsuits from pensioners and creditors. Bolger also is studying how New York created a financial oversight board in the 1970s when New York City fell into trouble.

"The governor's commitment to this process and Detroit's comeback is unwavering, and he will be working with partners in the Legislature to do everything it can on the state's end," spokeswoman Sara Wurfel said.

Meanwhile, reaction was mixed to the tentative deals reached Tuesday.

Water department retiree David Sole, 65, said he'll vote no. He feels whipsawed, especially after the city had threatened to cut pensions as much as 34 percent before settling on 4.5 percent for retirees outside police and fire. There would be no annual cost-of-living payments.

"Now they're saying we're not going to kill you — we're just going to kick you in the head," said Sole, whose pension is $1,700 a month. "We shouldn't pay a penny. No COLA will eat away at pensioners. As you get older, your life gets harder."

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