Detroit pension ruling foreshadows end of social compact A recent ruling in the Detroit bankruptcy proceedings has shaken to the core the commonly held belief that public employee pensions are protected under state law. Federal bankruptcy court Judge Steven W. Rhodes held not only that Detroit could enter Chapter 9 bankruptcy, but also that the cash-strapped city could cut retiree pensions, along with its other financial obligations, to pull itself out of debt. The landmark ruling comes despite the fact that the Michigan Constitution, like many other state constitutions, expressly protects public employee pensions. The judge declared pension obligations are no different than any other business contract and should not be treated differently in bankruptcy proceedings. The decision is raising serious concerns among union leaders and pension officials about the security of public employee pensions not just in Detroit, but also throughout the nation, including New York. “Municipalities have long threatened bankruptcy to try to walk away from their pension obligations,” said CSEA President Danny Donohue. “Now, they have a court’s blessing to break their promise to retirees.” AFSCME President Lee Saunders agreed that the ruling puts a target on the backs of public employees. “It sets a bad precedent for cities that are under economic distress to look at doing the easy thing: to attack the workers and attack the retirees,” he said. The crisis in Detroit is playing out in many other cities that are struggling to make ends meet with decreasing revenues. While there is no denying the economic problems these cities are facing are real, elected officials must seek real solutions to the real causes of the problem instead of scapegoating workers. In negotiations before the ruling, Detroit officials suggested cutting pension benefits by nearly 85 percent. Although the judge indicated it was unlikely the court would approve draconian cuts to pensions, retirees said any reduction would be devastating to them. The average municipal pension is about $19,000 a year and some retirees say they already must often choose between food and medicine. AFSCME Council 25, which represents Detroit’s nonuniformed municipal workers, immediately appealed the decision, which, if upheld, could strengthen the hand of municipalities everywhere seeking lower pension costs, even if they have no intention of actually declaring bankruptcy. “What happens here in Detroit matters to working people everywhere,” said AFSCME Council 25 President Al Garrett. — Ed Molitor View AFSCME Council 25 President Al Garrett discussing the Detroit pension decision at: http://truthaboutdetroit. com/ January 2014 The Work Force 5
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