Really, truly: what is happening in Detroit is more important to you than the Zimmerman jury sequestration details. Or the Rolling Stone cover. Or any of the other things that have been distracting us lately.
What’s going on in Detroit could steal our families’ financial security. It could radically alter what our lives are going to be like, here in New Hampshire, when we can’t work any longer.
Here’s the short version: four months ago, the Republican Governor of Michigan, Rick Snyder, named bankruptcy lawyer Kevyn Orr to be “emergency financial manager” of the City of Detroit.
Yesterday, Attorney Orr filed a petition in federal court to have the city declared bankrupt.
What’s he looking for? High on his list: debt relief from the city’s obligations to its current and future retirees.
This is where you need to start watching, really closely. Depending on which accounting method is used, Detroit’s pension systems are either 91.4% funded or 69.3% funded.
Yes, Detroit’s pension funds are in a lot better financial condition than ours is. Yet Attorney Orr says their unfunded liability is too large, and he has asked a federal court to give the public employer “relief” from its retirement obligations.
Sound familiar? Down in West Virginia, thousands of people have been protesting a bankruptcy judge’s decision to let Patriot Coal off the hook for its retirees’ benefits.
And in Oklahoma, American Airlines retirees are waiting to see if a bankruptcy judge will let their employer renege on long-promised benefits.
Yes, using bankruptcy to evade pension obligations has been a problem in the private sector for decades now. But just last month, it became a problem for public sector employees, too.
During bankruptcy proceedings for Stockton, California, a federal judge ruled that the city could use bankruptcy to relieve itself of the obligation to provide retiree health benefits. “The liability for retiree medical benefits is estimated by the parties to be in the hundreds of millions.” Stockton retirees are having to settle for a single lump sum payment of $5.1 million. That’s barely pennies on the dollar, for a debt owed to people who spent their careers in public service.
And now Attorney Orr is trying to take Detroit down that same path toward “debt relief”.
Think it couldn’t happen here? Think you can rely on the 1984 constitutional amendment, Article 36-a, that was meant to protect New Hampshire public workers from raids on our retirement benefits?
Probably City of Detroit workers thought their 1963 constitutional amendment would protect their retirement benefits, too.
What’s really going on here?
During the 2007-2008 Wall Street meltdown, public pension systems across America lost more than a trillion dollars in value. Yes, that’s “trillion” – with a “T”.
And now that our pensions are a trillion dollars underfunded, they’re being attacked as “unaffordable”. (Aren’t you glad Bill O’Brien isn’t still Speaker of the NH House?)
Any guesses on how many other Republican governors and mayors will soon be trying to “restructure” their way out of obligations to public sector retirees?
Back when I worked for Republican politicians, they truly believed in the sanctity of contracts (such as employers’ contractual obligation to pay long-promised retirement benefits).
In fact, when they talked about “core functions” of government, the enforcement of contracts was right up there at the top of the list. After all, how can the economy function if parties aren’t required to live up to their contractual obligations?
Perverting the bankruptcy process to obtain “relief” from contractual obligations… well, that wasn’t anywhere in the playbook, back when I worked for Republicans.
Can’t help but notice…
The very same day that 30,000 Detroit public workers learned their financial future was on the chopping block, thanks to losses from the 2007-2008 Great Recession…
…over there on Wall Street, the Dow hit another record high.