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What happens in Detroit WON’T stay in Detroit.

8easystepsIt’s amazing, the stuff you can find on the Internet these days.

Step-by-step instructions for all sorts of things, including – oh, yeah – how public employers can relieve themselves of retirement obligations through the Chapter 9 bankruptcy process.  Like they’re trying to do in Detroit, right now.

And reading through Ice Miller’s description of the process – right here, if you’re interested – it sure doesn’t seem all that hard.

Ice Miller, by the way, is a nationwide law firm that has provided services to the New Hampshire Retirement System for years.   Here’s how they summarize the bankruptcy process that Michigan Governor Rick Snyder has just started:

“A proceeding under Chapter 9 is very different than under other chapters of the Bankruptcy Code.  [Under Chapter 9,] the court must determine whether the petition was properly filed and then, at the end of the case, must determine whether a plan for the adjustment of debts is confirmable. Between those two points, a bankruptcy court cannot require the sale of assets; does not oversee the use of funds; does not interfere with political or governmental powers; cannot require tax increases; and generally does not take an active role.”

Whoa.  Doesn’t look like there’s much protection for city workers, in that process.  And according to Ice Miller, during bankruptcy a public employer can:

  • try to reject their obligations under existing collective bargaining agreements;
  • try to reduce pension contributions and retirement benefits.


Which sounds pretty much like what they’re trying to do, out in Detroit right now.

Starting to feel a little queasy here?  Let’s look a little closer.

 

Will of the voters?

Yeah, right.  The “emergency financial manager” who filed Detroit’s bankruptcy petition last week was appointed under a law passed by the Republican-led state legislature in December 2012.  Trouble is, that law is almost identical to a law rejected by voters barely a month before, in a referendum vote.  (Whatever happened to democracy?)

And then there’s the timeline.

I’m not even going to try to figure out which chicken came before which egg.  The newest emergency manager law became effective in March.  The law firm Jones Day was awarded a $3.35 million contract as Detroit’s “restructuring counsel” in March.  Jones Day partner Kevyn Orr was named Detroit’s emergency financial manager in March.  (Or maybe by then he was a former partner? Attorney Orr resigned from the firm sometime in March.)  Different media reports give different dates;  and from this many miles away, it’s impossible to figure out what happened in what order.

And then there’s the law firm.

I’m human; I can’t help but sometimes judge a law firm by its clients.  And Jones Day’s client list includes Koch Industries, as well as Mitt Romney’s old firm, Bain Capital.

And then there’s the lawsuit, filed by Jones Day lawyers, challenging a ban on political contributions by foreign sources (including foreign corporations).  And then there’s the lawsuit, filed by Jones Day lawyers not long before last year’s election, challenging an Obama administration regulation regarding insurance coverage.   (Also can’t help but wonder at all the work this law firm is apparently doing for free!)

And then there’s the attorney.

According to his official bio, Attorney Orr worked for the FDIC’s Resolution Trust Corporation in the 1990s; and while there, his duties included “serving as the agency’s chief lawyer responsible for the agency’s participation in the Whitewater investigation.”  Yeah, you read that right: the Whitewater investigation.

Starting to think that maybe there’s politics involved here, somehow?

And then there’s the Governor.

Last December was a busy month for Gov. Rick Snyder.  Not only did he push through a new emergency manager law, to replace the one rescinded by voters, he also pushed through a Right to Work bill.  Read “GOP, Koch Brothers Sneak Attack Guts Labor Rights in Michigan” here.  (Yes, there’s the Koch brothers, again.)  He was so effective at pushing stuff through the Legislature that the Washington Post named him “The Scott Walker of 2014”.

And… oh, dear:  is there really a Rick Snyder for President Facebook page?

Got a headache yet?

The big trouble here is, whatever happens with Detroit – with its very expensive law firm, with its history of highly-political cases…

whatever happens in Detroit will set a legal precedent for other politicians and other employers who may want to relieve themselves of their obligations to public workers. Yesterday’s USA Today even has an interactive graphic; read “Detroit not alone under crushing pension obligations” here.

So… you think you’ve got retirement benefits? Think again.

That Ice Miller report has a state-by-state breakdown of the requirements to go through the Chapter 9 bankruptcy process.   Including a note that, when the report was published, Michigan didn’t have any law authorizing a municipality to declare bankruptcy.  Which it didn’t, until Governor Snyder and the Republican-led Legislature pushed through “The Local Financial Stability and Choice Act” last December… just days after pushing through the Right to Work bill.

If it’s happening in Detroit, it can happen almost anywhere.

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About Liz Iacobucci

Liz Iacobucci is the former Public Information Officer for the State Employees’ Association of New Hampshire, SEIU Local 1984. Over the past three decades, she has served in government at the federal, state and municipal levels; and she has worked for both Democratic and Republican politicians.
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