| Detroit Free Press | - |
It's
the biggest question in Detroit: How much will emergency manager Kevyn
Orr try to cut pensions of retired city workers? The first details will
come in the so-called “plan of adjustment” that Orr will present in
bankruptcy court by the first of the year.
5 pension cut scenarios for retired city workers; Orr mum on extent of cuts
6:15 PM, December 3, 2013
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Detroit EM Kevyn Orr responds to bankruptcy ruling: Detroit Emergency Manager Kevyn Orr addresses the media after a judge rules on Chapter 9 Bankruptcy during a press conference at the Coleman A. Young Municipal Center in Detroit, Mich. on Tuesday, Dec. 3, 2013.
Detroit Emergency Manager Kevyn Orr spent one hour talking with the Detroit Free Press editorial board at the newspaper on Tuesday, December 3, 2013. Orr talked about a variety of things and answered many questions from pension issues to artwork hanging in the DIA to the decision handed down by Judge Steven Rhodes at U.S. Federal Court in Detroit. Rhodes ruled that the city of Detroit can enter Chapter 9 bankruptcy. / Eric Seals/Detroit Free Press
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It’s the biggest question in Detroit: How much will emergency manager Kevyn Orr try to cut pensions of retired city workers?
The first details will come in the so-called “plan of adjustment” that Orr will present in bankruptcy court by the first of the year. Orr declined to say Tuesday how he plans to spread cuts over more than 20,000 City of Detroit retirees and their beneficiaries. But here are some possible scenarios:
■ Orr might shield the city’s oldest and poorest retirees and cut deeper into the pensions of younger, somewhat better off retirees.
■ He might impose the cuts equally across the board but phase them in over a number of years, in effect offering a measure of protection for older retirees.
■ He might cap pension payments at some basic amount, requiring cuts only to those getting the biggest retirement checks.
■ Orr could leave pensions for current retirees relatively intact but impose deeper cuts on the active workers who remain years short of retirement age.
■ He might impose smaller cuts on the city’s retired police and firelighters because their pension fund, the Police & Fire Retirement System, is in somewhat better shape than the General Retirement System fund for the city’s non-uniformed retirees.
■ It is possible that unions representing city workers may defeat Orr’s plan on appeal. Many experts expect the question of whether pensions can be cut in a bankruptcy proceeding to ultimately make its way to the U.S. Supreme Court.
Orr remained mostly mum about the possibilities Tuesday after U.S. Bankruptcy Judge Steven Rhodes ruled pension cuts are allowed under federal bankruptcy law. Rhodes insisted that any cuts to pensions be “fair and equitable.” Orr later said he is “very sensitive to the human dimensions.”
It is clear that no pensioner will lose everything. Even with a dispute over how badly the city’s two pension systems are underfunded — Orr estimates the underfunding at $3.5 billion, which pension leaders say is actually less than $700 million — the two funds still have billions of dollars in actual cash to pay benefits.
■ Related: 'Let's get this done' Kevyn Orr says after judge's bankruptcy ruling
■ Related: DIA sales not ruled out, but Rhodes says selling of assets demands 'extreme care'
For example, Orr estimated that the Police & Fire System is about 80% funded. So retired cops and firelighters should be able to continue to receive at least 80% of their current pension checks, with any cuts only to the unfunded portion.
Meeting with Free Press editors and reporters Tuesday afternoon, Orr said he didn’t know how many separate classes retirees might be grouped into or whether any of the schemes to create tiers of cuts would be in his plan.
Orr said he hopes that retiree representatives will be willing to sit down and negotiate a solution, although up to now the city’s municipal unions have resisted any attempt to reduce pensions.
The first details will come in the so-called “plan of adjustment” that Orr will present in bankruptcy court by the first of the year. Orr declined to say Tuesday how he plans to spread cuts over more than 20,000 City of Detroit retirees and their beneficiaries. But here are some possible scenarios:
■ Orr might shield the city’s oldest and poorest retirees and cut deeper into the pensions of younger, somewhat better off retirees.
■ He might impose the cuts equally across the board but phase them in over a number of years, in effect offering a measure of protection for older retirees.
■ He might cap pension payments at some basic amount, requiring cuts only to those getting the biggest retirement checks.
■ Orr could leave pensions for current retirees relatively intact but impose deeper cuts on the active workers who remain years short of retirement age.
■ He might impose smaller cuts on the city’s retired police and firelighters because their pension fund, the Police & Fire Retirement System, is in somewhat better shape than the General Retirement System fund for the city’s non-uniformed retirees.
■ It is possible that unions representing city workers may defeat Orr’s plan on appeal. Many experts expect the question of whether pensions can be cut in a bankruptcy proceeding to ultimately make its way to the U.S. Supreme Court.
Orr remained mostly mum about the possibilities Tuesday after U.S. Bankruptcy Judge Steven Rhodes ruled pension cuts are allowed under federal bankruptcy law. Rhodes insisted that any cuts to pensions be “fair and equitable.” Orr later said he is “very sensitive to the human dimensions.”
It is clear that no pensioner will lose everything. Even with a dispute over how badly the city’s two pension systems are underfunded — Orr estimates the underfunding at $3.5 billion, which pension leaders say is actually less than $700 million — the two funds still have billions of dollars in actual cash to pay benefits.
■ Related: 'Let's get this done' Kevyn Orr says after judge's bankruptcy ruling
■ Related: DIA sales not ruled out, but Rhodes says selling of assets demands 'extreme care'
For example, Orr estimated that the Police & Fire System is about 80% funded. So retired cops and firelighters should be able to continue to receive at least 80% of their current pension checks, with any cuts only to the unfunded portion.
Meeting with Free Press editors and reporters Tuesday afternoon, Orr said he didn’t know how many separate classes retirees might be grouped into or whether any of the schemes to create tiers of cuts would be in his plan.
Orr said he hopes that retiree representatives will be willing to sit down and negotiate a solution, although up to now the city’s municipal unions have resisted any attempt to reduce pensions.
5 pension cut scenarios for retired city workers; Orr mum on extent of cuts
For those of you who don't understand why cities are going bankrupt one by one across the country it goes something like this. Cities mostly are paid for by property taxes. So, when property dropped sometimes over 50% in value overnight in places like Detroit, they no longer had a sustainable tax base. It is sort of like all the individuals came close to bankruptcy or did go through it who owned property in Detroit which made all the promises made to city workers unfundable (bankrupt). Since there is no way to recover from the Great Recession for many cities, more cities in the future also will go bankrupt as well and their retired or about to retire workers will suffer the same fate as well in some cases anyone who owns Municipal Bonds from those cities. However, legally each city will be different in the way the principal on Muni Bonds will be paid of and in regard to how much benefits those retired or about to retire city workers across the nation will lose. However, if there is no money for whatever the reason you can't squeeze blood out of a turnip. So, cities promised things that could not be sustained during or after the Great Recession.
Hopefully the nation learns from this because we could have another Great REcession or outright Depression any day because of too big to fail banks throughout the U.S. and Europe and throughout the world.
So, in reality there is nothing to stop another one like 2007 and 2008. Nothing legally that would stop this has been put in place. This is why I believe we need another Glass Steagle Act to protect at least the average American from another Recession or Depression soon.
21st Century Glass-Steagall Act will disable “too big to fail” bank risk ...
www.bostonglobe.com/opinion/2013/09/...glass-steagall.../story.htmlSep 18, 2013 - Five years have passed since the financial crisis. The crash happened quickly and dramatically, and it caught our nation and apparently even ...Glass-Steagall secret history: I'm a believer. - Slate
www.slate.com/.../2013/.../glass_steagall_secret_history_i_m_a_...Aug 14, 2013 - The furiosity and insistence with which proponents of stricter financial regulation have denounced the 1990s-era repeal of the Glass-Steagall ...[PDF]21st Century Glass-Steagall Act - Senator Elizabeth Warren
www.warren.senate.gov/files/documents/21stCenturyGlassSteagall.pdf3. This Act may be cited as the ''21st Century Glass-. 4. Steagall Act of 2013''. 5. SEC. 2. FINDINGS AND PURPOSE. 6. (a) FINDINGS.—Congress finds that—. 7 ...
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