December 4, 2013

Photo credit: Jeremiah Robinson/ZUMA Press/Newscom

In a landmark ruling, a federal judge allowed the City of Detroit to proceed with its bankruptcy filing. For Detroit, this is a cause for celebration –  it means the city will be able to restructure its $18 billion in debt. But taxpayers shouldn’t celebrate just yet.

The judge required there be cuts made to Detroit’s massive public employee retirement programs with the proviso that such cuts be “fair and equitable.” That qualification is rather ambiguous, and thanks to the very powerful union representatives, a hefty portion of tax dollars will inevitably still go toward union-stipulated pensions — rather than to overdue improvements in city services and infrastructure.

Heritage Foundation expert Alison Fraser explains just how badly the city needs changes to its retirement program:

Over half of the city’s $18 billion in debt actually comes from the pension plans and health care benefits. Annual costs (plus debt payments) already claim 43 cents out of every tax dollar coming to the city’s coffers and will skyrocket in a few short years. So without changes, fewer and fewer tax dollars will be free to pay for things like street lights, police or other emergency services—the kinds of services that cities are supposed to provide for their citizens.

Fraser recommends the union leaders work with city representatives to restructure existing pension debts and restructure pensions for current workers going forward to make sure all are affordable to the city’s taxpayers.

Do you think unions should allow pensions to be restructured?

Comments (17)

Jack Tirrell - December 5, 2013

To ask the question is to answer it! If Detroit is bankrupt–which it is–for unions to continue to push for more costly pensions is counterproductive for the long term health of the city and for the union worker. Continuing to push for larger pensions will only make the financial state of the city much, much worse. However, logic has never been the strength of the labor unions or progressives. More accurate nouns would be selfishness and power.

Melinda Yale - December 5, 2013

Over the years, when companies have gone bankrupt, the pension funds are gone, period. Many people in the private sector have seen their pensions decreased because of lack of funds. My husband is one. Why should it be any different for the very people who probably had a great deal to do with Detroit being bankrupt.

John Schuh - December 5, 2013

Of course. These benefits, where they were negotiated, were based on the means available to the city at the time. At bottom, these are just promises contingent on the city’s ability to pay. A “Greek” solution is in order.

Charles Helm - December 5, 2013

“After me, you come first” is what is being proposed by the unions, discounting all other considerations. The City of Detroit’s resurrection along with it’s non-union populace should be foremost in the Court’s deliberation. The unions’ demands when a city is literally broke are unconscionable.

Sharon - December 5, 2013

I don’t “think” the unions have anything to say about this.

Paul - December 5, 2013

NO. Pensions are part of the salary and benefits package. Workers give up raises etc. for pension benefits. The employees and pensioners are not the bad guys or the problem. The people who mismanaged the city are the problem. The Federal Gov. debasing our currency is the problem. If you want dedicated, hard working public employees city’s better honor their commitments to them or all trust will be lost.

Joe and Kay Walker - December 5, 2013

The unions are mostly responsible for the disaster Detroit has become. With the union influence, they will never dig out of their hole, and tax payer money will only continue to enrich the unions and Detroit will never recover.

Dennis - December 5, 2013

A major change that should occur, is that government pensions & benefits should start when the individual reaches their normal retirement age, 65- 67yrs old. Most businesses operate this way with some exceptions allowing early ‘outs’ with corresponding reductions – 2-3% reduction for every year under the normal retirement age. Here in Mich, we have many 48-50 yr old retired government workers receiving full pension & benefits. Some even have two full retirements before being 60yrs old since they worked in different gov jobs that had ’20 years and out’ contracts. Reform is necessary.

Denis Politano - December 5, 2013

Unions must help restructure the pension system!

Roy C Dickey - December 6, 2013

They should at least make some good faith concessions or they might lose everything

John Huston - December 6, 2013

I don’t think their is a choice for two reasons. First the City of Detroit is bankrupt. Unless funds were place in an Annuity, they are gone. Second, why should there be special treatment? Years ago, when 401K’s were born, myso called pension was wrapped into a 401K program for pennies on the dollar. I had no choice. It was done and there were no bankruptcy proceedings. Unions, like much of the “gimme society” seem to think that money just appears by magic.

Ron Ceres - December 6, 2013

Corrupt Mayors and Councils along with corrupt unions have created this problem; the pensioners should have realized long ago that there are no free lunches and that sooner or later the Piper must be paid.
That time has arrived!

David Knoble - December 7, 2013

If the Unions had permitted at least a partial 401k rather than defined benefit plans, their members would be protected. The union leaders clearly have only their own interests at heart. Of course, they want me and all taxpayers to support them. To propagate the destruction of a city for self-benefit is just immoral, both to the union members and the remaining citizens of the city, not to mention that it is attempted theft from the US taxpayers. Unionizing public employees was the beginning of this end.

I saw the steel mills in Pittsburgh self-destruct because of union demands and poor work ethic. Thus, not only did the union members lose their jobs, but their children had no chance for the good jobs at the steel mill, and we are buying Chinese steel.

Harvey N. Bailey - December 7, 2013

The unions, over the years have pushed for and received more than adequate pension increases, that is one reason that Detroit is in this situation. So now it’s time for the unions to belly up to the bar and buy a few rounds for the city.

Marlene Rone - December 12, 2013

Unions need to start working with municipalities. It doesn’t serve anyone if it causes bankruptcy. They need to get real.

Holly Chapo - December 15, 2013

YES!! Public sector unions have become an economic scourge. If bankruptcy is the only way to get their pensions, etc. under control, then it must be done. Woe to Detroit if it gives in once again.

Allan - December 16, 2013

Restructuring the debt I can understand, but the public employee pension should be treated as nothing more than another line item. It should not take precedence in any way over any other line item such as city vendors. If vendors get ten cents on the dollar, the pensions should only get ten cents on the dollar. When everything is considered, public employee pensions should have been moved to 401K plans in the ’60′s like the private sector with employee contributions comparable to the private sector. Also current and past city officers should be held criminally liable for creating this fiasco.

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