Just hours after U.S. Bankruptcy Court mediators announced an historic agreement between the city and pensioners from the police and fire departments, news reports emerged about a second deal for general retirees.
Both agreements are potential bombshells in this already landmark case, in part, because they are significantly better for retirees than anything Emergency Manager Kevyn Orr has publicly discussed or included in court filings. General services pensioners, according to the most recent city court filings, would have been facing a 34 percent cut if they didn’t approve the city’s eventual bankruptcy exit plan and 26 percent if they did.
But according to last evening’s news reports, the deal now includes (just) a 4.5 percent reduction in the monthly pension payments, significantly lower than the previous proposals for the roughly 25,000 general service retirees. Meanwhile, retired police and firefighters aren’t facing any reductions of their current pension payments, according to a statement released early Tuesday afternoon.
Don’t think everyone will find this a perfect deal. Plenty of public statements from retirees and their supporters have called for zero cuts to pensions. Those folks won’t be happy about the two deals’ provisions under which both employee groups face the elimination of some contractual cost-of-living adjustment (COLA) increases. General employees lose it altogether, while police and fire have some reductions in the near future with the option of gaining the COLA payments back.
The two agreements require the roughly 32,000 retired, former or current employees involved to vote in favor of the city’s bankruptcy exit plan as a class. The so-called “grand bargain” money is also tied to a favorable vote. That’s the $866 million that comes from foundations ($366 million), the Detroit Institute of Arts ($100 million) and the state ($350 million). Those funds would be put toward pension funds in exchange, in part, for the museum’s collection remaining intact and not being sold to pay other city creditors.
But the state money so far hasn’t materialized in any form except for Gov. Snyder’s proposal for it. With these employee agreements in place, the pressure is on the Legislature now to find some funding to complete the terms the other parties have set forth.
This next chapter in Detroit’s bankruptcy has happened. The next (next) chapter will be the pension fund leadership lobbying members to vote in favor of the plan and how Orr, who has given the city’s current and former employees far more than he publicly offered, will treat banks and other financial institutions in the next round of court filings outlining the city’s exit plan.
-By WDET’s Sandra Svoboda
@WDETSandra and email@example.com