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Michigan Officials Stress Pension Cuts Unavoidable While Declining Federal Funds

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"Michigan Officials Stress Pension Cuts Unavoidable While Declining Federal Funds"

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Gov. Rick Snyder (R-MI) (Credit: AP)

While Gov. Rick Snyder (R-MI), Detroit Mayor David Bing, and emergency manager Kevyn Orr gave varied takes on the likelihood of a federal bailout for the country’s largest bankrupt city on Sunday, Snyder and Orr agreed that the city’s pensioners are going to see their promised benefits cut.

Orr explicitly avoided taking a view on federal help when asked by Fox News Sunday’s Chris Wallace, saying that as an appointee rather than an elected official the question was beyond his purview. On ABC, Bing hinted that federal help might be proper, noting that “when we had Chrysler and General Motors, that the federal government helped in their bankruptcy, they came back and they’re doing well.” Bing said it would be “difficult right now to ask directly” for federal help, and said “not yet” when This Week’s George Stephonopoulos asked directly if he would request federal aid.

Snyder, who appointed Orr, appeared to reject the idea of a bailout. In his first Sunday show appearance, Snyder told NBC that “I’m not going to speak for the federal government.” Later, on CBS, the governor was asked directly if there is a bailout in the city’s future. “No. And I don’t expect one,” Snyder said. “If the federal government wants to do that, that’s their option,” he said, adding “I don’t view that as the right answer.”

The unfunded portion of the city’s pension and healthcare liabilities to 30,000 public employees and retirees amounts to about half of the $18 billion in unpayable debts that lead to last week’s bankruptcy filing. While bailout funds might allow the city to keep its contracts with workers, Orr and Snyder were clear that bankruptcy means trimming back those promised payments.

Each man stressed that the majority of the city’s obligations are funded, and that bankruptcy would curtail only the $3.5 billion in unfunded pensions and $5.7 billion in unfunded health care costs. “There are going to be some adjustments,” Orr said when Wallace asked directly about breaking pension contracts. “I’m empathetic about the problem,” Orr said, noting his mother is a retiree, but “we don’t have a choice.”

Snyder agreed, telling NBC that a bankruptcy judge will appoint a representative for pensioners to give them a voice in the proceedings, where “the real question is how do you address the unfunded piece.” On CBS, he was similarly circumspect about pension cuts, stressing that they’ve promised not to start cutting pensions for six months and are seeking to give retirees a voice in determining what happens “beyond that.” “The bankruptcy process allows us to do it in a much thoughtful, more deliberate, better way where they can have a voice at the table,” Snyder said.

Even before the bankruptcy filing, analysts say, Orr’s approach to resolving the debt burden appeared aimed at forcing pensioners to share in the pain of a bankruptcy they did not cause.

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