CREDIT: Photo: AP
Michigan’s Republican Attorney General said over the weekend that he will defend retiree interests in bankruptcy court, calling the state constitution “crystal clear” on pension protections. The announcement came days after his office successfully argued the opposing side of a legal dispute around the same state constitutional provisions.
In a statement calling Detroit’s debts “staggering,” Bill Schuette explained his thinking: “Equally staggering is the financial uncertainty of pension benefits relied upon by Michigan seniors living on fixed incomes and anticipating a safe and secure retirement after a lifetime of work.” Schuette added that “Retirees may face a potential financial crisis not of their own making,” and pledged to “defend the rights of Michigan citizens and defend the Constitution of the State of Michigan.”
It is unclear whether or not Schuette’s defense of those constitutional provisions will have a material effect on how $3.5 billion in unfunded pension promises will be treated by federal bankruptcy judge Steven Rhodes. Rhodes’ jurisdiction over the case was settled at a hearing last week after Schuette appealed a state judge’s ruling on behalf of Detroit’s pensioners. Such confusing work on both sides of a given legal question “isn’t uncommon for the state Attorney General’s Office,” the Detroit Free Press reported, and a spokeswoman for Schuette said the AG’s office would continue representing the state’s interests as well as asserting constitutional protections for pensions.
Schuette previously served in the U.S. Congress from 1985-1990 and later served eight years in the state senate. He is in the first of a possible two terms as Attorney General.
The state’s bankruptcy proceedings pit bondholders on Wall Street against city employees, retirees, and their families. Detroit’s emergency manager, Kevyn Orr, has reported that the city’s unpayable liabilities total roughly $18 billion. Half of that is owed to current and former city workers through health insurance and pension contracts. The other half is owed to banks and other investors. Municipal bond analysts and local labor activists alike suspect Orr and Gov. Snyder have pushed for a bankruptcy filing as a way to back away from pension promises.
Experts told ThinkProgress that federal assistance will be key to reviving Detroit. But both state and federal officials have rejected the idea of a bailout, making a zero-sum courtroom battle between investors and retirees the more likely outcome.