Why We Don’t Know What’s In Detroit’s Pension Cuts Proposal


Michigan Gov. Rick Snyder (R) and the man he appointed to manage Detroit's financial emergency, Kevyn Orr

When Detroit’s long-awaited plan to emerge from bankruptcy was published on Friday, it seemed as though the city’s 30,000 current and former public servants finally knew just how their pension contracts would be violated. But thanks to sweeping omissions in the rushed document, it is hard to say just what the proposed cuts to retiree benefits will look like.

The proposed plan says that police and firefighter pensions will pay 10 percent less and other workers and retirees will lose 34 percent of what they are owed each month if they continue to fight against the cuts in court. Each group can get a slightly sweeter deal — a 4 percent cut for emergency workers and a 26 percent cut for others — if pensioners acquiesce to emergency manager Kevyn Orr’s proposal. Because the plan’s cuts would be applied on top of canceled cost-of-living adjustments and health insurance plans, those figures understate the harm to retirees’ economic security.

But the city omitted further details about the cuts from the document it published Friday, along with numerous other subsections that are key to evaluating the proposal’s suitability and determining whether a better outcome might be possible. The technicalities in those subsections are key to establishing just how poorly the city’s various creditors would fair under the plan. In total, 34 separate documents detailing various provisions of the plan are absent.

Workers’ advocates have latched onto the omissions as evidence that Detroit’s plan “is not yet ready for prime-time,” in the words of pension fund lawyer Robert Gordon. Pensions spokesman Bruce Babiarz went further in an email to ThinkProgress, saying people on Orr’s team “are rushing this document out according to their script — prematurely and almost uselessly.” The emergency manager’s initial bankruptcy filing was criticized by observers as being hasty and pre-meditated, and U.S. Bankruptcy Judge Stephen Rhodes chastised Orr late last year for manipulating the calendar and the media in ways that denied worker representatives adequate time and information to respond to the city’s pre-bankruptcy proposals. Babiarz compared the rush to approve this new, incomplete plan with “Mr. Orr saying in June he had not received any counter-offers [when] we had no information or detailed data on which to counter.”

But Orr spokesman Bill Nowling contested that portrayal of the bankruptcy plan’s omissions, citing confidentiality concerns relating to the city’s federally mediated negotiations with bondholders and a committee that represents retirees. “The omitted documents, in most cases, are current items being discussed in federal mediation which, by Judge Rhodes’ order, the city and parties are enjoined not to disclose until there is a negotiated agreement or mediation talks have ended,” Nowling said in an email, adding that retirees’ representatives have been given “the financial details pertinent to their consideration” of the proposed cuts.

The city published the incomplete plan on February 21, a full week ahead of Judge Rhodes’ deadline of March 1. Nowling explained the haste as part of an effort to “avoid a costly protracted litigation battle” and save Detroit money. But if the document’s omissions instead lead retirees’ lawyers to dig in harder against Orr’s position in court, the bankruptcy timeline could dilate substantially, raising the city’s already-massive legal bills to bankruptcy law firm Jones-Day and other consultants.