For Detroit’s retirees, it’s all over but the voting. Most of the bankrupt city’s retirees will face much smaller pension cuts than observers have long feared would be part of a deal with the city. Police and firefighters will not see cuts at all under a series of tentative agreements announced Tuesday.
Firefighters and police would see their annual cost-of-living adjustments reduced from 2.25 percent to 1 percent but their base pension amounts would escape cuts. Other retirees would lose their cost-of-living adjustments entirely, and absorb a 4.5 percent cut to their base pension amounts. A previous proposal from the city would have cut emergency worker pensions by between 4 and 10 percent and sliced between 26 and 34 percent from retirement payments to the rest of the group.
While the deals are a big improvement from recent proposals, they remain out of proportion to the role workers played in the city’s financial troubles. Worker pensions are modest by national standards, and workers are not responsible for the bad deals initiated by former corrupt mayor and current federal prisoner Kwame Kilpatrick (D) that blew up the pension funds’ balance sheets. It was banks, not workers or their pensions, that pushed Detroit into bankruptcy. And beyond questions of fairness, this week’s deals also downplay the total impact of bankruptcy on retirees’ lives.
“Nobody is happy. Obviously, everyone deserved all of their benefits,” Retired Detroit Police and Fire Fighters Association president Donald Taylor told the Detroit News. “But sooner or later reality sinks in. The city’s in bankruptcy, so you have to do the best you can for the majority of your members.”
Tuesday’s figures do not account for the massive cuts to retiree health care benefits that were already agreed to earlier this spring. Retirees’ insurance benefits will be replaced with a voucher system at the end of the year, leaving people who gave their entire working careers to the city to fend for themselves in private insurance markets. Vouchers range in value from $125 a month for relatively well-off retirees to $175 per month for those with income below $75,000, and elderly retirees ineligible for Medicare will receive $300 a month.
The health care changes are huge for people like Brendan Milewski, a 34-year-old former firefighter who had to take a disability pension 11 years into his career when a building collapsed on eight members of his crew, paralyzing him from the chest down. In the early months of the bankruptcy process, he told ThinkProgress that the kinds of cuts to pensions and health care that the city was pondering at that time might keep him from encouraging a young person from joining the department he loves.
Milewski is surprised at the deal announced Tuesday and frustrated that so much of the bankruptcy process has focused on public servants like him. “Today’s news of a possible agreement surrounding police and fire pensions comes as a complete shock to me,” he said in an email, “especially because of the ugly and aggressive nature both sides have publicly dug their heels in over the past two weeks.”
“Of course I thought the city needed some major intervention to break through decades of mismanagement, unaccountability, and corruption that became accepted as business as usual. But I had no idea us public servants (and our pensions) would be seen as the problem,” Milewski said. He also warned against painting the deal in too positive a light. “Even if we don’t see an actual reduction to our monthly benefit, the damage has already been done after what they did to our healthcare,” Milewski said, adding that retirees are facing annual health insurance costs between $10,000 and $16,000. Emergency personnel like Milewski are not eligible for Social Security, and must retiree at age 60 according to city rules even though Medicare does not kick in until age 65. He remains hopeful that catastrophic injuries such as his will get a carve-out from the broader health insurance deal with the city, as the medical care that keeps him alive would be far beyond what he and his wife can afford.
The city anticipates its deals will push many retirees into poverty, and has set aside millions of dollars to keep those people afloat.
The deals are still pending approval from both pension fund boards and the full 30,000 workers and retirees served by the Detroit retirement system. But barring a surprise rejection vote, this week’s news means that one of the most-watched facets of the largest municipal bankruptcy in U.S. history is resolved just nine months after Detroit’s unelected leader engineered the city’s sprint into insolvency.
So knowing how much worse it all could have played out, would Milewski now tell would-be firefighters to suit up with confidence? Not quite. “My advice still remains the same: For the sake of your families’ future, do not put all of your eggs in the [Detroit Fire Department] basket,” he said. “You better diversify yourself with a back up plan so you and your family aren’t left out in the cold.”