Detroit bankruptcy decision puts pensions at risk - WNEM TV 5

Detroit bankruptcy decision puts pensions at risk

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Detroit retirees could see smaller pension checks after a judge said pensions are a fair target in the city's historic bankruptcy.

Judge Steven Rhodes says pensions are like contracts and aren't immune to being changed in a public bankruptcy. It was probably the most controversial decision Tuesday in a broader ruling that allows Detroit to come up with a plan to cure $18 billion in debt.

Reaction is harsh. Retiree David Sole predicts people could lose homes and be forced into soup lines. While Detroit says pension funds are underfunded by $3.5 billion, there's been no specific proposal to reduce pensions. That's caused much anxiety in the 4 1/2-month-old case.

Detroit emergency manager Kevyn Orr is promising to be "thoughtful, measured and humane" with retirees.

State Attorney General Bill Schuette applauded Judge Steven W. Rhodes for his ruling to allow the City of Detroit to enter Chapter 9 bankruptcy.

However, Schuette was deeply disappointed with Rhodes' analysis of the impairment of retiree pensions moving forward in the bankruptcy process.

"Everyone knows Detroit is bankrupt. I agree with Judge Rhodes' decision that the City of Detroit is eligible for bankruptcy," said Schuette. 

"However, I am deeply disappointed by Judge Rhodes' analysis that pensions may be impaired. I will continue to aggressively defend pensions and Article 9, Section 24 of the Michigan Constitution as this case proceeds to the confirmation stage of the bankruptcy process, at which time we can thoroughly review any plans for potential legal action involving pensions.

In the meantime, I plan to file amicus briefs in support of pension protections provided under the Michigan Constitution."

Copyright 2013 Associated Press. All rights reserved.

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