As part of his plan to push the city through bankruptcy proceedings, a proposal submitted by Detroit's so-called 'Financial Emergency Manager' Kevyn Orr on Friday confirmed the worst fears of public pensioners as it called for a 34% slashing of monthly payments for retired city workers, many of whom rely solely on those delayed and guaranteed earnings to support them through their later years.
That reduction is geared to general workers, such as teachers, clerks, and other municipal workers, while the pensions of retired firefighters and police officers would receive a less substantial but significant 10% cut if the plan is ultimately approved.
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Though the attack on public workers has been at the center of Orr's efforts since he first filed the bankruptcy petition last year, pensioners responded to Orr's official proposal to the bankruptcy court with outrage.
“The proposed plan of adjustment is a gut punch to Detroit city workers and retirees,” said Al Garrett, president of the AFSCME Council 25 which represents the city’s largest employee union “The plan essentially eliminates health care benefits for retirees and drastically cuts earned pension benefits. Retires cannot survive these huge cuts to the pensions they earned. The plan is unfair and unacceptable.”
For his part, Republican Governor of Michigan Rick Scott characterized Orr's submitted plan for gutting the public pensions as "thoughtful, comprehensive" and "a crucial step toward a fully revitalized Detroit.”
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The ill-received news on pensions cuts was only slightly mollified by some quasi-good news that came down just before the release of Orr's draft proposal. Earlier on Friday morning, a federal appellate court rejected a lower court decision by ruling that pensioners and trustees of the funds do, in fact, have the legal right to challenge the constitutionality of the bankruptcy proceedings.
According to Reuters:
[The court] said it will hear direct appeals by seven groups of petitioners, including pension plans for Detroit's police and firefighters, regarding the city's eligibility for bankruptcy.
"Upon consideration of the petitions to appeal and the responses thereto, a direct appeal to this court is warranted," the 6th U.S. Circuit Court of Appeals in Cincinnati said in an order filed on Friday. It said it would not expedite the appeals for the time being.
A federal bankruptcy judge in a landmark December ruling said Detroit was eligible to pursue its bankruptcy case. In his ruling, Judge Steven Rhodes said Detroit met federal requirements for bankruptcy protection primarily because it was insolvent and negotiations with its thousands of creditors were not practical.