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July 22, 2013

Michigan Judge Challenges Detroit Bankruptcy Filing 
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A Michigan judge has ordered Detroit to withdraw the city's bankruptcy
petition because it could cut the pensions of retired public employees,
thereby violating the state's constitution. Michigan's Attorney General
quickly appealed the ruling after it came down on Friday. Detroit last
week became the largest city in the United States to file for
bankruptcy, with unpayable debts estimated at $18 billion. About half of
those debts are in unfunded pensions and benefits to thousands of public
workers and retirees. Speaking to Chris Wallace on Fox News Sunday,
Emergency Manager Kevyn Orr said pension cuts are inevitable.

Kevyn Orr: "We're going to have a dialogue with the pension funds about
what we can do. There are two different funds — police and fire
and general services. And they may have different levels of funding. And
all we're talking about in this restructuring is the unfunded component
of those pension funds. I want to be clear...

Chris Wallace: "Billions of dollars."

Kevyn Orr: "It's significant some of money. Make no mistake about it,
and there have to be concessions. may be different for each fund, and
they're going to be focused on the unfunded portion. But they will have
some component of the..."

Chris Wallace: "But you are saying that pensioners who worked for the
city for decades are not going to get the benefits they thought they
were going to get?"

Kevyn Orr: "There are going to be some adjustments. There are probably
going to be need to be some adjustments."

Bankruptcy proceedings could begin as early as this week. If approved in
court, Detroit's bankruptcy would force creditors to enter into
negotiations on resolving its debt. Michigan's Republican Gov. Rick
Snyder has downplayed the prospect of a bailout from Washington, saying
he would not seek the federal government's help.

 

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