Sorry to be so scatological about it, but any hopes that Detroit retirees could live a happy retirement should be flushed down the bowl along with Judge Steven Rhodes of the U.S. Bankruptcy Court for the Eastern District of Michigan. Rhodes said Tuesday that the city could, sure, go ahead and try to erase $18 billion in debt incurred in part by under-funded pensions and health costs. It was OK, the judge decided, for Detroit to file for Chapter 9 bankruptcy protection.
So The Motor City blue-collar guys get to pack it up and go home while the white-collar guys scrum around the table with glasses of scotch scratching out deals. Oh sure, the unions will be underfoot, trying to get theirs. But in the end, which group will scratch out the most scratch for its team? Bet it's the guys with the best lawyers.
The case now turns to the art of crunching numbers and trying to strike deals, although unions are pursuing an appeal.
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The Associated Press quoted one worker as saying: "We'll be thrown out of our homes and starving if they seriously slash our pensions. Then they'll tell us to go to the soup lines." How close that is to truth is anybody's guess, but I'd say it errs more on the side of likely than not.
Specifically, the court ruled that the state constitution doesn't offer any guarantees to any contract linked to public benefits for employees.
Like many others believed, the judge stated that Detroit should have filed for bankruptcy years ago.
This ruling came more than four months after Detroit filed for Chapter 9 protection.
As horrible as this is for the citizens of Detroit, what does it portend for some of the municipalities in California, for whom this situation might seem a test case?
The California Public Employees' Retirement System didnn't waste a moment weighing in. "The Detroit court failed to recognize the difference between a two-party contract and the unique nature of a state public employee retirement system, which creates a three-way relationship among a public agency, its employees and the retirement system. In California, our members' vested rights to their pensions are protected by the California constitution, statutes and case law," CalPERS said.
While CalPERS is a state public pension plan, not a city one, it's right to worry that it could end up in a similar situation. After all, ask not for whom the bell tolls.
If the unions get hosed (and it looks like they will) what precedent does that set? Indeed, what does it tell our sons and daughters about the value of working hard and in which arena you decide to do so? Bust your hump best you can, but only do it for the private sector. That's a bad message, ignoring that public service can be just as important as private service.
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