Traverse City Record-Eagle


May 11, 2014

Jack Lessenberry: The 'Grand Bargain'….or Bust!

Suddenly, for the first time since Detroit’s dreary bankruptcy process began last year, there seemed a real chance that the city might emerge from all this in a way that didn’t leave the pensioners penniless, or destroy the Detroit Institute of Arts.

City newspapers triumphantly heralded the news that the city had reached a deal with retirees on their pensions. The Sunday Free Press had a headline screaming “At last, we can see the light.”

But in reality, nothing is certain — yet. This could easily break down, come apart, and creditors could yet come after the art.

Everything depends on a conservative GOP-controlled Legislature that has been anything but friendly to Detroit. For the deal to work, lawmakers will have to contribute $350 million to shoring up city retirement coffers. And that will be anything but an easy sell.

But first, the good news. Emergency Manager Kevyn Orr’s office made the stunning announcement April 15 that the city had reached agreement with negotiators for both major city pension funds.

Previously, he had indicated that most of the city’s retirees were facing benefit cuts of 26 percent — and worse, if they attempted to fight that offer. Police and firefighters would see a smaller cut in their pensions, since their fund was in better shape.

However, everyone was surprised that in the end, the deal turned out to be vastly better for the city’s 32,000 pensioners.

Public safety retirees will face no pension fund cuts at all — though they agreed to cap cost-of-living adjustments at 1 percent. Negotiators for those covered under Detroit’s general retirement system, agreed to accept a 4.5 percent cut.

That’s vastly better than most experts accepted — but to get it, the pensioners, evidently betting that inflation would stay low, they waived the right to any future cost of living adjustments.

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