Traverse City Record-Eagle

Michigan

May 23, 2014

House OKs Detroit bankruptcy funds

LANSING (AP) — Michigan’s Republican-led House approved spending $195 million to help prevent steep cuts in Detroit retiree pensions and the sale of valuable art, a measure that would link the state with a broader deal designed to end the largest public bankruptcy in U.S. history.

By a bipartisan 74-36 vote, the chamber approved legislation Thursday contributing state funds to join $466 million in commitments from 12 foundations and the Detroit Institute of Arts. The pool of money would shore up Detroit’s two retirement systems while the city-owned art museum and its assets would be transferred to a private nonprofit.

A state-dominated board could potentially oversee the city’s finances for at least 13 years, longer if the city’s books are not balanced. The oversight commission would go dormant in as little as three years if Detroit’s finances stay solid post-bankruptcy.

The House passed 11 bills, which now go to the Senate, which is also controlled by Republicans. The plan has the support of the Republican governor and legislative leaders, but its passage has been no sure bet in the bailout-averse Legislature.

Lawmakers stood and applauded after the votes, saying politics was put aside to help rebuild Detroit.

“Choosing to do nothing means putting billions of debt and uncertainty on our kids and our grandkids,” said Republican Rep. Al Pscholka of Stevensville, who noted his district is closer to Chicago than Detroit. “Michigan and southwest Michigan are in a strong position by settling this matter, by settling this bankruptcy.”

The legislation would transfer $194.8 million from Michigan’s savings account to an authority that would disburse the money to Detroit’s pension funds, if the bankruptcy judge later this year approves a restructuring plan resolving the city’s debts and other conditions are met.

The up-front state payment, the equivalent of $350 million spread over 20 years, would come from the state’s rainy day account and would be repaid with annual $17.5 million withdrawals from Michigan’s tobacco settlement over 20 years.

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