Detroit Federal court rules public pensions not untouchable

[MaggieD]

This is huge:

The judge made it clear that public employee pensions were not protected in a federal Chapter 9 bankruptcy, even though the Michigan Constitution expressly protects them. “Pension benefits are a contractual right and are not entitled to any heightened protection in a municipal bankruptcy,” he said.

Perhaps there is hope.

 

[joG]

This is huge:
Perhaps there is hope.

Yes. That is interesting. I found this here: http://www.nytimes.com/2013/12/04/us/detroit-bankruptcy-ruling.html?hpw&rref=us&_r=0

 

[WCH]

Being this city has half the population and who knows what amount of missing wealth, there's no way they can pay those 'obligations'.

 

[Slyfox696]

This is huge:



Perhaps there is hope.

I haven't followed along too closely, but why is people possibly being screwed out of money they worked for throughout their career "hope"? I understand money is limited, but it seems to me stealing money from people who had nothing to do with the changing situation of the city is incredibly unfair, especially if you're taking money from people who can no longer go back to work.

 

[Peter Grimm]

This is huge:



Perhaps there is hope.

Hope for what? Going back on their promises?

If they promised to pay someone a pension, they need to pay that money.

Don't make promises you can't keep.

 

[PerfectStorm]

If they promised to pay someone a pension, they need to pay that money.

Don't make promises you can't keep.

They made need to but they can't....Detroit is broke.

The city is now paying for the excesses of 50 year Democrat rule.

 

[sawyerloggingon]

I haven't followed along too closely, but why is people possibly being screwed out of money they worked for throughout their career "hope"? I understand money is limited, but it seems to me stealing money from people who had nothing to do with the changing situation of the city is incredibly unfair, especially if you're taking money from people who can no longer go back to work.

Where is the money going to come from to pay for these bloated benefits?

 

[Peter Grimm]

They made need to but they can't....Detroit is broke.

The city is now paying for the excesses of 50 year Democrat rule.

Well then sell off some assets. There's "broke" and then there's broke. Detroit ain't broke.

 

[Perotista]

Hope for what? Going back on their promises?

If they promised to pay someone a pension, they need to pay that money.

Don't make promises you can't keep.

The problem with Detroit was gross mismanagement for probably around 30 years give or take. I am not saying this was all managements fault either. Detroit relied on the auto industry which was fine when they went unchallenged in the states, but when the auto industry began to make ****ty cars, this allowed foreign competitors to enter the U.S. market and take half that market away from U.S. automakers. When schools levels drop, concerned parents parents move out, with taxes become too high, people move out, when city services go to pot, people move out, when jobs become scarce, people move out, people vote with their feet.

I did the same when I moved from Kentucky back to Georgia, there I had to pay a payroll tax of 2% along with a state income tax of 6%. In Georgia all I had was a state income tax of 3%, no brainier. People from the northeast, companies from the northeast also voted with their feet to move south when they perceived taxes and regulations rose above the norm.

The sad part in all of this is only the people who can afford to move, move. Those who can't have no choice but to stay. Unfunded pensions will hurt those who receive them at sometime in the future. But what this shows me, it shows me how good a job Jerry Brown has done as governor of California, he has taken that state from the brink of bankruptcy to more solid financial ground. Good for Jerry. Now instead of California being the most likely state to declare bankruptcy, that honor goes to Illinois now.

 

[PerfectStorm]

Well then sell off some assets. There's "broke" and then there's broke. Detroit ain't broke.

Fro the NY Times link:

Mr. Orr said he intended to file the formal blueprint, known as a “plan of adjustment,” by the first week of 2014. That plan could include efforts to spin off city departments to outside entities, to sell city assets and to reinvest in failing city services. Mr. Orr has said his goal is to bring Detroit, the nation’s largest city ever to find itself in bankruptcy, out of the court process by next fall.

So they will attempt to sell assets but the need 18 billion just to break even.

 

[MaggieD]

Hope for what? Going back on their promises?

If they promised to pay someone a pension, they need to pay that money.

Don't make promises you can't keep.

And, for the public pension workers, "If it sounds too good to be true, it usually is." The ironic part of this is that public pension workers will continue to vote for the Democrats who didn't fund their pensions for the next hundred years. Fools.

This is landmark since the judge's ruling points out the truth. Which is that public pension contracts are just like any others. This will encourage unions to compromise. That's great news.

 

[Slyfox696]

Where is the money going to come from to pay for these bloated benefits?

Not my concern, nor should it be the concern of those who honored their commitments throughout their careers. It's not the fault of the retirees the city doesn't have money right now. The retirees worked for that money and they deserve that money.

 

[MaggieD]

Not my concern, nor should it be the concern of those who honored their commitments throughout their careers. It's not the fault of the retirees the city doesn't have money right now. The retirees worked for that money and they deserve that money.

So did City of Detroit providers. So did their workers . . . their pensions. Everybody suffers. And those in the system now? Not retired? Don't like the new deal? Get another job.

 

[polgara]

The problem with Detroit was gross mismanagement for probably around 30 years give or take. I am not saying this was all managements fault either. Detroit relied on the auto industry which was fine when they went unchallenged in the states, but when the auto industry began to make ****ty cars, this allowed foreign competitors to enter the U.S. market and take half that market away from U.S. automakers. When schools levels drop, concerned parents parents move out, with taxes become too high, people move out, when city services go to pot, people move out, when jobs become scarce, people move out, people vote with their feet.

I did the same when I moved from Kentucky back to Georgia, there I had to pay a payroll tax of 2% along with a state income tax of 6%. In Georgia all I had was a state income tax of 3%, no brainier. People from the northeast, companies from the northeast also voted with their feet to move south when they perceived taxes and regulations rose above the norm.

The sad part in all of this is only the people who can afford to move, move. Those who can't have no choice but to stay. Unfunded pensions will hurt those who receive them at sometime in the future. But what this shows me, it shows me how good a job Jerry Brown has done as governor of California, he has taken that state from the brink of bankruptcy to more solid financial ground. Good for Jerry. Now instead of California being the most likely state to declare bankruptcy, that honor goes to Illinois now.

I wish we could hear from people in the Detroit area on how the bankruptcy decision might affect them personally. It may be that it's still too early to tell, but it seems like an effort is being made to improve the lives of the residents affected--street lights being turned on, trash will be picked up, etc, so why are some predicting riots?

Good morning, Pero. :2wave:

 

[Beaudreaux]

So did City of Detroit providers. So did their workers . . . their pensions. Everybody suffers. And those in the system now? Not retired? Don't like the new deal? Get another job.

And there's the nut of it all. Certain people concern themselves with the public sector worker, and forget the private sector companies and their employees. If anyone gets screwed due to this ideological failure, everyone, even and especially those that made it possible by voting for this experiment and demanding bloated union contracts should share the pain. Not just the private sector providers to the city.

Actions have consequences, and the public sector unions and their membership may find that out now... finally.

 

[Peter Grimm]

And, for the public pension workers, "If it sounds too good to be true, it usually is." The ironic part of this is that public pension workers will continue to vote for the Democrats who didn't fund their pensions for the next hundred years. Fools.

This is landmark since the judge's ruling points out the truth. Which is that public pension contracts are just like any others. This will encourage unions to compromise. That's great news.

These people have employment contracts, which they signed, which guarantees them a given pension upon retirement in exchange for their labor. The people in question fulfilled their end of the bargain, they put in their time. Now the government is trying to renege on their end of the bargain.

You can't just go back on a contract because later on down the road you decide "oh hey, we really can't afford this." A deal is a deal.

Now I understand bankruptcy law a little bit, and I understand that when an entity declares bankruptcy, that does allow them to get out of certain contracts. However it has two consequences:

1.) It blasts their credit rating so they won't be able to get a loan again for decades
2.) Assets and other things are sold off to meet at least as many of the obligations as possible

Now what are the consequences when a city declares bankruptcy? Who really knows.

All I know is that the city is trying to get out of its obligation to honor these employment contracts, and if successful, the ones getting the short end of the stick are going to be old folks.

That's some bull**** right there. Hell no. They can sell of public land or whatever they need to do, but they need to honor the contracts they got in to.

 

[jmotivator]

I haven't followed along too closely, but why is people possibly being screwed out of money they worked for throughout their career "hope"? I understand money is limited, but it seems to me stealing money from people who had nothing to do with the changing situation of the city is incredibly unfair, especially if you're taking money from people who can no longer go back to work.

You can't squeeze blood from a turnip. There are any number of promises that Detroit made to it's citizens that it had no ability to fund. If the auto workers were protected from this bankruptcy all that would mean is the other people who were also lied to would have lost even more.

The "hope" here is that this will be a wake up call to unionized labor all over the country saying that you can't demand the moon AND the stars because, in the end, you have to consider their employer's ability to pay.

 

[Peter Grimm]

Not my concern, nor should it be the concern of those who honored their commitments throughout their careers. It's not the fault of the retirees the city doesn't have money right now. The retirees worked for that money and they deserve that money.

Exactly. They need to be compensated and that's all there is to it.

 

[Peter Grimm]

You can't squeeze blood from a turnip. There are any number of promises that Detroit made to it's citizens that it had no ability to fund. If the auto workers were protected from this bankruptcy all that would mean is the other people who were also lied to would have lost even more.

The "hope" here is that this will be a wake up call to unionized labor all over the country saying that you can't demand the moon AND the stars because, in the end, you have to consider their employer's ability to pay.

Why doesn't the city sell off some assets? How much is the airport worth?

 

[longview]

You can't squeeze blood from a turnip. There are any number of promises that Detroit made to it's citizens that it had no ability to fund. If the auto workers were protected from this bankruptcy all that would mean is the other people who were also lied too would have lost even more.

Exactly, unless something radical happens(like a boom is economic activity, or population) the current course of our country is unsustainable.
If we can learn this from an example like Detroit, and correct our poor spending/planning habits, there is still hope.
The Government has no money to give, it only gives what it took from others.

 

[MaggieD]

These people have employment contracts, which they signed, which guarantees them a given pension upon retirement in exchange for their labor. The people in question fulfilled their end of the bargain, they put in their time. Now the government is trying to renege on their end of the bargain.

You can't just go back on a contract because later on down the road you decide "oh hey, we really can't afford this." A deal is a deal.

Now I understand bankruptcy law a little bit, and I understand that when an entity declares bankruptcy, that does allow them to get out of certain contracts. However it has two consequences:

1.) It blasts their credit rating so they won't be able to get a loan again for decades
2.) Assets and other things are sold off to meet at least as many of the obligations as possible

Now what are the consequences when a city declares bankruptcy? Who really knows.

All I know is that the city is trying to get out of its obligation to honor these employment contracts, and if successful, the ones getting the short end of the stick are going to be old folks.

That's some bull**** right there. Hell no. They can sell of public land or whatever they need to do, but they need to honor the contracts they got in to.

The muni sector is going to love that the City of Detroit is re-organizing. You are dreaming. A contract is a contract until there's a bankruptcy. The City of Detroit has contracts with many of its service providers. If it were that easy to protect one's ass from a bankruptcy, every supplier would enter into contracts with every customer.

The public sector thinks that when they "sign on" what's promised today is going to be in effect thirty years from now. That simply shows that they don't know anything about business. Every single time their employment contract comes up for renewal? There's an opportunity to change the 30-year-promise and buy out of it. It's not re-negging in the least. You promised me I could retire at 55 when you hired me last year!!!! You can't change the deal!! Perhaps the public sector needs to stop listening to their union crones and start learning about contract law. Watcha' think?

I just wonder how much money politicians collected from unions when they amended the state constitution to try to prevent this.

And I will still wonder why the public sector votes unfailingly for Democrats -- the jakes who got them into this mess by promising more than they knew they could deliver.

 

[jimbo]

Hope for what? Going back on their promises?

If they promised to pay someone a pension, they need to pay that money.

Don't make promises you can't keep.

This is a bancruptcy. The assets are converted to cash and then distributed to the creditors. The secured creditors get first shot.The pension plans are unsecured creditors. They go last.

Should the lenders, contractors, and the thousands of others owed by the city be moved behind the pensions?

You are correct. No one should make promises they can't keep, but that is the liberal way.

 

[Woodman909]

I haven't followed along too closely, but why is people possibly being screwed out of money they worked for throughout their career "hope"? I understand money is limited, but it seems to me stealing money from people who had nothing to do with the changing situation of the city is incredibly unfair, especially if you're taking money from people who can no longer go back to work.

The rank & file of the unions must take some level of responsibility for electing their thieving union leaders who for decades were bent on driving the municipal govt to it's knees and help put them in this position. Did they think there was no bottom to the well they drank from?

 

[PerfectStorm]

This is a bancruptcy. The assets are converted to cash and then distributed to the creditors. The secured creditors get first shot.The pension plans are unsecured creditors. They go last.

Same thing happened with the GM bailout....unsecured creditors received pennies on the dollar.

 

[American]

The muni sector is going to love that the City of Detroit is re-organizing. You are dreaming. A contract is a contract until there's a bankruptcy. The City of Detroit has contracts with many of its service providers. If it were that easy to protect one's ass from a bankruptcy, every supplier would enter into contracts with every customer.

The public sector thinks that when they "sign on" what's promised today is going to be in effect thirty years from now. That simply shows that they don't know anything about business. Every single time their employment contract comes up for renewal? There's an opportunity to change the 30-year-promise and buy out of it. It's not re-negging in the least. You promised me I could retire at 55 when you hired me last year!!!! You can't change the deal!! Perhaps the public sector needs to stop listening to their union crones and start learning about contract law. Watcha' think?

I just wonder how much money politicians collected from unions when they amended the state constitution to try to prevent this.

And I will still wonder why the public sector votes unfailingly for Democrats -- the jakes who got them into this mess by promising more than they knew they could deliver.

Not all public sector employees are union members.