Michigan AG to defend Public Pensions in bankruptcy

[haymarket]

Michigan AG to defend public pensions, state constitution in Detroit bankruptcy filing | Detroit Free Press | freep.com

Some good news in the Detroit bankruptcy fight. As it has been explained on this site, the Michigan Constitution forbids any unit of government from decreasing or lessening the retirement pensions of people who have already retired. Governor Snyder and his appointee in Detroit have said they are going after pensions as part of the Detroit bankruptcy filing.

But now the pensioners have a valuable legal ally - the Attorney General of the State who will use his office and resource to fight for upholding the Michigan Constitution and the people.

Taking an opposing side to Gov. Rick Snyder and Detroit emergency manager Kevyn Orr, Michigan Attorney General Bill Schuette said Saturday that he will defend the state’s constitutional protection of public

pensions​

​

in the Motor City’s historic bankruptcy filing. Invoking his role as “the people’s attorney,” Schuette said he will file in U.S. Bankruptcy Court in Detroit on Monday to intervene in the city’s federal bankruptcy proceedings, even after his office opposed efforts in a state court earlier this month to halt the bankruptcy filing in challenges brought by pensioners and lawyers for the city’s

pension​

​

funds.
“The City of Detroit’s bankruptcy will cause even greater hardship for many people in southeast Michigan who are already struggling,” Schuette said. Schuette said he will intervene “on behalf of southeast Michigan pensioners who may be at risk of losing their hard-earned benefits,” in accordance with his responsibility as attorney general to defend the Michigan Constitution.
The move would put Schuette at legal odds on at least one aspect of the city’s bankruptcy with the administration of fellow Republican Snyder, who hired Orr and has defended bankruptcy with steep cuts for unsecured creditors — including pensioners — as the only way to restore Detroit to solvency. Schuette noted that Orr has not detailed the type of cuts he intends to seek from Detroit’s two pension plans, but Orr has said the city doesn’t have money to pay $3.5 billion in underfunding in the two plans that provide retirement pay to about 20,000 people. Pension plan officials bitterly dispute the underfunding levels.
“Michigan’s constitution, Article 9, Section 24, is crystal clear in stating that pension obligations may not be ‘diminished or impaired,’ ” Schuette said.

Nice to see the Michigan AG on the side of the people and the Constitution.

 

[Captain Adverse]

Michigan AG to defend public pensions, state constitution in Detroit bankruptcy filing | Detroit Free Press | freep.com

Some good news in the Detroit bankruptcy fight. As it has been explained on this site, the Michigan Constitution forbids any unit of government from decreasing or lessening the retirement pensions of people who have already retired. Governor Snyder and his appointee in Detroit have said they are going after pensions as part of the Detroit bankruptcy filing.

But now the pensioners have a valuable legal ally - the Attorney General of the State who will use his office and resource to fight for upholding the Michigan Constitution and the people.



Nice to see the Michigan AG on the side of the people and the Constitution.

I think it is a PR stunt. The guy is maneuvering for higher public office...Governor? Senator maybe?

If there is no money, there's no money. The city would have to sell property at a loss already in bankruptcy (whenever that starts up). If there isn't enough revenue for current city services, where does this guy think it will come from for pension programs?

 

[Samhain]

Based on Detroit's last budget, pensions accounted for 20-25% of monthly expenditures and are expected to be 60% of monthly expenditures by 2015.

Who takes on the cost of the pensions? The state? The post-bankruptcy city? Who?

 

[Occam's Razor]

Michigan AG to defend public pensions, state constitution in Detroit bankruptcy filing | Detroit Free Press | freep.com

Some good news in the Detroit bankruptcy fight. As it has been explained on this site, the Michigan Constitution forbids any unit of government from decreasing or lessening the retirement pensions of people who have already retired. Governor Snyder and his appointee in Detroit have said they are going after pensions as part of the Detroit bankruptcy filing.

But now the pensioners have a valuable legal ally - the Attorney General of the State who will use his office and resource to fight for upholding the Michigan Constitution and the people.



Nice to see the Michigan AG on the side of the people and the Constitution.

Yup, it's one of those rare bright spots of hope that all is not lost. The last time I felt there was a bright spot of hope was when County Sheriffs blocked federal agents from access to the hospital of Terry Schaivo. Guns drawn, full on showdown... and they won they day.

If we can bail out the auto industry, banks, so that reckless idiots can keep their bonuses... we can protect the earned and deserved pensions of some of the most vulnerable in our society, the elderly.

 

[Occam's Razor]

Based on Detroit's last budget, pensions accounted for 20-25% of monthly expenditures and are expected to be 60% of monthly expenditures by 2015.

Who takes on the cost of the pensions? The state? The post-bankruptcy city? Who?

Nope... Detroit has to launch a renaissance, double it's population, attract start-ups, redevelop... and create the revenue it had when it created those pensions.. when the city was double in size and economically viable.

 

[MaggieD]

Michigan AG to defend public pensions, state constitution in Detroit bankruptcy filing | Detroit Free Press | freep.com

Some good news in the Detroit bankruptcy fight. As it has been explained on this site, the Michigan Constitution forbids any unit of government from decreasing or lessening the retirement pensions of people who have already retired. Governor Snyder and his appointee in Detroit have said they are going after pensions as part of the Detroit bankruptcy filing.

But now the pensioners have a valuable legal ally - the Attorney General of the State who will use his office and resource to fight for upholding the Michigan Constitution and the people.

Nice to see the Michigan AG on the side of the people and the Constitution.

Honestly, I cannot imagine why you are so worried about accrued pension benefits. The state's constitution states quite clearly that they must be honored. Unless Michigan is going to shred its constitution, there is no way accrued benefits are going to be lessened. "The world is watching," so to speak.

The best taxpayers can hope for is that these defined benefit pension plans go the way of the dinosaur going forward...that Detroit's public sector joins the ranks of 100% of the private sector and participate in Social Security -- and the 70% of the private sector whose SS retirement is bolstered by a defined contribution plan.

Even in the midst of this debacle, "they" are lying. IMO, they are fearful that the bright light being shone on these Cadillacs (fitting for Detroit, don't you think) will have the worst political backlash they've ever seen. For this reason, the number they're releasing to the press -- the average public pension being collected -- is shown as $19,000. And this is an outright lie.

 

[Occam's Razor]

Honestly, I cannot imagine why you are so worried about accrued pension benefits. The state's constitution states quite clearly that they must be honored. Unless Michigan is going to shred its constitution, there is no way accrued benefits are going to be lessened. "The world is watching," so to speak.

The best taxpayers can hope for is that these defined benefit pension plans go the way of the dinosaur going forward...that Detroit's public sector joins the ranks of 100% of the private sector and participate in Social Security -- and the 70% of the private sector whose SS retirement is bolstered by a defined contribution plan.

I disagree. The best taxpayers can hope for is Detroit to increasing it's revenue to pay their obligations so the rest of the state doesn't have to.

Even in the midst of this debacle, "they" are lying. IMO, they are fearful that the bright light being shone on these Cadillacs (fitting for Detroit, don't you think) will have the worst political backlash they've ever seen. For this reason, the number they're releasing to the press -- the average public pension being collected -- is shown as $19,000. And this is an outright lie.

I haven't really followed the nitty gritty of this, so I'll have to do some reading before commenting further.

 

[haymarket]

I think it is a PR stunt. The guy is maneuvering for higher public office...Governor? Senator maybe?

If there is no money, there's no money. The city would have to sell property at a loss already in bankruptcy (whenever that starts up). If there isn't enough revenue for current city services, where does this guy think it will come from for pension programs?

Do you operate under the impression that the City of Detroit has to pay the entire bill for pensions at one time and their current shortfall between income and expenses will prevent them for ever honoring their incurred contractual obligations which are backed by the Michigan Constitution?

 

[haymarket]

Nope... Detroit has to launch a renaissance, double it's population, attract start-ups, redevelop... and create the revenue it had when it created those pensions.. when the city was double in size and economically viable.

A very wise post. The reality is that in 1950, southeast Michigan had 4.5 million people. Today, the same area still has 4.5 million people. However, Detroit which had 1.8 million is now down to just over 700,000. Those 1.1 million people and their taxes went to surrounding suburbs. Short term gain for them turned into long term problem for the city and now the state.

 

[haymarket]

Honestly, I cannot imagine why you are so worried about accrued pension benefits. The state's constitution states quite clearly that they must be honored. Unless Michigan is going to shred its constitution, there is no way accrued benefits are going to be lessened. "The world is watching," so to speak.

The best taxpayers can hope for is that these defined benefit pension plans go the way of the dinosaur going forward...that Detroit's public sector joins the ranks of 100% of the private sector and participate in Social Security -- and the 70% of the private sector whose SS retirement is bolstered by a defined contribution plan.

Even in the midst of this debacle, "they" are lying. IMO, they are fearful that the bright light being shone on these Cadillacs (fitting for Detroit, don't you think) will have the worst political backlash they've ever seen. For this reason, the number they're releasing to the press -- the average public pension being collected -- is shown as $19,000. And this is an outright lie.

And what information do you have Maggie to show that this is an outright lie?

 

[MaggieD]

A very wise post. The reality is that in 1950, southeast Michigan had 4.5 million people. Today, the same area still has 4.5 million people. However, Detroit which had 1.8 million is now down to just over 700,000. Those 1.1 million people and their taxes went to surrounding suburbs. Short term gain for them turned into long term problem for the city and now the state.

One thing the city of Detroit could do would be to require that anyone working FOR the city LIVE in the city. That's the way it is in Chicago. If it weren't, Chicago would be in the same flight condition that Detroit finds itself in.

 

[MaggieD]

And what information do you have Maggie to show that this is an outright lie?

85% of current active participants in Michigan's pension plan have their pensions figured as below:

Annual pension benefit formula (in general):

Hires before July 1, 2010:
Final average 3 years’ compensation[§§] x 1.5 percent x years of service

Hires on or after July 1, 2010:
Final average 5 years’[***] compensation x 1.5 percent x years of service

Comparing Michigan Private-Sector Pensions to MPSERS

Do the math. Figure a 3-year average just before retirement at $50,000 X 3 (first example) = $150,000 X 1.5% = $2,250 X 30 Years = $67,500.

 

[WorldWatcher]

85% of current active participants in Michigan's pension plan have their pensions figured as below:

Annual pension benefit formula (in general):

Hires before July 1, 2010:
Final average 3 years’ compensation[§§] x 1.5 percent x years of service

Hires on or after July 1, 2010:
Final average 5 years’[***] compensation x 1.5 percent x years of service

Comparing Michigan Private-Sector Pensions to MPSERS

Do the math. Figure a 3-year average just before retirement at $50,000 X 3 (first example) = $150,000 X 1.5% = $2,250 X 30 Years = $67,500.

A three year average doesn't mean (using $50K) = (50,000 + 50,000 + 50,0000) * 1.5 = 150,000 * 1.5 = 2,250


A three year average would mean (using $50K) = ((50,000 + 50,000 + 50,0000/3) * 1.5 = 50,000 * 1.5 = 750


Meaning the calculation would be = ((50,000 + 50,000 + 50,000)/3) * 1.5 * 30 = 50,000 * 1.5 * 30 = 750 * 30 = $22,500

---

Average means sum the values of the elements in the set and then divide by the number of elements in the set. It doesn't mean sum the elements and stop.


>>>>

 

[MaggieD]

A three year average doesn't mean (using $50K) = (50,000 + 50,000 + 50,0000) * 1.5 = 150,000 * 1.5 = 2,250


A three year average would mean (using $50K) = ((50,000 + 50,000 + 50,0000/3) * 1.5 = 50,000 * 1.5 = 750


Meaning the calculation would be = ((50,000 + 50,000 + 50,000)/3) * 1.5 * 30 = 50,000 * 1.5 * 30 = 750 * 30 = $22,500

---

Average means sum the values of the elements in the set and then divide by the number of elements in the set. It doesn't mean sum the elements and stop.


>>>>

Jesus Christ, Maggie!!!!!!!!!!!! More coffee!!!!!!!!!!!!!!!! Thanks for straightening me out, WorldWatcher. And, considering the magnitude of mistake, I'd say you were quite polite about it.

It loses quite a lot of punch when I point out that it's STILL $22,500 compared to the oft-used $19,000 figure, doesn't it??

 

[WorldWatcher]

Jesus Christ, Maggie!!!!!!!!!!!! More coffee!!!!!!!!!!!!!!!! Thanks for straightening me out, WorldWatcher. And, considering the magnitude of mistake, I'd say you were quite polite about it.

It loses quite a lot of punch when I point out that it's STILL $22,500 compared to the oft-used $19,000 figure, doesn't it??

No prob.

Actually this thread made me look up my own retirement projection last night. I'm under VRS (Virginia Retirement System) and make about $60,000 a year and my projected retirement is $2,100 a month ($25,200) and there is no medical insurance after Medicare qualification age.

My system as 2725 Full Time (i.e. can be part of the retirement system) and of those 2112 make below the $50,000 mark and lots of those (bus attendants, bus drivers, secretaries, instructional assistants, etc.) make less than $25,000 per year. Using the previous formula that would be less that $11,000 per year in retirement.


Disclaimer: I'm kind of an oddball because I didn't start under VRS until I was about 40 and have a defined benefit retirement from my military career.

 

[Manc Skipper]

The average will be pulled down by the number of late starters and part timers, who get a pro rata pension.

 

[WorldWatcher]

The average will be pulled down by the number of late starters and part timers, who get a pro rata pension.

I'm not sure about MI, but in Virginia there is no "pro rated" pension for part timers, you have to be full time for employment time to qualify for participation in our states retirement.


Can part timers participate in retirement in MI?



>>>>

 

[Captain Adverse]

Do you operate under the impression that the City of Detroit has to pay the entire bill for pensions at one time and their current shortfall between income and expenses will prevent them for ever honoring their incurred contractual obligations which are backed by the Michigan Constitution?

No, I am aware how pension plans are supposed to work. What I am saying is that the city entered into bankruptcy because current revenues are unable to maintain current city services and pension plan payments; nor meet city deficits and debt balances. Something has to suffer.

Trying to meet pensions, existing deficits, and debt paymens in bankruptcy means cutting already reduced city services to the bone and beyond. How can the city continue to function if the bulk of revenue is going to go everywhere but where it is truly needed?

 

[Excon]

I really hate it when they leave out the actual law in what they are reporting.
It speaks to me of dishonesty and subterfuge.

§ 24 Public pension plans and retirement systems, obligation.

Sec. 24. The accrued financial benefits of each pension plan and retirement system of the state and its
political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.​

http://www.legislature.mi.gov/(S(u2ore045dxgahh45zyk1ssqx))/documents/mcl/pdf/mcl-chap1.pdf​

Apparently the AG is going to have to argue the intent of the law and not the actual law.

While contractual obligations can be renegotiated, under bankruptcies, they can be invalidated.

It will be interesting to see how this plays out in Court, especially since this filing was a Federal, not state filing.

 

[Helix]

the pensions are probably screwed, and that really bothers me. a pension is deferred salary; you take a ****tier wage in exchange for retirement money. then when it comes time to collect, all of the sudden the money isn't there, and you're screwed. it's a lousy setup, and the middle class gets hammered again and again by both public and private pensions going bust. a manufacturing company in my area just screwed its workers in this exact same way.

 

[AliHajiSheik]

I really hate it when they leave out the actual law in what they are reporting.
It speaks to me of dishonesty and subterfuge.

§ 24 Public pension plans and retirement systems, obligation.

Sec. 24. The accrued financial benefits of each pension plan and retirement system of the state and its
political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.​

http://www.legislature.mi.gov/(S(u2ore045dxgahh45zyk1ssqx))/documents/mcl/pdf/mcl-chap1.pdf​

Apparently the AG is going to have to argue the intent of the law and not the actual law.
While contractual obligations can be renegotiated, under bankruptcies, they can be invalidated.

It will be interesting to see how this plays out in Court, especially since this filing was a Federal, not state filing.

I think this issue already left the realm of law and went right into politics. The citizens of Michigan better prepare for a bigger tax bill or a cut in their services.

 

[washunut]

Michigan AG to defend public pensions, state constitution in Detroit bankruptcy filing | Detroit Free Press | freep.com

Some good news in the Detroit bankruptcy fight. As it has been explained on this site, the Michigan Constitution forbids any unit of government from decreasing or lessening the retirement pensions of people who have already retired. Governor Snyder and his appointee in Detroit have said they are going after pensions as part of the Detroit bankruptcy filing.

But now the pensioners have a valuable legal ally - the Attorney General of the State who will use his office and resource to fight for upholding the Michigan Constitution and the people.



Nice to see the Michigan AG on the side of the people and the Constitution.

Can you tell us how the constitution of MI works in this situation. A city says it cannot pay, does the state step in a pay the pensions?

 

[Excon]

the pensions are probably screwed, and that really bothers me. a pension is deferred salary; you take a ****tier wage in exchange for retirement money. then when it comes time to collect, all of the sudden the money isn't there, and you're screwed. it's a lousy setup, and the middle class gets hammered again and again by both public and private pensions going bust. a manufacturing company in my area just screwed its workers in this exact same way.

I disagree with the underlined. Especially when it comes to Government employment.



That said ...
Pensions should be separate from the employer.

 

[haymarket]

One thing the city of Detroit could do would be to require that anyone working FOR the city LIVE in the city. That's the way it is in Chicago. If it weren't, Chicago would be in the same flight condition that Detroit finds itself in.

That is the way it was for a long time Maggie. Then residency was stripped from the city by the State Legislature in Lansing.

Now you live in Chicago - or at least the vicinity - so tell me something. We go to the city about once a year and always stay downtown near the Miracle Mile. I realize some neighborhoods are very different. We always had the impression that white people in Chicago did not do the wholesale abandonment that they did here in Detroit.

Is that accurate to any degree?

 

[haymarket]

85% of current active participants in Michigan's pension plan have their pensions figured as below:

Annual pension benefit formula (in general):

Hires before July 1, 2010:
Final average 3 years’ compensation[§§] x 1.5 percent x years of service

Hires on or after July 1, 2010:
Final average 5 years’[***] compensation x 1.5 percent x years of service

Comparing Michigan Private-Sector Pensions to MPSERS

Do the math. Figure a 3-year average just before retirement at $50,000 X 3 (first example) = $150,000 X 1.5% = $2,250 X 30 Years = $67,500.

MSPERS includes teachers who had a considerable larger salary than city employees so that figures is really not an accurate reflection of the pension of Detroit city employees who are at risk. Teacher pensions are not at risk. Teachers have also been part of a system called MIP where you kick in a decent chunk to get that higher pension every payday.