Detroit Bankruptcy Ruling Imperils Pensions

Detroit Bankruptcy Ruling Imperils Pensions

 by Korey Clark

This month the federal bankruptcy court judge presiding over Detroit's bankruptcy case, ruled that the city's public pensions were not untouchable, even though they are expressly protected under Michigan's Constitution.  
"Pension benefits are a contractual right and are not entitled to any heightened protection in a municipal bankruptcy," said Judge Steven W. Rhodes. 
James E. Spiotto, a Chicago-based lawyer who specializes in municipal bankruptcy, said: "No bankruptcy court had ruled that before. It will be instructive." 
The ruling challenges the widely held belief that public pensions are sacrosanct, and it is likely to resonate in Chicago, Philadelphia and other cities across the country where rising pension costs are crowding out spending for education, public safety and other services, as well as in other cities facing bankruptcy, like Stockton and San Bernardino, California. 
Lee Saunders, president of the American Federation of State, County and Municipal Employees, said the ruling basically places a "bull's eye" on the backs of public employees and retirees. 
"It sets a bad precedent for cities that are under economic distress to look at doing the easy thing: to attack the workers and attack the retirees," he said. 
Experts said the ruling was unlikely to prompt a rush of municipal bankruptcy filings, but it would probably give cities more leverage in negotiations before going into bankruptcy. (NEW YORK TIMES) 

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