Detroit — Officials with Detroit’s public safety unions on Monday blasted the city’s “brutal and unreasonable” plan to cut pensions as it aims to shed about half of its estimated $18 billion in debt.
Union leaders, during a news conference at the police said the association offices on Jefferson, said the pension changes outlined in the document filed Friday by Emergency Manager Kevyn Orr are “crippling” and “unacceptable.”
“The city’s plan of adjustment attacks the hard-earned vested pensions of police and fire employees,” Detroit Police Officer Association President Mark Diaz, alongside representatives for Detroit’s firefighters and police commanders, lieutenants and sergeants, told members of the media Monday. “In some cases, denying employees of all and any pension, in spite of their years of dedicated city service.”
The pension changes are outlined in the plan Orr submitted to the U.S. Bankruptcy Court which lays out his debt-cutting strategy in the city’s municipal bankruptcy case. The plan pushes for pension cuts and the proposed elimination of cost-of-living increases for the next decade.
Orr has called the pension cuts “modest” for police and firefighters.
Detroit’s 4,000 active and 8,000 retired police and firefighters, who have a better-funded pension fund than its non-uniform employees, would get a 4 percent cut if they accept Orr’s deal — or 10 percent, if they continue to fight the proposal in court, according to the plan.
The plan also calls for no general fund dollars to be spent on pensions through June 2023.
But Diaz says the reductions are “colossal,” and noted the city has also simultaneously imposed health care cost increases and coverage decreases on top of a prior wage reduction of 10 percent. In addition, public safety unions are not entitled to Social Security benefits, he added.
“The members of the Detroit Police Department and Fire Department need no lecture on the concept of sacrifice,” Diaz told reporters. “Every Detroit police officer and firefighter, as well as their loved ones, have sacrificed from the moment they answered the call to serve the city.”
The union leaders Monday declined to answer questions, citing mediation efforts in the bankruptcy court.
With no apparent deals reached with retiree groups, Orr’s plan pits retirees against banks and bondholders and was released on the same day the 6th Circuit Court of Appeals accepted a direct appeal of Detroit’s eligibility for bankruptcy from the city’s pension funds and largest labor union.
The plan also notes $815 million committed from foundations, the state and Detroit Institute of Arts donors to preserve the museum’s city-owned collection and shore up pensions.
Gov. Rick Snyder has pledged $350 million in aid toward the funding pot. But that contribution is contingent, in part, on creating a safety net for low-income retirees to ensure their pensions are not reduced below $15,856 a year, Orr has said.
Under the plan, the city’s non-uniform employees are subject to a 26 percent reduction in their pensions if they agree not to pursue a sale of city-owned art or participate in protracted litigation over state constitutional protection of their pensions.
If they don’t accept a “timely settlement” within the next month, Orr has said they could see their pensions reduced to 34 percent.
By comparison, Orr proposes cutting payments to general obligation bondholders owed $374 million by 80 percent. The overall plan would eliminate $9 billion from about $11 billion in unsecured debts owed for pensions, retiree health insurance and bondholders, Orr’s office has said.
Diaz said U.S. Bankruptcy Judge Steven Rhodes has determined the pensions are a contract claim — the equivalent of investor claims. A classification the unions reject, he said.
“We understand Judge Rhodes’ focus on the welfare of the citizens of Detroit,” he said. “What cannot be lost in this focus, however, is that neither the city, nor its citizens are served by a broken pension promise to the abused police and fire employees. The corrosive effect of breaking, and thereby trivializing, pension promises are not in the interest or service of the city, nor its citizens.”
Orr’s plan can be amended in the coming weeks before the city and its creditors argue the details in bankruptcy court.