Budget surplus ignites fight for Detroit retirees

Nicquel Terry, and George Hunter
The Detroit News

Detroit — The city’s $63 million budget surplus has become a bone of contention between municipal retirees and city officials.

Retirees insist they deserve a share of the surplus to make up for hits they took to their pensions and other benefits during the city’s bankruptcy three years ago.

The city’s chief financial officer says that’s not possible because the extra money needs to be set aside to cover future pension obligations.

And while the two sides debate how those extra funds should be spent, retirees like Clifford Kleszcz struggle to make ends meet.

Kleszcz got a duty disability retirement from the Detroit Police Department in 2015 after two knee surgeries and a diagnosis of post-traumatic stress disorder.

“I sacrificed my body and well-being for the people of this city, and now I can’t pay my bills because we gave up so much in the bankruptcy,” said Kleszcz, 50, who is moving from Dearborn Heights to Arkansas because the cost of living is lower there.

“When they needed us to sacrifice during the bankruptcy, we did our part,” Kleszcz said. “To hear the mayor bragging about having a surplus of millions of dollars after everything we gave up — and they’re not offering us any of it — it feels like a slap in the face.”

Thousands of retirees saw their pensions cut by 4.5 percent in 2014 after the city filed for bankruptcy. The city slashed $7.8 billion from payments to its retired workers and escaped $4.3 billion in retiree health care costs.

The city’s administration said there’s no way to restore pensions because Detroit must set aside funds each year for the Retiree Protection Fund to address a looming pension shortfall in 2024.

“It really isn’t (a possibility) at this point and it isn’t in the foreseeable future,” CFO John Hill said. “We are taking some of the surpluses now and using them to put money away so we will be able to honor our pension obligations that are already set in the future.”

The Retiree Protection Fund would gather interest and investment earnings so that by 2023 it would have $377 million to help manage massive payments the city must begin contributing in 2024.

The administration proposes the general fund contribution to the protection fund would be $15 million in fiscal year 2018, $20 million in 2019, $45 million in 2020, $50 million in 2021, $55 million in 2022 and $60 million for 2023.

That doesn’t sit well with members of the Detroit Active and Retired Employee Association, who flooded a June City Council meeting, wearing T-shirts bearing the message: “Hands off my pension.”

At the meeting, the group urged the city’s leadership to use its surplus to restore their pensions to pre-bankruptcy amounts.

“We took the brunt of the bankruptcy and we expect a return so we can live pleasantly in our golden years,” said Cecily McClellan, who retired in 2012 from the city’s Human Services Department.

William Davis, president of the Detroit Active and Retired Employee Association, said he is fed up with city leaders touting Detroit’s success without restoring retiree pensions.

Davis said his monthly pension is $1,000 less than it was before the city’s bankruptcy. That loss includes the 4.5 percent cut, another 2.5 percent cut from prior cost of living raises and the 15.5 percent Davis said he had to pay back from his annuity savings plan.

Davis said he believes the city’s surplus could help restore at least a portion of the pensions.

“It’s amazing how they find money to give millionaires and billionaires all these tax breaks,” Davis said. “The people who say they are going to do things don’t even live up to the agreement and there’s no penalty for it.”

Hill said it would also be unfair to restore pensions for retirees when other parties were also affected by the bankruptcy. For example, banks and bondholders were forced to take concessions.

Hill said tax breaks are critical for economic development and job creation in Detroit.

“One big issue the mayor is trying to address is making sure that all Detroiters who can work have a job,” Hill said.

Sheila Baker, a 2008 retiree from the Detroit Department of Transportation, said she took enough concessions as a city employee, giving up raises for several years.

Now, Baker said she is not only struggling with a pension that’s lower than she expected, but her health insurance costs have soared from $73 to $412 a month.

“A crime was committed against all of our retirees,” Baker said. “We are asking for consideration to our pensions. Each and every day, we suffer.”

Councilman Gabe Leland said he was committed to finding ways to compensate the retirees for their pension losses.

“Pensioners have a huge place in my heart,” Leland said. “We have asked our policy division to work with us to figure out how we could give that money back.”

Mark Young, president of the Detroit Police Lieutenants and Sergeants Association, said police and other municipal retirees are being treated unfairly.

“There are a lot of people out there really hurting right now,” Young said. “It’s sad when the city asks people to do their part, but the city doesn’t step up to do their part.”

Kleszcz said he recently hurt his arm fixing his sink. He said he was billed $10,000 through United Healthcare Golden Rule just to get the torn ligament diagnosed.

“I can’t even think about actually getting my arm treated, because I can’t even afford to pay the cost of having it looked at,” he said.

“So I’ve just resigned myself that my arm is going to hurt all the time, and there’s nothing I can do to get it fixed,” Kleszcz said. “I worked hard to protect the citizens of this city, and this is the way the city government pays me back. That’s just wrong.”