Retirees on edge as Detroit bankruptcy cuts loom
Print Edition
Thousands of pensioners already struggling to get by are afraid they will be pushed into poverty if the United States city of Detroit is able to slash their benefits in a bankruptcy court.
Retired fire chief Jerry Franklin Smith spent 39 years battling blazes in a city filled with abandoned buildings and too many arsonists. He’s worried that if a bankruptcy judge allows the city to wipe out its obligations to his pension fund he’ll need to somehow find a job at the age of 78.
“I’ve only done physical things all my life. But I really can’t do them anymore,” Smith said. “It makes you nervous.”
Police and firefighters don’t qualify for the federally-run Social Security pension plan, which has an average payout of US$1,268 a month. So their city-run plan is the only thing keeping them out of food banks or even homeless shelters.
Luckily it is better-funded than a separate plan run for Detroit’s other municipal workers. But it is still owed millions and the city is hoping to slash all pension and retiree health care benefits in order to wipe out debt and reduce future costs.
Emergency manager Kevyn Orr was in court last Friday urging a federal judge to find the city eligible for bankruptcy in the second such hearing since the birthplace of the US auto industry became the largest US city to go bust on July 19.
Orr has estimated that about US$9 billion of the city’s US$18.5 billion debt is owed to the pension funds and retiree health care benefits of the city’s 10,000 workers and 20,000 retirees.
Unions and pension administrators dispute his calculations and have filed suit to block any significant cuts, noting that pension benefits are protected by Michigan state’s constitution.
“Governor (Rick) Snyder has taken an oath to protect every aspect of our constitution, thereby he would be violating said oath should he fail to protect our pensions,” said Mark Diaz, president of the Detroit Police Officers Association.
The legal fight could drag on for months or even years, leaving city workers and retirees who’d planned their lives around those previously fixed payments in limbo.
Carol Conner, 63, has already seen her modest monthly stipend shrink after the city imposed higher fees for retiree health care benefits.
“How am I supposed to get by?” asked Conner, who lives on Detroit’s crime-ridden east side on a monthly pension comes that currently comes to less than US$1,600.
Conner, who retired from her position as a building attendant to care for her 83-year-old mother, said she is among many Detroiters who turned to the city as a job of last resort.
The pay wasn’t very good, but she needed a job and health care benefits after a long spell of unemployment. Conner worked at Chrysler and General Motors — which were successfully restructured under bankruptcy protect in 2009 thanks to billions in help from the federal government — but was downsized before she could qualify for a pension from either automaker.
Once a bustling beacon of industrial might, the Motor City is now a poster child for urban decay, its landscape littered with abandoned skyscrapers, factories and homes.
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