Commentary: Are Pensions Sacred?

Jun 19, 2013

We didn’t have an early spring this year, but it looks like an early summer. I say that because while it is still technically spring, the authorities are already engaged in what has been a late summer Michigan ritual, digging up a field to look for Jimmy Hoffa.

Usually, it strikes me as strange that this case still gets so much attention, but this year we’ve been so overwhelmed with news from Detroit that we probably need a little escape.

But whether or not they find Hoffa’s bones, something is happening below the radar in Detroit that could have nationwide implications.  Detroit Emergency Manager Kevyn Orr has met with the city’s creditors. Tomorrow, he is going to meet with pension fund executives and union leaders who represent thirty thousand city workers and retirees.

The emergency manager wants them to agree to getting less money, because the city owes so much in pension fund payments it promised to make, but can’t.

Retirees and their representatives are indignant at the thought of losing any of the pension money they have counted on all their lives. They are unlikely to be willing to take the kind of cuts that the emergency manager is going to ask them to.

And if that’s the case, all this could very well wind up in federal bankruptcy court, where the judge’s ruling could establish a precedent that could have earth-shaking nationwide effects.

The dilemma is this: Michigan’s constitution does protect public employee pensions. But in federal bankruptcy court, a judge can order changes in pensions or force the sale of assets

There’s also a strong tradition in this country that federal law is always superior to state law, and when the two are in conflict, federal law always prevails. That’s what Kevyn Orr, an attorney who has specialized on bankruptcy, is counting on, if it comes to that.

If the unions are dragged into bankruptcy court and a federal judge rules that pensions are nothing but one more unsecured debt that can be cut or canceled, this will obviously have tremendous implications nationwide.

For Detroit is hardly the only city with pension funds that are less than fully funded. There may certainly be issues of fairness here. Richard Mack, a union attorney, said to the Detroit News. “Why should they cut the people who’ve got a guaranteed right to the benefit and …financially can’t afford it, verses an investor who probably is in a much better position to take a cut?”

You can see his point. But compassion and equal justice under law are not always the same. Some Detroit workers were able to retire in their early 50's and enjoy their pensions in the suburbs. There’s something wrong with that too. What’s clear is this. The city made promises it is never going to able to afford to pay. But nobody wants to risk a federal judge saying, “Sorry, you have no legal recourse to get the money you were told was coming to you.”

Life is often unfair, but the essence of civilization is in trying to make it less so. Nobody knows how this will all play out. But let’s hope that somehow, the city and the unions can craft an agreement.

Otherwise, we may end up in really scary territory indeed.

Jack Lessenberry is Michigan Radio's political analyst. Views expressed in the essays by Jack Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, the University of Michigan.