Detroit retirees wonder how bankruptcy will affect benefits

Jul 22, 2013

 

A federal bankruptcy court now will be the scene for some colossal decisions about the future of Detroit – which filed for Chapter Nine protection last week. One of the key issues is whether retirees will see their benefits cut – something the city’s emergency manager says is now “a question of necessity.”
 
Peggy Dankert lives on the far west side of Detroit. She retired from the city’s EMS department about four years ago, after more than 26 years. Dankert says she’s not happy her pension could be on the chopping block in bankruptcy court, right alongside bondholders’ investments.
 

“I can’t buy insurance on my pension benefits like buy insurance on their bonds. So I don’t think they should be treated the same.”

Dankert's monthly pension check is about $3400 a month. That’s almost double the average pension for someone who’s not a police or fire retiree. Retired cops and firefighters have even better pension deals because they’re ineligible for Social Security.

“So I don’t really have that buffer should benefits get cut. My only option is to find employment. John Mlynarczyk retired in 2006 as a police commander. He says at 62, finding new work won’t be an easy proposition. And Mlynarczyk says it’s not just the potential bite out of his pension check that hurts.
 
“Couple the distress of cutting pension benefits with eliminating health benefits and getting taxed by the state of Michigan last year by our honorable governor last year who saw fit to balance the budget on the backs of retirees, and it’s a big hit to a lot of us.”
 
But Michigan’s governor, and emergency manager Kevyn Orr say at more than $9 billion in unfunded retiree benefits, the city is just out of options. Ronald King, an attorney for the pensioners, disagrees – and is arguing in state court that Michigan’s Constitution protects those benefits.

“Maybe the courts will disagree with us, but there is a constitutional protection in place that protects accrued pension benefits. And we have an obligation to at least play that out.” Sheila Cockrel is a former pension board member, and a former Detroit City Council member.

“This question of public sector pensions is not a Detroit issue. It is an issue throughout the United States of America.” She says she hopes provisions are made for the most vulnerable retirees. But she says she doesn’t see a way out of the cuts.

“Is it fair, no. Is it good, is it right? No! But if we want this city to take the huge potential that does exist here… for the city to come back, there’s going to have to be huge sacrifice.” There are about 21,000 retirees collecting pensions from Detroit. They’ve been told that for the next six months, those payments will remain untouched. After that, it should be a lot clearer just how much sacrifice for pensioners there will be.