* "This is not a bailout"
Gov. Rick Snyder used the phrase “this is not a bailout” five times in the 26 minutes he used to announce the first details of a “grand bargain” to settle the Detroit bankruptcy and the fight over pension benefits.
The governor’s plan would commit as much as $350 million over 20 years to help dig Detroit out of bankruptcy and keep the assets of the Detroit Institute of Arts off the auction block.
The money would most likely come from what Michigan is getting from the national tobacco settlement, that 15-year-old cash cow that’s been tapped for college scholarships, economic development, Medicaid – the list goes on. And now it might be part of the Detroit bailout (but don’t call it a “bailout").
So, there’s this plan and a revenue stream to go along with it. Now, the governor just has to sell it to the Legislature.The Michigan Constitution requires every dollar that goes to the state to go through the Legislature’s appropriations process.
And we wouldn’t exactly call this a done deal or an easy sell. After all, this is an election year. And Republicans, especially those west of Lansing and north of Clare, have little reason to go along with a political hot potato like aid for Detroit. At least two Senate Republicans, probably more, are looking at primaries. Plenty of House Republicans are also looking over their shoulders for a Tea Party primary challenge. Politically speaking, there are probably more reasons not to do this than to do this.
But unlike, say, the governor’s efforts to get more road funding, this settlement plan cannot linger indefinitely. This bankruptcy is moving along and when the settlement is done, it’s done. This plan has a shelf life.
So how do the the governor and the Legislature’s Republican leaders make the case to the rest of their party? Well, how about ownership, to start? This governor and Legislature passed the law that put Detroit into emergency management and, ultimately, bankruptcy. If it succeeds, the GOP can claim credit for fixing problems created by 60 years of mismanagement in a city governed by Democrats. That’s a common Republican theme.
But an infusion of money? That’s not a classic conservative, Republican solution. So, a big part of the problem here is bringing Republicans to acceptance that there’s not a best solution. There is only the least-worst solution to this. The deal-closer might be this: The estimates are Detroit has somewhere north of $3 billion in pension liabilities. That’s what puts the assets of the city-owned art museum at risk. And let’s be honest, if those paintings, sculptures, and other cultural treasures were not in play, it’s doubtful we’d be having this conversation.
The argument to reluctant Republicans to close the deal might be something like this: Pouring money into solving a problem may not be conservative, but neither is assuming a giant debt. There is still that question hanging out there on whether the Michigan Constitution puts the state on the hook if the city can’t make its pension obligations. No budget-balancing conservative wants to go home and tell constituents how the Legislature allowed the Detroit controversy to blast a giant hole in the state budget.
And, then, there’s the sweeteners. Let’s suggest here that maybe it’s no accident of timing that the governor in his State of the State speech offered the Tea Party a big fat steak dinner when he endorsed a federal balanced budget amendment, and getting Michigan in line to help with that.
And, the governor has to do more than just convince his party. He will not cross the finish line with only Republican votes. For one thing, there are going to be a fair number of GOP lawmakers who are simply unpersuadable. This will require a bipartisan solution. And Democrats aren’t just lining up. Democrats will make some demands.
At the same time, House Speaker Jase Bolger says union concessions should be part of the package. "Union organizations themselves, through their reserves that were built in part through dues from these contracts that could not be afforded, should join in the effort to add dollars to minimize the very real impact on their members' pensions," Bolger said in a statement.
And, what might be demanded of the DIA, the pension funds, and the city to close the gap?
All kinds of reasons to say “no.” And Rick Snyder, the seasoned business negotiator, needs to get a critical mass of all those groups to say “yes."