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Mon June 9, 2014
Why some Detroit pensioners' votes are worth more than others in the 'grand bargain'
Surprisingly, perhaps, the so-called 'grand bargain' to solve Detroit’s bankruptcy sailed through the Legislature.
Now, there is nothing to do but wait.
Remember election nights in the old days, and staying up all night to find out who had won?
Well, we’ve got something like that again where Detroit is concerned, except this election night will last more than a month.
The Detroit bankruptcy settlement now depends on the votes of 32,000 city workers and retirees. We won’t know the final result until July 11 or later. These folks are being asked to agree to have their pensions cut, and promise not to sue.
Many retirees are also being asked to pay back some annuity savings money they were improperly credited with.
They are being asked to do something hard to understand that will make their lives harder, but if they don’t do it, the experts say their pensions will be even smaller and their lives worse.
What is clear is that if the workers and retirees vote no, the entire carefully calculated structure of the bankruptcy settlement falls apart. All the money raised by the state and private foundations for the grand bargain goes away.
To quote Kevyn Orr, Detroit’s emergency manager, “if that money goes away, we are talking about severe cuts. We are talking about predators being unfettered in their number of attempts to get at every asset of the city.”
If the pensioners vote 'yes,' the Detroit Institute of Arts will be spun off from the city and protected forever from attempts by the city’s creditors to recapture their money by selling off the art.
If they reject the agreement, there are no guarantees, so there is a lot at stake here. Just figuring out the results will be terribly complex.
This isn’t just a straightforward vote.
First of all, there are two different classifications of city workers and retirees. One is the public safety officers, whose pension was in better shape. They are only being asked to agree to cut their annual cost of living to no more than 1% a year.
Then, there are those in the general retirement system, who are almost two-thirds of the total. They are being asked to cut their pensions by 4.5%– and give up any cost of living changes.
That means if even moderate inflation returns, the value of their pensions will dwindle, fast. A majority of those voting in both classes have to approve lowering their pensions.
Plus, there’s another huge wrinkle. Not only do a majority of those voting have to approve this deal, the votes aren’t all equal.
The votes of those whose pension accounts have more money in them are more important than those who have less. In the end, the 'yes' votes have to come from people whose pensions have at least twice as much value as those of the people voting 'no.'
This election is far more complex than the Electoral College, and the winner will have to be calculated by computer.
When it comes to Detroit, it seems nothing is ever simple.
Now there is a bankruptcy solution on the table, and for the next month, we can only stand and wait.
Jack Lessenberry is Michigan Radio’s political analyst. Views expressed in the essays by Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.
Politics & Government
Politics & Government