Well, the shoe finally dropped last Friday, or maybe it was a hammer. At any rate, we now know the details of Detroit’s proposed bankruptcy “plan of adjustment,” and they include pension cuts. Pretty massive pension cuts. Most pensioners would see their monthly checks cut by 34%. Police and fire retirees, whose pension fund is in better shape, lose 10%.
For many, this would be devastating. Devastating, and unfair.
There’s no doubt that Detroit’s pension funds were poorly managed. There’s also no doubt that the city was too liberal in its pension policy.
There are some folks who spent 30 years in a low-stress clerical job, and then were able to retire, move to Florida and collect a pension for life starting at age 52. That policy doesn’t make any sense even if the city of Detroit could afford it, and it never could.
My guess is that in the future, there won’t be any pensions for new city workers, just a defined contribution savings plan.