Update 5:00 p.m. from Rick Pluta:
Governor Rick Snyder has proposed committing up to $350 million to help mitigate cuts to Detroit pension benefits – as well as keep assets of the Detroit Institute of Arts off the auction block.
The state’s offer would play out over 20 years and would match money raised from private donations to make sure DIA paintings, sculptures, and other works of art don’t get sold off to pay pension benefits that are central to the bankruptcy negotiations.
“This is not bailout,” he said. “This is a settlement. I want to be very clear about that.”
Snyder said one of the conditions would have to be creditors dropping any legal claims to DIA asserts.
“This is not geared toward the bondholders, bankers, or people on Wall Street,” he said. “This is geared towards Michiganders that worked really hard in our state and have a pension and are looking at a difficult situation – how do we improve that situation?”
The governor says he hopes the state’s offer will help move the city through bankruptcy more quickly, which would be a good deal for the state.
The proposal must still be adopted by the Legislature. Republican leaders say hearings will begin very soon.
“We have some questions, some ‘t’s’ that need be crossed, some ‘i’s’ that need to be dotted, but in general is something that’s very positive and being received that way,” said state Senate Majority Leader Randy Richardville (R-Monroe). “So, we will consider it over the next few weeks. We will look in detail, and consider it as best we can.”
The governor’s offer came as Detroit bankruptcy judge Steven Rhodes refused to allow an evaluation of DIA assets to go ahead. Detroit’s creditors could still challenge the plan in bankruptcy court.
The state’s share would match contributions from private donors. It would come from money the state gets annually from the 1998 nationwide settlement between states and tobacco companies. The plan will be part of the governor’s budget proposal to be delivered Feb. 5.
Update 4:44 p.m.
Gov. Snyder and Sen. Majority Leader Randy Richardville (R-Monroe), and Speaker of the House Jase Bolger (R-Marshall) announced that they plan to support legislation aimed at saving Detroit pensions and DIA art.
From their press release:
Snyder, Senate Majority Leader Randy Richardville and House Speaker Jase Bolger announced they are working with the Michigan state legislature to allocate up to $350 million over the next 20 years to be combined with funds raised by private Michigan foundations to assist in saving retiree pensions. The governor recommends these state funds would come from tobacco settlement revenues...
“We are working on a fiscally sound mediation solution with clear conditions. We will not participate in a bailout, nor allow these funds to go anywhere other than directly to retiree pensions,” said Snyder. “This is an opportunity to work together to find solutions that will allow Detroit to get on a firm foundation faster, help pensioners, and ultimately save the Michigan taxpayers millions in the long run. I want to applaud the foundations for taking this unprecedented and generous step and the mediators for facilitating these discussions.”
Snyder said there would be "strict conditions on any funds allocated towards the settlement." Money from the state, he said, must solely go toward pensions and that "independent fiduciaries manage the pension funds going forward."
Detroit's emergency manager released a statement after today's announcement saying in part:
"The level of proposed investment by the philanthropic community and the State will go far in helping reach a timely and positive resolution of the City's financial emergency. A mutually agreed resolution to outstanding bankruptcy issues is the best way to help the City restore basic and public safety services to its 700,000 residents. It is now time for the remaining parties to set aside the bargaining rhetoric and step forward and join this settlement to help this great city regain its footing and become once again an attractive place to live, work and invest."
MPRN will have more for us later.
Many political deals have been dubbed a "grand bargain."
This "grand bargain" involves private money and potential state money to save Detroiters' pensions and the artwork at the Detroit Institute of Arts.
This morning federal mediators involved in the Detroit bankruptcy released a statement saying in part:
"We are advised that the governor of the State of Michigan, Rick Snyder, intends to announce soon his support for significant state participation in the plan to help protect the pensions of city of Detroit retirees, support the DIA, and revitalize the city in the aftermath of the bankruptcy. The governor has indicated that he will engage with the Michigan Legislature to help secure this support for the plan."
Gov. Snyder is expected to hold a press conference at 3:30 announcing more details of the plan.
He'll be joined by Sen. Majority Leader Randy Richardville (R-Monroe), and Speaker of the House Jase Bolger (R-Marshall). It's a sign that these legislative leaders are supportive of the plan.
Chief bankruptcy mediator Judge Gerald Rosen struck a deal with private foundations that pledged more than $300 million to help Detroit solve the pension/art problem.
With that money pledged, state leaders took note and are deciding whether to try to match the money pledged by the foundations.
Earlier reports stated that the plan calls for sending Detroit $350 million over 20 years.
We'll find out more details later today.
How Michigan legislators will react to this plan is anyone's guess. In their statement, federal mediators urged that "all parties approach the issue with an open mind."