Detroit pension cuts regrettably necessary
Bankruptcy is a painful thing, for individuals, companies and, although not as common, cities. Sometimes unfortunate – but necessary – measures are needed for a return to solvency.
City workers and retirees in bankrupt Detroit Monday approved pension cuts in a landslide following two months of balloting.
There still will be an August trial to determine if Detroit’s overall bankruptcy plan is fair and feasible to creditors.
However, the landslide decision is encouraging in that people want Detroit to emerge stronger financially. General retirees, who accepted the changes with 73 percent of ballots in favor of the cuts, would see a 4.5 percent pension decrease and lose annual inflation adjustments.
Retired firefighters and police officers, 85 percent of whom voted “yes,” would be out a portion of their yearly cost-of-living raise.
There are tens of thousands of creditors in Detroit’s $18 billion bankruptcy, the largest municipal insolvency in U.S. history.
Obviously, it’s going to take a lot of effort for the city to emerge from its long-term obligations. Gov. Rick Snyder said Tuesday Detroit’s future is “increasingly brighter” despite the difficult choices being made.
The average annual pension for police and fire retirees is $32,000, while most other retired city workers receive $19,000 to $20,000. The cuts obviously represented a difficult decision for at least some of those retirees.
Plus, had they rejected the plan, they might have risked even more severe cuts.
They are to be applauded for acknowledging Detroit’s challenging financial scenario and helping the city move forward.