The Equity Factor

Detroit Emergency Manager Reverses Course On Pension Freeze

On Monday, Detroit Emergency Manager Kevyn Orr lifted a freeze on the city’s non-uniformed pensioners to give them a chance to negotiate their underfunded benefits.

This is your first of three free stories this month. Become a free or sustaining member to read unlimited articles, webinars and ebooks.

Become A Member

Detroit Emergency Manager Kevyn Orr quietly issued a freeze on non-uniform city pensions on December 31, leaving some 5,600 workers with a bitter New Year’s gift. But late on Monday, hours after the Detroit News first reported Orr’s freeze, he lifted it — at least temporarily — at the urging of U.S. District Judge Gerald Rosen, who is mediating the city’s bankruptcy negotiations.

Orr wants to give pensioners and unions a chance to negotiate in the mediation sessions what is said to amount to $3.5 billion in underfunding. The state-appointed emergency manager said that though he has halted the freeze on pensions, he can reinstate it at any time if mediation doesn’t reach an agreement. (The temporary freeze applied to the city’s general retirement fund, not to fire and police.)

“The city remains in a financial emergency, and to the extent that mediation can assist in finding a way to improve services for all of its 700,000 residents, then it is worth continuing,” Orr said in a statement. “But time is running short, and the city’s financial status remains dire. An additional delay without the prospect of a mediated solution threatens to further erode essential services and public safety.”

Detroit is in an uncharted and autonomous world when it comes to pension reform. Because the city has declared for Chapter 9, Orr can simply freeze pensions or slash benefits if he so desires. The pensions are strongly guarded by the Michigan state constitution, but the ironclad protection doesn’t hold up in bankruptcy court. Orr explained his reasoning behind freezing the non-uniform pensions, saying it “will enhance the city’s capacity to provide or cause to be provided necessary government services essential to the public health, safety and welfare in addition to rectifying the city’s financial emergency.”

There won’t be a resolution anytime soon, though. That Polar Vortex hovering over the Midwest has postponed today’s bankruptcy hearing until next week.

The Equity Factor is made possible with the support of the Surdna Foundation.

Like what you’re reading? Get a browser notification whenever we post a new story. You’re signed-up for browser notifications of new stories. No longer want to be notified? Unsubscribe.

Bill Bradley is a writer and reporter living in Brooklyn. His work has appeared in Deadspin, GQ, and Vanity Fair, among others.

Follow Bill

Tags: detroitequity factorunionspensionsbankruptcy

×
Next City App Never Miss A StoryDownload our app ×
×

You've reached your monthly limit of three free stories.

This is not a paywall. Become a free or sustaining member to continue reading.

  • Read unlimited stories each month
  • Our email newsletter
  • Webinars and ebooks in one click
  • Our Solutions of the Year magazine
  • Support solutions journalism and preserve access to all readers who work to liberate cities

Join 1099 other sustainers such as:

  • Gabby at $5/Month
  • Abigail at $10/Month
  • Gloria at $5/Month

Already a member? Log in here. U.S. donations are tax-deductible minus the value of thank-you gifts. Questions? Learn more about our membership options.

or pay by credit card:

All members are automatically signed-up to our email newsletter. You can unsubscribe with one-click at any time.

  • Donate $20 or $5/Month

    20th Anniversary Solutions of the Year magazine

has donated ! Thank you 🎉
Donate
×