Concerned with just how hard Detroit has fallen as a result of its financial issues and declaration of bankruptcy last July, the Michigan Legislature recently proposed 11 bills that specifically outline how to keep Detroit in check, including the creation of a seven-member board to oversee the city’s pensions and finances for at least the next 20 years.
Introduced last Thursday, the 11 bills were scheduled to be heard for the first time during a committee hearing on Tuesday morning, with Detroit’s Emergency Manager Kevyn Orr testifying in favor of the legislation. Two additional hearings are planned for later this week.
While the bills have mostly been applauded by the state’s Republican Gov. Rick Snyder and the Wall Street-tied Orr, some left-leaning lawmakers have expressed concerns about some aspects of the legislation — such as the formation of the financial oversight board — since no one from the Detroit City Council would be appointed to the special commission or have a say in who does find themselves on the board.
“Twenty years from now, or even five years from now, this board should not have the same level of oversight that it might have next year,” said Detroit Councilwoman Saunteel Jenkins. “At some point soon, the city of Detroit needs to be returned to a fully democratic government, meaning the people that the residents of the city of Detroit elected to run this city should be able to run this city.”
The city’s Democratic Mayor Mike Duggan hasn’t commented publicly on the plans, but as a new statewide poll revealed, 62 percent of Michigan voters support the $350 million funding package for the city, regardless of where they identify themselves on the political spectrum.
A majority of voters said they wouldn’t hold a vote in favor of financial aid for the city against their representative even if they themselves didn’t necessarily agree with the financial assistance, as several other cities in the state are now finding themselves in similarly dire financial straits.
While the consensus in the state is that Detroit needs help, there is some disagreement on how to best assist the struggling city.
Under the current 11-bill proposed legislation, the city’s roughly 30,000 retirees and city employees would have their pensions cut by 4.5 percent and lose all cost-of-living payments. Retired police officers and firefighters would only lose their cost-of-living payments — but that’s in addition to the pay freezes, pay cuts and reductions in health care benefits many of these people have already endured.
Given that these employees already earn as little as $19,000 to $20,000 per year — about $833 per bi-weekly paycheck — a 4.5-percent cut could be devastating. But since their pay is coming from the state’s “rainy day” fund, many are thankful they have a paycheck at all.
Though there is a possibility the money lost could be returned to employees over the years if the city is able to restore money to its pension funds, there’s also a chance that the pay cut public employees receive would be higher than the 4.5 percent that is currently being proposed.
Donald Smith, 69, is a retired city employee who spent 29 years working in parking enforcement and as a civilian for the Detroit Police Department. He earns about $889 per month from his pension. Though the 4.5-percent cut would be hard for Smith, he and many other city employees say they are inclined to vote in favor of the cuts because state officials have warned that the cuts could be worse and have said that the Detroit Institute of Arts could be shuttered if the employees don’t agree to the cuts.
“I’m still in limbo — I don’t understand how we can vote without something concrete,” said Smith. “At this point, I can’t make an informed decision. If it was 4.5 percent and everything was locked up. I’d probably be inclined to do it. … It doesn’t seem like a fair vote.”
In addition to the public employees, creditors — including big banks — will vote on the plan to cut public employees’ pensions. Ballots are to be mailed out this week and are due by July 11. Orr’s plans to restructure the city’s debt will then be presented in court and Judge Steven Rhodes will rule on whether the plan is lawful or not by the end of September.
Tina Bassett, a spokeswoman for the general services pension fund, said there will be four informational meetings — including two that will be streamed online — next month to provide as much information as possible on how this plan will work and affect employees.
Though officials with the general services pension fund applaud the pension cuts plan, Bassett said officials will not campaign to pass the measure during the informational meetings, likely since Bassett herself recognizes that the plan is “a leap of faith” and dependent on state funds being available for Detroit.
Other proposed legislative changes include prohibiting the Detroit Institute of Arts from renewing its tax millage when it expires in 2023, since the art museum is now privately owned, and setting up newly hired city employees with 401(k) plans instead of pension plans.
Lawmakers are now writing the legislation in a way that makes the laws applicable to any Michigan city struggling with finances — not just Detroit — so it’s not known how the legislation may change throughout the week.