Finance

Michigan Governor's $350M Pledge to Save Detroit's Art, Pensions 'Not a Bailout'

by | January 22, 2014
People survey a Diego Rivera painting at the Detroit Institute of Arts.
People survey a Diego Rivera painting at the Detroit Institute of Arts. David Kidd/Governing

By Paul Egan and Kathleen Gray

The state of Michigan would pledge $350 million over 20 years to help settle the Detroit bankruptcy, with the money going to Detroit retirees, as part of a plan to help city pensioners and the Detroit Institute of Arts, Gov. Rick Snyder said Wednesday.

"This is a settlement; this is not a bailout," Snyder said at a news conference.

The governor said the money would come from the state's tobacco settlement funds and would be conditional on "independent fiduciary management" of Detroit pension funds. It also would have to be part of a settlement of the bankruptcy that ended court cases, he said. And he said that by pledging it as part of an overall settlement, the state would head off what could be years of costly litigation. "Let's put this behind us so we don't have ongoing lawsuits ... so we all can focus on growing Detroit," Snyder said.

The state money "will not make retirees whole but it will significantly reduce the burden they would otherwise face," Snyder said, flanked by GOP legislative leaders.

Snyder was joined at the news conference by Senate Majority Leader Randy Richardville, R-Monroe and House Speaker Jase Bolger, R-Marshall. Both pledge support for the plan, which requires approval of the Legislature, but acknowledged it may not be an easy sell. Bolger said he and other legislative leaders have taken on tough fights before.

Snyder pitched a plan to lawmakers last week for the state to pledge about $350 million over 20 years to roughly match a $330 million commitment foundations made under a deal Chief U.S. District Judge Gerald Rosen brokered to assist both the DIA and pensioners.

Snyder met Tuesday with what's known as the Quadrant: Richardville and Bolger; Senate Minority Leader Gretchen Whitmer, D-East Lansing, and House Minority Leader Tim Greimel, D-Auburn Hills.

Lawmakers expressed high hopes and skepticism this morning.

Richardville told the Detroit Free Press that he saw the proposal for the first time Tuesday, and "I think it's worthy of talking about."

"I'm going to be meeting with my caucus this afternoon," Richardville said. "There will probably be some sort of legislative action necessary. ... We haven't agreed to anything, except that we will take a look at it. I think it's worth considering."

Richardville said his caucus "doesn't want anything to do with a bailout" but is interested in talking about "getting them out of bankruptcy."

"We could be talking about something that could help individuals who may live in Detroit," Richardville said.

"When you talk about retirees, you talk about people who get pensions and health care who worked all their lives in Detroit" but don't necessarily live there, he said.

"I saw the proposal. I like the proposal; it does a lot to help people out."

Asked about strings attached to any deal, Richardville stressed the importance of paying off long-term debts so such a financial crisis doesn't arise again.

"Whatever we can do to help, we will help," Richardville said. "But there is no such thing as a bailout; it doesn't exist in our language. We will look at specific pieces, especially if it has to do with employees who are retired."

( State Sen. Rick Jones, R-Grand Ledge, said he's "not prepared to vote for mid-Michigan tax dollars to go to Detroit."

"I represent mid-Michigan, and my taxpayers want money to go to our roads and our schools and our cities and townships," he said. "I also worry about setting a precedent. If we do this bailout for part of Detroit's problems, who's next?"

State Sen. Roger Kahn, R-Saginaw, chairman of the Senate Appropriations Committee, told the Free Press that there is "lots of optimism" about an agreement.

"The governor wants to do this. The (Senate) majority leader wants to do it. The speaker (of the House) wants to do it, and the folks in the minority want to do it."

However, "I just don't see how it works," said Kahn, who added that he wanted to hear the details from Snyder. "I would like to be wrong."

The overall funding plan being discussed, which would include the state support and the money pledged by the foundations, is intended to limit cuts to the pensions of Detroit retirees and prevent a sell-off of DIA artwork. It would require the approval of U.S. Bankruptcy Judge Steven Rhodes.

Kahn said he's concerned that if the plan raised $1 billion, it wouldn't be enough to make a significant difference in settling Detroit's debts. He's not sure a judge would sign off on such a plan, and he's not convinced it would prevent a lawsuit over pension money filed by unions representing city employees and retirees.

(c)2014 Detroit Free Press

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