Finance

Detroit’s Police and Firefighters Pension Agrees to Benefits Cuts

by | June 20, 2014

By Joe Guillen

Trustees of Detroit's pension fund for police and firefighters agreed today to urge workers and retirees to accept pension cuts as part of the city's plan to shed its massive debt in bankruptcy court.

The board will send letters to its 13,000 members next week urging a "yes" vote on ballots that are due by July 11 to a company in California that is counting votes.

With its approval, the police and fire pension board joins a coalition of worker and retiree groups that have endorsed the city's proposal to cut pension benefits as part of its overall restructuring plan.

Contributions from charitable foundations, corporations and others equivalent to $816 million have helped soften the cuts. But that money -- referred to as the "grand bargain" -- will not be available if pensioners reject the city's offer.

George Orzech, chairman of the Detroit Police and Fire Retirement System, said he voted to support the city's plan because it is the best offer available. Orzech said he still believes the state constitution protects pensions from being cut. But the federal bankruptcy judge overseeing Detroit's case ruled in December that pensions are a contractual obligation that is not protected in bankruptcy.

"The judge made a decision, which I believe is wrong, that pension benefits can be impaired," Orzech said. "I can't do anything about that. All I can do is go forward with how to prevent the impairment as much as possible."

The city's restructuring plan calls for police and fire pensioners' cost-of-living adjustments to be reduced by about 55% with no cuts to monthly pension checks.

Emergency manager Kevyn Orr has warned that cuts will be much worse if pensioners for either of the city's two retirement systems reject the city's offer because the $816-million pension deal will fall apart. The city's General Retirement System board of trustees voted to support the deal last week.

"We now have two strong votes in support of the plan of adjustment from the pension boards," Orr spokesman Bill Nowling said. "They understand that only with a 'yes' vote can retirees and actives benefit from the unprecedented $816-million grand bargain."

The Detroit Police and Fire Retirement System board of trustees today voted 8-3 -- with one trustee abstaining -- to adopt a resolution recommending a "yes" vote. Board Vice Chairman Mark Diaz, who also serves as the police officers' union president and is in contract talks with the city, abstained.

Trustee Matt Gnatek, a patrol sergeant, was among the trustees who voted against recommending a "yes" vote.

Gnatek said he refused to waver from his belief that pensions should not be cut.

"It's hard enough for these guys to survive on what little they have," he said. "I can't just agree to give up something that I know shouldn't be taken from us."

(c)2014 the Detroit Free Press

Join the Discussion

After you comment, click Post. You can enter an anonymous Display Name or connect to a social profile.

More from Finance