In Detroit’s Bankruptcy, City Retirees Are the Ones Who Lose

Detroit’s currently ongoing bankruptcy trial — the largest municipal bankruptcy in history — will have consequences for all the city’s residents. But none more so perhaps, than, the city of Detroit’s retirees.

According to a September 17 USA Today article, even the Detroit Retiree Commission has voiced its support toward the city’s decision to make the pension cuts it proposed in its bankruptcy exit plan.

Unlike a Chapter 13 bankruptcy, which allows the filer to keep their property after creating a plan to repay most of their debts, Detroit’s bankruptcy will require more drastic sacrifices to be made in exchange for a chance at financial stability and revitalization.

The city’s retiree commission initially opposed Detroit’s proposal to make these pension cuts, saying that pensions for former city employees are constitutionally protected. However, the commission changed its mind after witnessing the commitment of Detroit’s leadership to improve the city, USA Today reported.

“Part of the test of whether Detroit’s plan would be successful was whether Detroit could be able to revitalize itself,” Ron Bloom, a member of the Detroit Retiree Commission, said. “Anything we put forward, we had to feel in good faith was consistent with Detroit being able to revitalize itself. The city was dysfunctional. We didn’t like what they had to say often, but we felt their commitment to revitalization was sincere.”

Under the terms of Detroit’s bankruptcy, city pensioners will take a 4.5% cut to their monthly pension checks, in addition to an elimination of cost-of-living adjustment for these checks, according to USA Today. Former police officers and firefighters, meanwhile, will take no reduction to their monthly checks, but will have a reduced cost of living adjustment from 2.25% to 1%.

So while Detroit may be able to pull itself out of bankruptcy eventually, it will largely be at the expense of the residents who put in decades of work to keep the city running.

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