When Detroit filed for protection under U.S. bankruptcy law, there were many negative reactions, one of the biggest being the opposition from the city’s pension funds.
They argued that the approval of Detroit’s suggested plan of reorganization would put the funds in financial jeopardy and result in the slashing of benefits for their members.
Michigan Gov. Rick Snyder has recently suggested a solution to try and win over the pension funds. According to Forbes, Snyder has pledged $350 million in state money, to be paid over 20 years to save the at-risk pensions for around 24,000 retirees in Detroit. The goal of this proposal is to help the city’s bankruptcy plan get approved more quickly, since winning over the pension funds would eliminate one of Detroit’s biggest opponents in bankruptcy court.
“Let’s put this behind us so we don’t have ongoing lawsuits … so we all can focus on growing Detroit,” said Snyder.
He added that this money won’t make retirees “whole,” but it could significantly help the burden that would be placed on these people if there wasn’t this type of financial aid available.
If this deal is agreed upon, there will be one less issue facing this bankruptcy filing; however, there are still a number of other obstacles, according to the Detroit Free Press.
First of all, the proposed state funding must be approved by the Michigan legislature in which many lawmakers oppose this financial bailout. Also, the Detroit pension boards need to agree to certain management changes required by Gov. Snyder. Unions, retirees and other parties also have to sign off on a deal to forgo any further litigation. In sum, Snyder’s proposal is welcome, but many “players” have to be brought on board before the deal can sail.
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