The Michigan Attorney General Bill Schuette stated that he will file an appearance in Bankruptcy Court on behalf of pensioners in the City of Detroit’s bankruptcy case. The Attorney General will argue that the Michigan Constitution does not allow adjustment of City pensions.
“Michigan’s constitution, Article 9, Section 24, is crystal clear in stating that pension obligations may not be ‘diminished or impaired,’ ” Schuette said.
Schuette called Detroit’s $18 billion-$20 billion in debts and liabilities “simply staggering.”
However, “equally staggering is the financial uncertainty of pension benefits relied upon by Michigan seniors living on fixed incomes and anticipating a safe and secure retirement after a lifetime of work,” he added. “Retirees may face a potential financial crisis not of their own making, possibly a result of pension fund mismanagement.”
This has sparked much debate over the juxtaposing positions taken by the Michigan Governor and Michigan Attorney General, both Republicans.
It will be interesting to see how the Attorney General addresses the supremacy clause issue. While the Michigan Constitution provides pensions may not be altered, the U.S. Constitution in Article I, Section 8, allows for Congress to write all laws regarding bankruptcy. In the case that Federal bankruptcy law conflicts with a state law or constitution, the Federal law shall ordinarily take favor. It will be note worthy to watch as this debate develops in U.S. Bankruptcy Court and the statutes and case law cited by the Michigan Attorney General to support his argument.
