The British news website The Guardian has a story regarding Detroit’s bankruptcy and the impact on pensioners. It does a good job of explaining the fear that individuals who served the City of Detroit have in losing pension income.
In the coming weeks and months the bankruptcy court will have to address these issues. Bankruptcy lawyers on both sides are already preparing for the debates. Detroit’s bankruptcy lawyers will argue that all unsecured creditors must be treated the same under the bankruptcy code. Pension bankruptcy lawyers will argue that it is unconstitutional in the State of Michigan to cut city pensions.
This is David Allen’s second visit to Engine 40’s fire station on Detroit’s west side since February 2012 when a wall collapsed on him during a fire leaving him unable to walk without an aide. Last time he was here to clean out his locker. This time, as Detroit careens towards bankruptcy, he is back to talk with colleagues about their prospects.
Detroit’s firefighters are used to danger and loss. The crew laugh and rib each other and Allen as they get ready to eat. But this time they are facing something other than fire. Beneath the camaraderie there is anger and fear.
Allen and his colleagues are among 30,000 Detroit city workers, past and present, who are about to learn what will happen to their pensions and healthcare if the city is allowed to file for a historic bankruptcy – the largest of its kind in history.
A decision could come as early as this week and will be logged by other struggling US municipalities. It is likely to have a profound effect on workers across the entire country.
Detroit has always been ahead of the curve. The birthplace of the automotive industry, Detroit revolutionised travel and created a middle-class army of skilled workers. Now it is forging ahead again, this time into darker territory. What happens to a city that promised its residents so much and now can not, or will not, deliver?
Allen, 50, has seen his wages slashed since his accident. He has got a pension of $3,000 (£1887) a month, for now, down from the base pay of $4,700, before overtime that could have added thousands more. He is unsure how much more cash will go if the bankruptcy goes through.
One proposal gives the city’s 21,000 retirees 16 cents for every dollar. That would leave Allen with $480 a month.
Next year he faces a new dilemma. The city is offering him $200 a month to find his own health insurance. He has physical therapy three times a week for injuries that have left him with seven fused vertebrae.
“I don’t even dare look online to see what it would cost. Someone told me it would [cost] thousands. Plus, I have two kids. One of them broke his finger last week playing basketball. A little accident like that could ruin everything,” he says. “I knew this was a dangerous job when I took it. They told me it would take 10 years off my life. If I had to do the same thing again, I would. But the city promised me something. They promised me a pension and healthcare. I put my life on the line, then they changed the rules.”
The fire station crew are worried and looking for answers.
“This has to be illegal,” says Verdine Day, a firefighter who is running for president of the local union. “There’s a federal disability act. Can the city just ride over that? At some point we have to stand up and fight.”
The Guardian: http://www.theguardian.com/world/2013/nov/13/detroit-bankruptcy-pay-pensions-banks
