Effingham Daily News, Effingham, IL

Local News

December 5, 2013

Stakes now even higher for retirees in Detroit

DETROIT (AP) — Shirley Lightsey’s phone keeps ringing. As head of a group of Detroit retirees, she’s trying to keep up with calls from anxious pensioners who fear their monthly payments are at great risk now that a judge says the bankrupt city can cut them.

Unions and pension funds are pledging to appeal a historic decision by Judge Steven Rhodes that found Detroit is broke and public pensions in a bankruptcy aren’t protected by the Michigan Constitution. Although union leaders have appealed, bankruptcy experts say it’s now a critical time to negotiate the best deal possible for 23,000 retirees and thousands more current employees.

Most city retirees have a pension of less than $20,000 a year.

“You’re talking about thousands of people who need to know what to anticipate six months from now, a year, 18 months,” said Melanie Cyganowski, a former bankruptcy judge in New York. “Can I live in the same house? Do I need to sell my house? Can I afford to live in a nursing home?”

An out-of-court deal would bring certainty, she said.

“You’ve bargained something and it will be there,” said Cyganowski, a judge for 14 years.

For months, Detroit’s emergency manager, Kevyn Orr, has said two pension funds are short by $3.5 billion, about 20 percent of the $18 billion in long-term debt that the city is trying to erase at a steep discount in bankruptcy court. Retirees are even more agitated because they still don’t know how much of a real hit they could face. Orr is expected to present a plan to settle all debts by early January, a way out that still would need the judge’s blessing.

Rhodes said he’ll be very sensitive to how retirees are treated, insisting he won’t “lightly or casually” approve any cut in benefits.

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