Effingham Daily News, Effingham, IL

Local News

December 5, 2013

Stakes now even higher for retirees in Detroit


Lightsey, 79, who worked in the water department and leads the Detroit Retired City Employees Association from her home in Southfield, said she doesn’t consider Rhodes’ decision this week as the last word.

Orr and his team “are ledger-driven, red ink, black ink people,” she said. “Retirees did everything they were supposed to do. They were not a drain on the system. They worked. They retired. Not one penny should be touched.”

Orr said he’s not heartless. He said he keeps a recording in his briefcase of uneasy retirees who spoke at a September court hearing.

“No one is more aware of the hardship that this is going to cause to a number of different people than me,” Orr told radio station WWJ on Wednesday.

But the reality, he added, is inescapable: “The city has no cash on hand to pay the magnitude of the debt we have.”

The narrow issue for the judge was whether Detroit met key steps to be eligible to stay in bankruptcy court and extinguish its debt. Rhodes surprised many by declaring public pensions are like any contract that can be broken in bankruptcy, even if states have protected them in their constitutions.

His opinion isn’t binding in any other case, but it at least cracks the door open for local governments or bankruptcy judges grappling with pensions elsewhere in the U.S. At least six states besides Michigan have some constitutional protections, according to the Center for Retirement Research at Boston College.

“He took a step further than anyone has yet. But it’s just a judge who is applying federal law and giving his opinion,” said Michael Sweet, a bankruptcy attorney who has advised local governments in California.

He believes Rhodes’ message has a pragmatic purpose for Detroit and lawyers representing pensioners: Get talking.

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