The Norman Transcript

Columns

December 7, 2013

Pensions slash a crisis

NORMAN — The latest news out of Detroit isn’t good. To get its fresh start, this once great but now bankrupt city is going to stick it to municipal employees and retirees.

City retirees there haven’t enjoyed exactly lavish pensions, but what they had was thought to be secure, protected under the state’s constitution. That was until this week, when a federal judge ruled that guarantee void.

This has bad implications for Detroit, and for public employees everywhere.

Federal Judge Steven W. Rhodes ruled that federal law trumps Michigan’s constitutional protection for public pensions. That means that pensions that were promised to more than 21,000 Detroit workers — fire and police, trash haulers, water and street crews — can now be considered as part of the unsecured debt of the city.

To put it in human terms, the public librarian who worked 30 years checking out books, helping countless youngsters learn to read, might see her pension slashed. That might mean this fixed income retiree won’t be able to pay her mortgage or heating bill each month.

According to Detroit Free Press, general city retirees receive about $19,000 in average pension benefits. Police and fire former employees get about $32,000, but they are also not eligible for Social Security benefits as part of their pension agreements.

The danger is that this approach will be presented as inevitable when cities and states finally have to clean up the messes of past poor governance. If the decision is upheld, the way has been greased for other cities to follow suit.

There’s something about the way very serious people discuss The Pension Crisis that promotes the stick-it-to-the-retirees approach. They like to throw around large, scary numbers without any context, such as expressing pension shortfalls as a percentage of expected revenues or income. They blame unions (or, if they’re particularly hostile, “union bosses”) for hanging on to something that private-sector employees once had but lost.

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