Gov. Snyder Pleased With Bankruptcy Judge's Decision

By: Shannon Kantner Email
By: Shannon Kantner Email

The pension question is out of the state's hands.

A federal judge ruled Wednesday that Detroit's bankruptcy - and all the issues surrounding - it will be decided in his courtroom, and his courtroom only.

That means the cases filed by Detroit retirees in state court will be moved to federal court. The ruling was good news for the city and Governor Snyder, but not the thousands of workers whose pensions are at risk.

Wednesday marked Detroit's 312th birthday, but instead of a city filled with celebrations, it was filled with contention.

"A lot of us wish this hadn't come to this point," Governor Rick Snyder said. "But this was 60 years of neglect, of failing to make the tough, the courageous decisions that needed to be made, they're being made now."

Now those decisions will be made in federal bankruptcy court, despite protesters efforts to keep retirees lawsuits in state court. They argue the Chapter 9 filing was unconstitutional because it puts pension plans at risk. Bankruptcy Judge Steven Rhodes ruled that's his jurisdiction, and Gov. Snyder said it's for the best.

"If we hadn't gone into bankruptcy, we would have had not just a couple of lawsuits, but literally creditors all over could be filing in courts all over the United States," Gov. Snyder said. "This allows us to go to bankruptcy court, have one judge to deal with in an effective, thoughtful way."

Experts say now that all the cases are in one court, the biggest unknown is what the impact will be on pension and retirement plans.

"The question now is will there be a reduction in pensions? Because the city's plan really hasn't been put forward yet," MSU Economist Eric Scorsone said.

First it needs to be decided if Detroit is truly insolvent, and then the question becomes how it becomes solvent again, and which creditors will take a hit.

"If the pensioners are part of that, they can argue to the federal court, 'This isn't fair, for these reasons.' So, there's still going to be a lot of conflict over this, it's not over by any means," Scorsone said.

AFSCME said just that in a statement: "We will never stop fighting for Detroit and its workers."

The judge has 90 days to decide if the bankruptcy filing is valid.

It may be months before the city has a plan in place to become solvent.

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