Detroit retirees back pension cuts
POSTED: Tuesday, July 22, 2014 - 5:30am
UPDATED: Tuesday, July 22, 2014 - 5:44am
Plan won support of about 82% of police and firefighters and 73% of other retirees and employees
DETROIT (CNNMoney) — It's been a surprisingly good year for Detroit.
Last year at this time, the city filed for the nation's largest municipal bankruptcy ever. The process has moved much faster than expected.
Monday, court documents showed thousands of employees and retirees had voted in favor of cuts to their pension benefits, raising the chances that the city will be able to emerge from bankruptcy later this year.
The reorganization plan won the support of about 82% of police and firefighters and 73% of other retirees and employees. "Even in a non-controversial, non-politically charged bankruptcy, getting to this stage in only a year is quite an accomplishment," said Michael Sweet, an expert in municipal bankruptcies.
Emergency Manager Kevyn Orr, who oversees the city's finances, has struck deals with city unions, pension funds and creditors to shave $7.4 billion in debt off Detroit's balance sheet.
The cuts to pension benefits could have been much worse. The current plan will reduce benefits by just 4.5%, and eliminate cost-of-living adjustments for employees and retirees from most departments. There won't be any cuts in current benefits for police and firefighters, and they'll only lose half of their cost of living adjustment.
The state of Michigan, a group of charities and foundations and many leading business such as the Big Three automakers, have agreed to chip in hundreds of millions of dollars of help in a so-called "Grand Bargain" to ease the cuts for retirees.