Asked on Monday if Detroit would have to cut pensions as part of a bankruptcy settlement, Michigan Governor Rick Snyder replied: No comment.
Snyder, a Republican, was testifying under oath at court hearings set up to determine whether the city of Detroit is eligible for Chapter 9 bankruptcy. Detroit Emergency Manager Kevyn Orr, who Snyder appointed to assume control of the city’s collapsing finances in March, filed for bankruptcy during the summer. Snyder officially approved the bankruptcy.
But this week public sector unions and municipal pension systems challenged the bankruptcy in federal court, arguing that Snyder exceeded his authority by approving a bankruptcy plan without stipulating that it must leave pension benefits untouched. The Michigan Constitution says pension benefits cannot be “diminished or impaired.” It will be up to presiding judge Steven Rhodes to determine whether federal bankruptcy law overrules state constitutional protections. Orr has repeatedly said that pensions would need to take a “haircut” in bankruptcy.
Union attorney Peter DeChiara asked Snyder during Monday’s court hearing if he agreed with Orr’s assessment of the need for cutting pensions, but the governor insisted it wasn’t up to him.
“I don’t necessarily know there has to be [pension cuts],” replied Snyder. “It’s not my decision to make that call.”
That was exactly the right answer, said Wayne State University law professor Laura Bartell. “He answered absolutely appropriately,” said Bartell. “He’s not drafting the plan of adjustment, Kevyn Orr is.”
As for the real question, as to whether Orr is allowed to breach Michigan state constitutional protections in his bankruptcy plan, the answer is “not clear.”
“The governor says, appropriately, that it’s for the judge to decide,” said Bartell.
But that’s unlikely to satisfy public employees who believe Snyder should have taken measures to protect their pensions in the first place.