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Public workers outside Detroit face pension cuts

The Detroit bankruptcy ruling was a sharp blow to retirement benefits, and the latest incident in a nationwide trend of pension cuts.
Jalita Shabazz joins protesters during a rally outside The Theodore Levin United States Courthouse in Detroit, Wednesday, Oct. 23, 2013.
Jalita Shabazz joins protesters during a rally outside The Theodore Levin United States Courthouse in Detroit, Wednesday, Oct. 23, 2013.

Now that a federal judge has found the city of Detroit to be eligible for bankruptcy, many of the city's retired public workers are anticipating cuts to their pension benefits.

"I was really hoping we were going to get a chance, but I feel like it was a done deal," said Donald Smith, who spent nearly 30 years working for the city government in various capacities before his retirement.

Smith, 68, depends on the $800 in retirement benefits he receives from the city every month. He might eventually need to make do with less if the man in charge of Detroit's finances has his way. Emergency Manager (EM) Kevyn Orr, who Gov. Rick Snyder picked to lead the city earlier this year, has said that retirement benefits would receive "some form of adjustment" during bankruptcy.

Such an adjustment would be far from a unique occurrence. For several years, retired public workers, future retirees and labor unions around the country have been fighting losing battles to hold onto current pension levels.

"We've been concerned about that for a long time now," said Steve Kreisberg, director of collective bargaining for the public workers union AFSCME. "If you look at the evidence ... just about 45 of the 50 states have published one form or another of major pension changes over the past couple of years."

Kreisberg cited data from the National Conference of State Legislatures (NCSL), which shows a multi-year wave in changes to pension obligations across the country. Between just 2010 and 2011, a total of 41 states "enacted significant revisions to at least one state retirement plan," according to a 2012 NCSL report.

Even setting Detroit aside, more cuts are on the way. On the same day that federal judge Steven Rhodes ruled that Detroit was eligible for bankruptcy, Illinois' legislature approved a major revision of the state's retirement systems. Illinois unions fiercely opposed the measure.

"Teachers, caregivers, police and others stand to lose huge portions of their life savings because politicians chose to threaten their retirement security," said the union coalition We Are One in a statement reacting to the passage of the law.

The Emergency Manager's office has calculated that Detroit faces a $3.5 billion outstanding pension liability, but a recent report from the left-leaning think tank Demos challenges those numbers. The cost of providing retirement benefits has stayed largely flat, according to report author Wally Turbeville.