Wallace, who lives in Detroit, discovered that U.S. Bankruptcy Judge Steven Rhodes ruled Tuesday morning that yes, Detroit is eligible for Chapter 9. The shocker for retirees, Rhodes also ruled that city pension benefits won’t receive heightened protection in bankruptcy and may be cut.
“It makes me sick,” said Wallace, who is single and receives a pension that’s less than $2,600 a month after taxes in addition to Social Security. She started working for the city in 1977 as a 911 operator and last worked in the water department as an analyst gathering data for capital improvement programs. She retired in 2006 after 31 years on the job.
“It’s definitely going to affect me. These people, the karma is going to get them. They don’t seem to care about people,” she said.
After Detroit filed for Chapter 9 in July, many City of Detroit retirees closed their eyes and crossed their fingers, and hoped that city pensions would be sacred and protected by the state constitution. Now, there’s no doubt that retiree health care and pensions are at risk. A change to health care coverage is planned for March, but cuts in pensions remain unknown and painfully uncertain.
The mediation process is ongoing. Will retirees face pension cuts of 10%? Could it be 30% or even as a few worry, 50%?
We don’t know.
Would there be any way there would be no pension cuts at all?
“Not by our numbers,” said Detroit emergency manager Kevyn Orr.
Orr said the size of the cuts and the timetable of when pension cuts would begin are part of the mediation process.
Orr said “anything is possible” when asked in a Tuesday meeting with Free Press editors and writers about the possibility of creating some sort of tiers for how cuts are made for retirees. Maybe tiers would be based on age? Pension amounts? He would not elaborate on what might be doable.
“We really need to sit down and come up with a solution now. We’re running out of time,” Orr said.
More retirees and their spouses dread that time clock.
“When it comes down to it, I won’t have much at all,” worries JoAnn Jackson, 69, who is married to a City of Detroit retiree on dialysis. Her husband Anthony, 73, worked 30 years for the city’s Public Lighting Department.
She’s adding up the gas bills, electric bills and medical bills. They both depend on that pension.
Jackson said: “They didn’t do right with the retirees.”
Brian Fields retired in January as a city police sergeant and his wife, Patrice, retired from the city in June 2012. They have worked with their financial planner and are trying to prepare for pension cuts that could be in the range of 20% to 25%.
Planning for something is far better than living as if the money will show up as usual without any cuts.
“You know it’s going to happen,” Patrice Fields said. “It’s a horrible thing.”
Christal Park, 59, who retired from the city in September, said she turned on the TV to watch the ruling after she took her grandchildren to school. Her husband, Thomas, 79, is also a former city worker who retired about 18 years ago.
Her initial reaction was to pray and say, “Oh, boy, now what?”
“We still have to see how deep they’re going to cut,” Park said.
Lee Scott, 81, said early rumors were that cuts could be 40% to 50%. He began receiving about $1,000 a month when he retired in 1986 and now receives about $1,400 a month after cost-of-living adjustments.
Scott, who lives in Lapeer County, said he took the lowest pension option so that his wife could receive pension benefits after he died. His wife Joan, 74, was a dental hygienist and did not have a traditional pension.
He noted that the couple might cut back and decide to get rid of one of their two cars to save on insurance.
“I think it hurts emotionally,” said Scott, who worked in the city housing department with modeling and building senior housing and other housing.
Scott worries more about police and firefighters who are not covered by Social Security. He’s unhappy about the way society seems to be willing to dismiss the hard work of public workers.
“There’s a lot of uncertainty about growing old today,” Scott said.
Bill and Sheila Quinn expect that now is the time to reconsider going out to dinner or a Red Wings game. His wife worked for the city for 15 years and was on the staff of former City Council member the Rev. David Eberhard.
Bill Quinn, 68, who is an independent stockbroker in Oakland Township, said: “We’re hoarding cash now. We’ll cut back on Christmas. We’ll cut back on everything else until we know what’s coming.”
It seems as if the American dream is quickly becoming a nightmare in which those things that were once certainties or now subject to debate. The fruit of our labor is no longer sacred, and can now be used to clean up the mess made by greedy, inept politicians and law makers.
This ruling in the Detroit bankruptcy filing sets a dangerous president for other cities to follow. Because it indicates that employee pensions are a disposable expense rather than a means of income for retirees. It cutting pension funds becomes the standard in this country it could spell the end of pensions all together.