Posted on 02/07/2015 8:46:52 AM PST by Kaslin
Just as Detroit is coming out of bankruptcy, the entire county is about to go under.
This will be especially aggravating because Detroit pensioners are already extremely upset with the pension haircuts they received.
In the "too late to complain now" category, Wayne County now seeks to overturn the Detroit bankruptcy settlement. Lawyers will have a field day with this setup.
Cries of Betrayal
Crain's Detroit Business reports Pension Cuts, Interest Paybacks from Bankruptcy Prompt Cries of Betrayal.
Pension checks will shrink 6.7 percent for 12,000 Detroit retirees beginning in March. Making matters worse, many also must pay back thousands of dollars of excess interest they received.Simple Math Lesson (Yet Again)
It’s a bitter outcome of Detroit’s record $18 billion municipal bankruptcy for David Espie, 58, who will repay the city $75,000 in a lump sum while his $3,226 monthly pension is cut by $216.
As retirement costs swallow larger portions of U.S. city budgets, Detroit’s bankruptcy plan resolved a pension crisis with creative strokes, though at a cost to retirees who thought their benefits were untouchable.
“I feel betrayed,” said Espie, who may abandon plans to move to Alabama.
In addition to absorbing pension cuts, almost 11,000 retirees and current employees must repay an estimated $212 million in excess interest they accrued in a city-run savings plan, which is separate from the pension fund. The annuity plan guaranteed a 7.9 percent annual return even when the pension lost money, and employees also received bonus interest in some years.
They can either pay the money back in a lump sum or have it deducted gradually from their monthly pension check with 6.75 percent interest.
Henry Gaffney, 61, a retired bus driver, said he’ll pay back $56,000 of the $300,000 he saved by deducting $428 from his monthly $3,100 pension check for 19 years. He said he pays $375 more for health insurance each month.
“I may have to find a part-time job,” said Gaffney, former president of Detroit’s bus-driver union. “I guess the city wants us to work until we’re dead
Wayne County is threatening to unravel a breakthrough deal that settled Detroit's bankruptcy case unless it receives land or more than $30 million — money the city needs to bankroll Detroit's revitalization.Too Late
The fight could undo a hard-fought bankruptcy settlement the city reached with its fiercest bankruptcy creditor, bond insurer Syncora Guarantee Inc.
image: http://3.bp.blogspot.com/-fOjPe9oWfIg/VNUgABMEjMI/AAAAAAAAcWg/uu81tVeQnac/s400/Wayne%2BCounty.png
Wayne County needs to close a $70 million budget deficit, shore up pension plans that are nearly $1 billion underfunded and keep its general fund from running out of money in 2016, county Executive Warren Evans said of a recent financial review.Solvency Crisis
Evans announced Thursday the county has averaged about a $50 million annual deficit over the past three years in its general fund budget, which had $49 million of pooled cash last September and could be in a liquidity crisis as early as August, before the fall property tax collection.
An independent financial outlook report prepared for the county by Ernst & Young LLP found that the nearly $500 million general fund is creating a $50 million to $70 million structural debt each year for the county, which already had $159 million accumulated budget deficit at the end of fiscal 2013.
But perhaps most critical is an $850 million unfunded liability in the defined benefit pension plans for the county, which had more than 2,000 full-time employees in 2014. Pension plan contributions, retiree health care costs and some debt service are expected to drain a combined $92 million from the general fund in fiscal 2015.
Evans said the county pension plans were 95 percent funded about 10 years ago, but were only about 45 percent funded in 2013 and are on pace to be 39 percent funded by around 2023 without corrective action.
Better to be the first to the bottom than the last.
a man standing in a bucket and trying to lift himself up by the handle.
~Winston Churchill (1874-1965)
Nobody can stop the fall but we can make the landing a little softer if we privatize as many urban services as possible as soon as possible.
Companies that take over municipal services usually hire most of the city employees anyway which is a whole lot better than being jobless.
“I may have to find a part-time job,” said Gaffney, former president of Detroit’s bus-driver union. “I guess the city wants us to work until we’re dead
That’s kind of my plan, Hen ol’ son.
Since when did Detroit recover? They went into the hospital suffering from gangrene and came out a double amputee. That's not a recovery, that's survival after a chopping (and by the way, those arms are looking in bad shape too... maybe we should schedule the next surgery now).
If anything this is a sign that people should be eager to get 401k and IRA type retirement plans. If the going gets rough, your old employer will toss you away quickly. If the money isn't under your control it isn't yours no matter how many promises have been made about it. You don't get in a situation where the account is underfunded based on projected 20% annual stock market returns or just dissolved completely due to bankruptcy or merger.
$3,100 per month for a 19 year retired BUS DRIVER????? Give me a freaking break. I get less than half of that for 20 years in the army, two wars, 9.5 years in Germany, moving my family 18 times.
These municipal pensions are scams that suck the blood out of taxpayers and lead an area to rot on the vine; NJ is being crushed by them, and nobody with a brain would ever open a business here (only to be handed their share of the IOUs for people who retired 20 years ago).
I’ve posted before about the news story (which I’m sure played out over 7 over again across the country) in which current city councils (mostly black) are railing about how much of their current revenues are siphoned off by retirees (mostly white); there is simply nothing left for current expenses. In NJ this is happening between white town councils and white retirees; who would want to live/do business in an area where things are literally falling apart so a cop can retire in his late forties (after stacking his last working years with overtime to generate a six-figure pension)?
I liked the idea in a recent FR story about tying the school district pensions to the financial health of the district itself; the parasites can watch their pensions disappear as their pupils fail to find worthwhile work due to crappy teachers failing to educate them...
Great article. Thanks for posting.
“Wayne County is bankrupt.”
Another undeclared bankruptcy…here...
Who bankrupted the county? The country?
6. But the grand nostrum will be a public debt…
7. It must not be forgotten that the members of the legislative body are to have a deep stake in the game. This is an essential point, and happily is attended with no difficulty. A sufficient number, properly disposed, can alternately legislate and speculate, and speculate and legislate, and buy and sell, and sell and buy, until a due portion of the property of their constituents has passed into their hands to give them an interest against their constituents, and to ensure the part they are to act.
8. The ways in which a great debt, so constituted and applied, will contribute to the ultimate end in view are both numerous and obvious. (1) The favorite few, thus possessed of it, whether within or without the government, will feel the staunchest fealty to it, and will go through thick and thin to support it in all its oppressions and usurpations. (2) Their money will give them consequence and influence, even among those who have been tricked out of it. (3) They will be the readiest materials that can be found for a hereditary aristocratic order, whenever matters are ripe for one. (4) A great debt will require great taxes; great taxes, many taxgatherers and other officers; and all officers are auxiliaries of power.
11. As soon as sufficient progress in the intended change shall have been made, and the public mind duly prepared according to the rules already laid down, it will be proper to venture on another and a bolder step toward a removal of the constitutional landmarks.
Rules for Radicals? “No, Rules for Changing a Limited Republican Government into an Unlimited Hereditary One”…
http://www.constitution.org/cmt/freneau/republic2monarchy.htm
/Freneau
Socialism Is Legal Plunder - Bastiat
/Bastiat
“Feds place 150 union pension funds in ‘critical’ status”
A hard lesson when learned.
The budget is like a lake. You have water flowing into the lake (income), and you have water flowing out of the lake (expenses). You also have evaporation (stealing). If you want a healthy lake/budget, you have to pay attention to all three areas.
Consider: Many people who joined the voluntary military did so based partly on the promise of compensation and fringe benefits. After serving 25 years, would it be right for the government to say, "Oh, we've decided to reduce your pension by 25% and we will not honor the promised VA fringe benefits, etc. " Broken promises! Should the military retiree be viewed as the bad guy here?
Consider: A person works 45 years paying into social security all of those years. Every year the SSA sends the annuitant a summary of their projected benefits. When it comes time to retire, the annuitant is told that the benefit will be reduced by 35%. Keep in mind that in surplus years, the government spent all the surplus money and put IOUs in the SSA fund. Broken promises! Is the SS retiree/annuitant the bad guy?
Consider: A person works 45 years paying into a Roth IRA each of those years. The Roth IRA, created by government, promises that money withdawn will not be taxed by the Feds. When it comes time to retire, the retiree is told by the government that it is giving his Roth a haircut because it needs the money. Broken promises! Is the retiree the bad guy here?
I contend that the pensioner who worked in good faith for government or the private sector is not the bad guy!!! Government is.
Social Justice! Whaddayaknow.</sarc>
Sucker bait. Argentina's Kirchner regime confiscated Argentinians' retirement accounts .... commingled them with the broke budget, gave the chumps a "chit", a call on resources. A ticket to a small monthly draw against the hypothecated value of the account.
Stated in Argentine gallopingly inflationary "vanishing money" of course.
What happens when GOVERNMENT X BANKING => "Screw the People"
True dat bro!
Detroit pensioners are already extremely upset with the pension haircuts they received.
Forget the Detroit haircuts, REPUBLICAN Gov. Snyder put the screws to the rest of us pensioners too with his 2012 tax on our private pensions..and now he wants to not only increase the state sales tax but the tax on gasoline too........
The unions cannot plead ignorance. They have known for years that these pension funds were grossly underfunded. They should have been negotiating greater contributions to the plans. Rather they chose to only bargain for higher wages and now they pretend they are surprised.
Could be worse. I worked 35+ yrs. at my job(skilled trade),finally gave up at age 75,got nothing but Soc.Sec. Poor as that was,it may be a lot worse for some still working at similar jobs.
This happened on a flight getting ready to depart for Detroit.
Jack was sitting on the plane when a guy took the seat beside him. The guy was an emotional wreck, pale, hands shaking, moaning in fear.
“What’s the matter?” Jack asked.
“I’ve been transferred to Detroit , there are crazy people there. They’ve got lots of shootings, gangs, race riots, drugs, poor public schools, and the highest crime rate in the nation.”
Jack replied, “I’ve lived in Detroit all my life. It’s not as bad as the media says. Find a nice home, go to work, mind your own business, and enroll your kids in a nice private school. It’s as safe a place as anywhere in the world.”
The guy relaxed and stopped shaking and said, “Oh, thank you. I’ve been worried to death. But if you live there and say it’s OK, I’ll take your word for it. What do you do for a living?”
“I’m the tail gunner on a Budweiser truck.”
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