Thursday, December 05, 2013

DETROIT BANKRUPTCY JUDGE PERMITTING PENSION CUTS IS A TERRIBLE PRECEDENT

A federal judge on Tuesday ruled that the city of Detroit, Michigan can cut pensions of municipal workers even though the pensions are protected by the Michigan State Constitution. According to the judge, federal bankruptcy law supersedes the state constitution.  New York has a similar constitutional provision guaranteeing government worker pensions, including teachers.

This is supposed to be ironclad protection against cutting benefits for active workers and retirees.  State and municipal government workers fulfilled their end of a contractual bargain by working a set amount of years so the pension money was supposed to be guaranteed by the government.  Any cuts to benefits were only supposed to happen future employees. That is why New York keeps creating new pension tiers. Current employees and retirees are not impacted when there is a new pension tier passed by the state. We are now up to Tier VI in New York.

Should we worry in New York about Detroit style pension cuts?  The answer is we are obviously in much better shape financially than Detroit so I don't believe our pensions are in any imminent danger.  However, this case sets a terrible precedent that will more than likely be used by many states and local municipalities to cut pension benefits for government workers.  As the race to the bottom continues for the middle class and working class, it looks like bankruptcy will be the newest tool used against government worker pensions as it has been done in the private sector.

This quote from the NY Times says a great deal about what we are facing:

“Last night, as a public employees’ union leader, you went to bed thinking, ‘My workers’ pensions have special protection; I can continue to play hardball,’ ” Karol K. Denniston, a lawyer with the firm Schiff Hardin who has been advising residents of California cities on fiscal issues, said Tuesday after the judge issued his ruling. “This morning you woke up and found yourself in a new world.”

Another quote lays out the dangers beyond bankruptcy for our pensions:

"It’s a horror film,” said Anders Lindall, a spokesman for Afscme in Illinois, where the state legislature voted Tuesday to cut back retirees’ cost-of-living adjustments as part of a broad effort to bring the state’s pension system into balance. Illinois, like Michigan, has an explicit reference to protecting public pensions in its Constitution.

In this new world, we have to have a revitalized labor movement.  Keeping this in mind, it is important that we have a good showing at today's labor rally at Foley Square in Manhattan after school.  Mayor elect Bill de Blasio needs to see that New York is still a strong union town.

3 comments:

Anonymous said...

The same was said about Chicago, it will not happen here. When is the labor movement going to wake up?

Bankruptcy in new york said...

There are lots of reason why we should make sure that our business be safe from bankruptcy. But one of the important thing that we should have in mind is that we can lose our business if we have issues regarding bankruptcy. We have to tke care of our business and it is important that we know what to do in case this happens to our business.

Katie Schroeter said...
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