January 22, 2014
Settlement option to reduce pension cuts, resolve bankruptcy process faster, save millions in tax dollars
Wednesday, January 22, 2014
LANSING, Mich. – Gov. Rick Snyder and majority leaders of both the Michigan Senate and House today announced their support to move toward an unprecedented bankruptcy mediation solution that would mitigate cuts to city of Detroit retiree pensions and keep the city on its path to revitalization.
Snyder, Senate Majority Leader Randy Richardville and House Speaker Jase Bolger announced they are working with the Michigan state legislature to allocate up to $350 million over the next 20 years to be combined with funds raised by private Michigan foundations to assist in saving retiree pensions. The governor recommends these state funds would come from tobacco settlement revenues. A coalition of foundations recently pledged over $330 million over the next 20 years, which jumpstarted a mediation solution to resolve key elements of the Detroit bankruptcy process.
“We are working on a fiscally sound mediation solution with clear conditions. We will not participate in a bailout, nor allow these funds to go anywhere other than directly to retiree pensions,” said Snyder. “This is an opportunity to work together to find solutions that will allow Detroit to get on a firm foundation faster, help pensioners, and ultimately save the Michigan taxpayers millions in the long run. I want to applaud the foundations for taking this unprecedented and generous step and the mediators for facilitating these discussions.”
The governor called for strict conditions on any funds allocated towards the settlement. Among these conditions are that all state participation would go solely toward pensions, independent fiduciaries manage the pension funds going forward, and appropriate releases from litigation claims are obtained from the unions, employees and retirees.
“Our citizens, their retirement and our art and cultural heritage warrant consideration of a reasonable, long-term solution,” Richardville said. “Detroit pensioners live all across Michigan and the future of Detroit impacts our entire state. I am open to working with the Governor, the House and Detroit on a solution that emphasizes oversight and accountability to ensure history does not repeat itself.”
A settlement based on participation from the state legislature, the foundations, and others would have positive implications for city, unions, retirees and the state, including the opportunity to save millions that would otherwise be spent in legal costs and on social services.
Bolger said the city of Detroit cannot stand alone and that the entire state must work together to resolve the bankruptcy.
“I won’t cut off taxpayers’ noses to spite Detroit’s face, but I also will not ask the state’s taxpayers to make a bad investment. That’s why we must look at how we can work together to move Detroit out of bankruptcy as quickly as possible. This is the right thing to do in order to serve the Michigan citizens who live in Detroit, the pensioners who devoted their hard work to the people, and the taxpayers throughout the rest of the state who deserve to be protected.”
Snyder, Richardville and Bolger all pledged to continue to work closely with state lawmakers in both chambers and parties, the mediators, and all parties involved toward a goal of reaching a settlement in the near future.
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