Retirees Strained by Detroit’s Bankruptcy; Pensions, Payroll, & Other Benefits Being Cut Off

The worst feeling that many of Detroit’s public workers and retirees are feeling nowadays is due to the bankruptcy filed by the city.  Last week, the City of Detroit announced that it had filed for $19 billion in bankruptcy protection.  The debt incurred by the city was mainly due to the shut down of large car manufacturers and other businesses that employed thousands of local citizens.  The car companies began outsourcing a lot of their workforce when the recession hit. Also, many of the companies are now using robotic technology in place of human labor.  These things caused the citizens who relied on these jobs for decades, to lose them.  With no job, the local people can’t spend dollars in the city. It’s very difficult to pump money back into the economy if no one has any money.

Now, there is another issue that has arose because of the bankruptcy.  City workers and retirees are now realizing that their salaries, health benefits, and pension are tied up in this debt.

“The debt question needs to be addressed. But even more important is the accountability to the citizens of Detroit,” said Snyder. “They are not getting the services they deserve and they haven’t for a very long time. So this can has been getting kicked down the road for decades. Enough is enough and now’s the time to turn it around.” (Michigan Governor Rick Snyder)

Although Snyder says he’s optimistic that the city can make a big turnaround, the immediate affects of this crisis is disheartening to the citizens.  The city, which once held a population of $1.8 million, has about 700,000 people now. Of those 700,000, Detroit has 10,000 active public workers and 18,000 retirees.  Detroit believed that the money coming in from property taxes, business taxes, etc would help fund the pension and health benefits. But, the contributions outweighed the city’s revenue. According to the Associated Press, benefits and pension plans are now underfunded by approximately $9.2 billion.  The city hasn’t been able to pay payroll and pension contributions for some time now.

With immediate focus on the unfunded portion of the pension funds, emergency manager Kevin Orr believes this issue can be resolved. The help of a federal bailout is also a possibility.

Detroit stand out like a sore thumb right now, but can return as a very productive and profitable city once the financial issues are patched up. Mayor Bing has faith and believes the citizens can pull through this.

“Detroiters are very, very resilient people,” said Bing, a professional basketball Hall-of-Famer who spent most of his career with the NBA’s Detroit Pistons. “Detroit is a very iconic city, worldwide. Its people will fight for this and we will come back.”