Michigan’s Senate has approved spending $195 million in order to help prevent steeper cuts to the pensions of Detroit retirees. The deal was designed to shield valuable city-owned art from being sold and marks the latest step in the attempt to resolve the largest public bankruptcy in U.S. history.
Winning Vote in Larget Bankruptcy Proceedings
The chamber voted 21-17 to contribute the state funds. These funds would join $466 million already committed by 12 foundations and the Detroit Institute of Arts. This money would support Detroit’s two retirement systems while the city-owned art museum and its assets would be transferred to a private nonprofit. The governor and legislators voted this way in an attempt to avoid city retirees from falling into poverty as the result of not receiving these funds. That potential outcome could cost the state an estimated $270 million in social safety net costs over 20 years. It’s felt that Michigan as a whole cannot succeed unless its largest city is turned around.
Art Collection Seen as Possible Source of Cash
Bond insurers have pointed to the art collection as a potential billion-dollar source of cash for the city. But the city firmly opposes that. Instead, it is banking on the separate deal that would protect the art forever. The deal also limits base pension cuts for approximately 30,000 retirees and city workers to no more than 4.5 percent – instead of as much as 26 percent.
Money Goes to Retirees Who Earned Pensions
“This is by far, in my opinion, the best that we’re going to be able to do,” said Senate Majority Leader Randy Richardville. “It’s not for the city of Detroit. This money goes directly to the people that earned those pensions … who through no fault of their own are at risk.” Gov. Rick Snyder is expected to sign the legislation quickly.
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