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DETROIT — On July 18, Detroit Emergency Manager Kevyn Orr filed a Chapter 9 bankruptcy, making Detroit the largest municipal bankruptcy filing in U.S. history. Bankruptcy law pays secured creditors first and unsecured creditors last or not at all. Bank of America, Chase, Citi, Goldman Sachs, etc. are secured creditors. Pension plans and retirement payments are unsecured creditors, facing cuts as the capitalist solution to the crisis of financing modern cities. Municipal Bankruptcy under Michigan’s Emergency Manager Act (public act 436) is equivalent to placing the emergency manager on crack cocaine. Rather than smoking cocaine, the emergency manager places a lifetime of pension fund payment, retiree obligations, city services and public assets into the crack pipe to be smoked – consumed – by the banks.
Retired workers drawing pension checks and the pension plans of active workers head the top of the unsecured creditors list. If an emergency manager can take away 50% of retired workers’ retiree monthly paychecks, why should an active worker put a portion of their wages into a pension fund for 30 years? Pensions are savings from wages rather than a government entitlement.
Labor unions, which are legally prevented from negotiating for retirees, sued the city stating the bankruptcy petition violates the Michigan’s state constitution. The state constitution protects public pensions for 10,000 city works and 20,000 retirees. Article IX Section 24 of the Michigan constitution states: “The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.” The state constitution protects public pensions because these workers do not qualify for social security or protection from failed pension schemes by the government pension board.
Governor Synder, who has sworn to uphold the Michigan Constitution when administered his oath of office, is part of the fascist state legislators enacting the Emergency Manager Law and reducing the state’s retirees to poverty through pension theft. The bankruptcy places the General Retirement System of the city of Detroit and the Police and Fire Retirement System of the city of Detroit, as well as trustees associated with administering the pensions, at the top of the unsecured list, facing economic disaster with pending cuts to pensions.
We are seeing attacks across the country on state and city workers’ pension plans and on other kinds of government spending that serves the people. In this era of high technology, with fewer and fewer workers needed, the corporations are restructuring government to take money away from workers they don’t need and funnel it into the pockets of the corporations.
The Emergency Manager system in Michigan is part of this process. The Emergency Manager (EM) is fascism. EM rule suspends local government, including the Mayor, City Council, elected schools boards, and gives an individual or corporation the authority to administer a political jurisdiction as a dictator. Michigan currently has 21 state-appointed emergency financial managers. If the court allows the bankruptcy to go through as planned, it will be a move to privatization of all government services and public sphere assets. There is plenty of money in our country. The federal government needs to step in and guarantee that our public services and resources remain public, and that every person has the basic necessities of life.
