Skip to comments.Constitutional Convention Delegates Wanted Detroit Pensions To Be Fully Funded
Posted on 12/28/2013 8:09:55 AM PST by MichCapCon
Retiree pensions in Detroit were underfunded. Politicians fretted about the city's inability to pay the obligations and state officials debated what to do about the problem.
That was 1961 and retiree pensions were underfunded to the tune of $1.2 billion, when adjusted for inflation. Politicians foresaw a government that promised state workers retirement benefits it couldn't afford so they attempted to protect those pensions in a new constitution the fourth in the history of Michigan. It was completed in 1962 and approved by voters a year later.
Today, Detroit's Emergency Manager Kevyn Orr projects the city's pension liability at $3.5 billion and wants to cut the pension debt. In two recent editorials, the Detroit Free Press said the pensions should be untouched during the city's bankruptcy.
"The City of Detroit made promises to its workers, promises it can no longer keep. And in 1963, the residents of Michigan chose to approve a constitution that protected pensions," a Dec. 5 editorial read.
In an Aug. 1 editorial, the Free Press stated Michigan has, "an ironclad constitutional protection " on pensions.
But the comments from the convention delegates more than 50 years ago show two components of constitutional protection for government pensions had to be in place.
In the words of one delegate:
one, that the retirement that was promised any employee which he has lived long enough to earn shall not be impaired or diminished; and two, that from now on all retirement funds that are promised by employers shall be funded properly.
In other words, they should put enough money in there so when they retire the money is there. And there was a very specific purpose for this. I wanted employers, legislative bodies and city councils to be very aware of what they were spending when they gave a person, a public employee, a retirement program. In other words, how much did it cost per year? But from now on any governmental body cannot avoid paying for a retirement fund that they promise an employee. They've got to make those payments annually, on time.
Eric Lupher, director of local affairs for the public affairs research group Citizens Research Council of Michigan, pointed out in a recent column that the plan was to have government fund whatever benefits they promised.
"The committee deliberately did not require public employers to fully fund benefits accrued during prior years of service as they anticipated it would be an overwhelming financial burden," Lupher wrote. "However, they wanted to ensure that going forward, the financial burdens for funding pension benefits were not passed onto future generations."
Patrick Wright, senior legal analyst at the Mackinac Center for Public Policy, said public pensions are dangerous because they allow politicians to promise benefits now and have their successors pay later.
"The constitutional provision was meant to have the proper money set aside each and every year," Wright said.
Stephen Henderson, editorial page editor at the Detroit Free Press, didnt respond to a request for comment.
The RATS getting more insane by the day....they destroy it and expect YOU to pay for it.
Oh, you say you don't have a tax base to rape and the city is broke? Pity, it sounds like you're going to have to fire a lot of useless union employees — or you could sell off lots of stuff the city owns starting with the art museum.
The trouble is that selling off city property probably won't bring in a lot of money and it is a one time proposition. This is a structural problem that the politicians and unions refuse to address. The only way out is through bankruptcy and renegotiating or voiding union contracts. Let the mass layoffs begin!
The state constitution is old and created by a bunch of old, racist white guys. What they said 50 years ago should have no bearing on today and should be opened to interpretation. My interpretation is the workers are SOL.
Dear retired city employees of Detroit: you traded your votes to the Democrat politicians for “a pocketful of mumbles, such are promises.” Sue the Democrat party. How hard is that to figure out? They won’t go broke.
I wonder how many people realize that the flip-side of current Fed policy—negative real interest rates to stimulate the economy, save housing, and save banks—not only robs individual savers, but makes it virtually impossible for defined benefit pension plans to fund their future obligations.
Keep voting for democrats. Because it’s all the republicans’ fault.
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