Judge: Detroit can proceed with bankruptcy -> Pension cuts are on the table

[JEDI]

http://money.cnn.com/2013/12/03/news/economy/detroit-bankruptcy-ruling/index.html?hpt=hp_t2

Opponents have argued that pension cuts are barred by the state's constitution. But Judge Rhodes ruled that pensions are fair game under federal bankruptcy law, trumping state law, though he noted that didn't mean he would definitely approve cuts.


ahh.. politicians promising unions the world in exchange for their votes.

"vote for the person who gives the most out of the public treasury."

plus the corruption and mis-management of the people running the pension.

but should retirees be the ones to pay the price?


edit 2/21/14:
Detroit bankruptcy plan proposes slashing pension benefits up to 34%
http://money.cnn.com/2014/02/21/news/economy/detroit-bankruptcy-pension-cuts/index.html

edit 12/6/14:
Detroit Bankruptcy plan approved - Retirees only lose 4.5% due to optimistic math
http://www.nytimes.com/2014/11/08/us/detroit-bankruptcy-plan-ruling.html?_r=0

 

[Matt1970]

Obama will be around shortly to bail them out.

 

[nanette1985]

Curious to see how this goes forward.

 

[Texashiker]

Obama will be around shortly to bail them out.

You might be thinking about the federal reserve.

The federal reserve is bailing out blockbuster, so why not Detroit?

 

[Genx87]

Heh this should be a lesson to any public employee stuck in a pension system that isnt fully funded. When the public entity you work for goes tits up. The pension is fair game to lose. All of those public workers in IL where I have heard they are funding about 30% of their requirement should be seeking alternative retirement income.

 

[Via]

The state of Illinois is watching this like NBA scouts are watching Alan Wiggins.

 

[MagnusTheBrewer]

Nobody above the State level gives a damn . Washington turned it's back on Detroit long ago.

 

[JEDI]

Heh this should be a lesson to any public employee stuck in a pension system that isnt fully funded. When the public entity you work for goes tits up. The pension is fair game to lose. All of those public workers in IL where I have heard they are funding about 30% of their requirement should be seeking alternative retirement income.

not the same because States are NOT allowed to declare bankruptcy.
if they did, CA would have filed already.

working for fed > working for state >working for city

the reason why working for the fed govt is better is because the fed govt can go into debt (ie: Trillions $).
states cant go into debt. they must balance their budget. so state employees do get laid off.

when was the last time there were federal employee layoffs?

 

[waggy]

The state of Illinois is watching this like NBA scouts are watching Alan Wiggins.

LOL that is what i was thinking. You know damn well Rahm is licking his chops over this.

 

[MagnusTheBrewer]

not the same because States are NOT allowed to declare bankruptcy.
if they did, CA would have filed already.

working for fed > working for state >working for city

the reason why working for the fed govt is better is because the fed govt can go into debt (ie: Trillions $).
states cant go into debt. they must balance their budget. so state employees do get laid off.

when was the last time there were federal employee layoffs?

A couple weeks ago? Federal employees.get laid off all the time when money runs out and departments are reorganized or eliminated. It just doesn't happen to as many people and isn't publicized.

 

[Via]

My mom knew a very successful private music teacher who made very good money. All of a sudden, in her late 40's, she went back to school to get a music education degree and took a job teaching music at rural public school (state of Illinois). She went from teaching very high-level private students to babysitting rural farmboys and girls trying to clap out a proper rhythm.

Why? I don't remember the exact details, but I'm pretty sure my mom said she only needed to teach for 10 years to qualify for a very nice pension. That was probably about 7-8 years ago, so I'll have to ask my mom again about the details.

 

[IGBT]

if you like your bankruptcy..you can keep your bankruptcy.

 

[Jimzz]

not the same because States are NOT allowed to declare bankruptcy.
if they did, CA would have filed already.

working for fed > working for state >working for city

the reason why working for the fed govt is better is because the fed govt can go into debt (ie: Trillions $).
states cant go into debt. they must balance their budget. so state employees do get laid off.

when was the last time there were federal employee layoffs?

Yes they can. They sell bonds and they also promise pensions/benefits later for lower pay today.

There are plenty of ways to go into debt and just about every states knows it. Spend today so the next person elected is stuck with it.

 

[rudeguy]

Everybody say "Thank you Kwami".

 

[Brovane]

My mom knew a very successful private music teacher who made very good money. All of a sudden, in her late 40's, she went back to school to get a music education degree and took a job teaching music at rural public school (state of Illinois). She went from teaching very high-level private students to babysitting rural farmboys and girls trying to clap out a proper rhythm.

Why? I don't remember the exact details, but I'm pretty sure my mom said she only needed to teach for 10 years to qualify for a very nice pension. That was probably about 7-8 years ago, so I'll have to ask my mom again about the details.

More details would be great. In CA your Teacher pension benefit is based on number of years of service. You all of a sudden don't get a great pension after 10 years of service. My Mom was a teacher in CA and worked for almost 42 years and she does have a great pension benefit but that was for 42 years of teaching. Also I believe there is also what they call a windfall provision which reduces a public employee pension if Social Security is also collected. So if you also qualify for say $800 a month in Social Security benefits and you take it you lose $800 a month in pension benefits. This really hits hard the people that switch careers in mid-life to start teaching.

 

[KB]

I feel bad for those naive enough to trust government with their money. We have seen time and time again how it is wasted to fill the pockets of politicians' friends.
Pensions in many states have long been too generous, and promised too much. This scheme could have gone on longer; however fewer workers coming into the market means too little new money going to pay those long retired workers. Ponzi scheme anyone?

 

[Brovane]

http://money.cnn.com/2013/12/03/news/economy/detroit-bankruptcy-ruling/index.html?hpt=hp_t2

Opponents have argued that pension cuts are barred by the state's constitution. But Judge Rhodes ruled that pensions are fair game under federal bankruptcy law, trumping state law, though he noted that didn't mean he would definitely approve cuts.


ahh.. politicians promising unions the world in exchange for their votes.

"vote for the person who gives the most out of the public treasury."

plus the corruption and mis-management of the people running the pension.

but should retirees be the ones to pay the price?

I am sure the sky is falling talk will reach a fever pitch with the Unions. Hopefully they will come back to the table to negotiate a equitable agreement without slashing benefits to much. The people already retired are the ones that get really hosed out of this since they cannot make much a change in retirement planning when you are already retired. However this has happened in the private sector for pension plans when benefits promised exceeds the funds available and promised benefits are cut.

 

[boomerang]

but should retirees be the ones to pay the price?

You'll probably do your typical hit and run, but in case you want to go further with this, who do you want to pay the price?

 

[boomerang]

I am sure the sky is falling talk will reach a fever pitch with the Unions. Hopefully they will come back to the table to negotiate a equitable agreement without slashing benefits to much. The people already retired are the ones that get really hosed out of this since they cannot make much a change in retirement planning when you are already retired. However this has happened in the private sector for pension plans when benefits promised exceeds the funds available and promised benefits are cut.

Happened to retired salaried Delphi employees. The PBGC took over their pensions. Last time I checked, which was many moons ago, the PBGC was drowning in red ink.

 

[MagnusTheBrewer]

You'll probably do your typical hit and run, but in case you want to go further with this, who do you want to pay the price?

The people who are responsible would be a nice change.

 

[boomerang]

Everybody say "Thank you Kwami".

Oh, it started waaay before that and it's far from being a problem exclusive to the city of Detroit. Defined pension benefit plans sounded great about the same time that Social Security was considered to be a perpetual entitlement that would go on forever and ever with fresh young workers supporting the old ones that retired. A big wide base on the bottom with a pointy top where the old workers died off. Shaped sort of like a pyrami...never mind.

Then politics and politicians got involved and the rest is history.

 

[boomerang]

The people who are responsible would be a nice change.

I don't disagree but there would a whole shit-ton of finger pointing before that ever happened. We are a blameless society. Nobody accepts blame for their behavior or decisions. 'It wasn't me' is the motto of the nation.

 

[MagnusTheBrewer]

I don't disagree but there would a whole shit-ton of finger pointing before that ever happened. We are a blameless society. Nobody accepts blame for their behavior or decisions. 'It wasn't me' is the motto of the nation.

You're right. I guess the thing that bothers me most is that it's never been attempted.

 

[fskimospy]

Oh, it started waaay before that and it's far from being a problem exclusive to the city of Detroit. Defined pension benefit plans sounded great about the same time that Social Security was considered to be a perpetual entitlement that would go on forever and ever with fresh young workers supporting the old ones that retired. A big wide base on the bottom with a pointy top where the old workers died off. Shaped sort of like a pyrami...never mind.

Then politics and politicians got involved and the rest is history.

Have you ever actually looked at the costs in defined benefit plans vs. say, 401(k)?

Per dollar contributed, pensions provide much greater returns. Retirement accounts exist to maintain some standard of living after you stop working, and pension funds generally see much higher rates of return than individual 401(k) accounts due to lower fees, more institutional power, etc. The reason why companies are offloading pensions when possible is that if things go south the company is left holding the bag with a pension while with 401(k) the employees are screwed. It's not an expense thing, it's a risk thing.

If your goal is to be the best steward of taxpayer money possible, basically any large institution like a city should be using pensions instead of 401(k) contributions.

 

[Exophase]

You might be thinking about the federal reserve.

The federal reserve is bailing out blockbuster, so why not Detroit?

Those reports of Blockbuster receiving bailout money are satire. I feel kind of sorry for you not realizing this. Makes me wonder what other "news" you end up reporting..