Showing posts with label Detroit. Show all posts
Showing posts with label Detroit. Show all posts
Friday, December 6, 2013
Detroit Bankruptcy a Wake-up Call for Pensioners
This article from the New York Post is a must read for anyone who has a municipal pension. State pensions may not be far behind. All it would take is an amendment to the federal bankruptcy law to allow states to declare bankruptcy.
Monday, June 17, 2013
Get Ready for the Largest Municipal Bankruptcy in U.S. History
In his book The Sun Also Rises, Ernest Hemingway penned a classic exchange regarding bankruptcy. "How did you go bankrupt?," asked one character. "Two ways. Gradually, then suddenly." was the reply.
Well, the same can certainly be said of Detroit, Michigan. Detroit is getting ever closer to declaring bankruptcy (see here). If Detroit does declare bankruptcy, it would be the largest municipal bankruptcy in the history of the United States.
What does this have to do with Minooka CCSD 201? Well, most of us know that the State of Illinois has financial trouble of its own, including the worst underfunded pensions in the nation and pension contributions that are increasingly eating into current services. Well, if you follow the link above and read the article, you will notice that the Detroit emergency financial manager, Mr. Orr, is contemplating a plan where, among other things, retirees will receive less than 10% of their promised benefits under the current pension plan. I am quite sure that this is going to cause a great deal of financial hardship for those retirees. One lesson that we can learn from Detroit's example is that when a municipality (or perhaps a state, in the case of Illinois) gets into serious financial trouble (and by all accounts Illinois is already there), the "promises" that were made pursuant to a pension plan become negotiable.
Now a state is different in at least one important respect: under current law, states cannot file for bankruptcy protection. They can, however, renegotiate "promises," and you can be sure that they will. States after all go bankrupt (or become insolvent) just like any other entity . . . "[g]radually, then suddenly."
Well, the same can certainly be said of Detroit, Michigan. Detroit is getting ever closer to declaring bankruptcy (see here). If Detroit does declare bankruptcy, it would be the largest municipal bankruptcy in the history of the United States.
What does this have to do with Minooka CCSD 201? Well, most of us know that the State of Illinois has financial trouble of its own, including the worst underfunded pensions in the nation and pension contributions that are increasingly eating into current services. Well, if you follow the link above and read the article, you will notice that the Detroit emergency financial manager, Mr. Orr, is contemplating a plan where, among other things, retirees will receive less than 10% of their promised benefits under the current pension plan. I am quite sure that this is going to cause a great deal of financial hardship for those retirees. One lesson that we can learn from Detroit's example is that when a municipality (or perhaps a state, in the case of Illinois) gets into serious financial trouble (and by all accounts Illinois is already there), the "promises" that were made pursuant to a pension plan become negotiable.
Now a state is different in at least one important respect: under current law, states cannot file for bankruptcy protection. They can, however, renegotiate "promises," and you can be sure that they will. States after all go bankrupt (or become insolvent) just like any other entity . . . "[g]radually, then suddenly."
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