LANSING – The early line among legislators and lobbyists on the chances Governor Rick Snyder can win approval for his plan to have the state commit $350 million over 20 years to help bring the city of Detroit out of bankruptcy is uphill, but doable.
As reported Wednesday by Gongwer News Service, Snyder floated the plan Wednesday to legislators in hopes of finding a way to lift Detroit out of bankruptcy without forcing the sale of some of the works at the Detroit Institute of Arts or slashing the pensions of retired city government workers.
Snyder’s idea is to have the state essentially match the $330 million commitment from foundations toward the cause.
The votes can be found if a coalition materializes of Democrats and Republicans in the Detroit region to pass the appropriation, several said. But it will be difficult and the risks many.
Not only will lawmakers confront a politically dangerous vote, but many, many details have to be resolved: which fund would provide the money, how much of a cut retirees’ pensions would take even with the cash infusion, figuring out how the move would affect the regional millage that is vital to DIA operations, and how much the DIA would contribute to the settlement.
There also is the major question of how the state would proceed with a major financial commitment without setting itself up to help other local governments’ troubled pension systems in the future.
Rep. John Walsh (R-Livonia) said he is generally supportive of any plan that would bring the bankruptcy to an end, but more specifics are needed with regard to the current plan Snyder is floating.
“We can tell not only our entire state but our nation and the world that we have resolved a very, very bad problem and we can move forward,” Walsh said of the benefits of a plan that would end the bankruptcy.
He also said the plan would have to be a “global solution that all the stakeholders sign off on.”
Walsh said he expects pushback from Democratic and Republican members who live outside of the city.
“I think they have every right to be concerned,” he said. However, he said a structured settlement with state assistance that settles the bankruptcy is worthwhile for all areas of the state.
Rep. Rashida Tlaib (D-Detroit) agreed with Walsh’s sentiment that a stabilized Detroit is important for the whole state.
“Any positive role to the state becoming a true partnership in helping Detroit families is important for the whole state to thrive,” she said. “I’ve talked to a number of my Republican colleagues and many of them do agree that helping Detroit move forward beyond this bankruptcy will help the whole state be able to move forward.”
Snyder’s presumptive Democratic challenger in the 2014 elections, Mark Schauer, said Snyder never should have opened pensions up to possible cuts in bankruptcy when he allowed the city, through his appointee as emergency manager, to file for Chapter 9. Michigan’s Constitution bars the diminishing or impairing of pensions although U.S. Bankruptcy Judge Steven Rhodes has said that does not apply in federal bankruptcy court.
“To punt it and leave it up to the federal bankruptcy court I mean is not just shirking responsibility but is violating the state’s constitution,” Schauer said. “That being said, Rick Snyder started this fire, he should put it out. And he should fulfill his constitutional oath to make sure that public employee pensions are not impaired.”
Rep. Brandon Dillon (D-Grand Rapids) also said there are still a lot of questions about the proposal, but there is also a willingness to figure out how to protect retirees and the people of Detroit to move past the bankruptcy.
“It really is going to be dependent on a lot more specifics going forward,” he said. “I don’t think we’re at the point where we have a concrete proposal we can analyze.”
Rep. Theresa Abed (D-Grand Ledge) said when people think of Michigan, they think of Detroit, so it’s important to help the city move forward. However, she said how that’s done is another issue.
“Right now, they just gave a very brief overview that sounds hopeful,” she said. “But how that’s going to work, what that’s going to look like … we didn’t really know anything specific,” she said.
Rep. Gretchen Driskell (D-Saline) said she supports a plan that helps the city move forward as well.
“Personally, you know Detroit is Michigan. … I am really aware of the challenges and the importance of having Detroit be successful,” she said. “So I support moving forward and trying to make sure we protect people who are most at risk.”
Sen. Bert Johnson (D-Highland Park) told reporters after Snyder’s State of the State speech that discussing the Detroit bankruptcy and other issues should have had a greater role in his State of the State address. Snyder only briefly mentioned Detroit and the need to resolve the city’s financial woes this year.
“I think you have to talk about Detroit’s bankruptcy, particularly when he provided the impetus for the gentleman who put us into bankruptcy,” he said, presumably referring to the city’s emergency manger. “It’s still a very, very contentious issue and – as it relates to our ability to get through it very effectively, efficiently, without pensioners being hurt and with operations for the city of Detroit squarely intact – it deserves a little more attention.”
With regard to Snyder’s pitch on aiding the bankruptcy by providing matching state funds and mitigating cuts to retired city employee pensions, Johnson stressed that if the plan is going to be successful, Snyder will have to step up and sell it like he did with Medicaid expansion.
“He tells us that if he doesn’t get it done by April or May that it’s going to be a dead issue as it relates to trying to shore up pension obligations for pensioners,” Johnson said. “I think he’s got to sell it. He’s introduced it; he’s going to have to sell it.
As to whether the DIA should have some skin in the game, Johnson said the DIA will have to “cobble those dollars very quickly.”
Yet the Detroit Free Press and The Detroit News quoted a top DIA official immediately rejecting the idea of contributing $100 million toward the settlement.
“I don’t know that it gets us to any more than 80 percent funded on pension debt obligation, but anything that’s going to put more money back in the hands of people who are making (between $26,000 and $35,000) a year, like my mother, is very, very important for us to prioritize,” Johnson said.
Rep. Stacy Erwin Oakes (D-Saginaw) said she believes there needs to be a fix, but so far is uncertain what the matching fund will be.
“We still don’t know what that would be as it relates to what those retirees would actually receive and what they’d be losing, (and) if those matching funds equate to them receiving 30 cents on the dollar as opposed to being made whole,” she said.
She said the proposal could be a tough sell given that it is an election year, but ultimately she said enough people believe in the mantra “so goes Detroit, so goes the state of Michigan,” that concentrating funds in the city could be beneficial.
“We need to put some focus there, but it needs to be well thought-out,” she said.
But Senate Appropriations Committee Chair Sen. Roger Kahn (R-Saginaw Township) was more skeptical.
Asked his thoughts on the possibility the Senate would take up some of what Mr. Snyder has asked with regard to Detroit’s bankruptcy, Kahn said he would like to be respectful and give the issue a full hearing, but “I’m not on board on this,” he said.
“A lot of us have questions about whether this is deja vu all over again, like the schools; what this is going to do in terms of lining other people up – Pontiac, my Saginaw, Flint – and how we’re going to deal with that potential pitfall,” he said.
Kahn said supporters of the idea will have to make the case spending the $350 million is the best use of those resources.
But he also questioned how much of an impact $350 million would have on a $3.5 billion unfunded liability in the city’s general retirement system (the city has a separate system for police and fire employees).
“The general employee pension shortfall is $3.5 billion, so $500 million, even if we match it at $1 million, is less than a third of the need there,” he said. “That amount of money is like pissing in the ocean – it’s not enough. With our $500 million, I might be able to fund those pilot schools for education (see separate story). That’s the problem. It isn’t that I don’t want to do it, but it’s got to have a meaningful result.”
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