Why can't Detroit [[and other government units) and corporations

[Packman41]

It's very sad for the pensioners, since they are likely to take a bit of a hit [[not massive, most probably), but their money was unfortunately entrusted to people unworthy of the trust.

Ain’t that the truth.

The “haircuts” to the cash benefits could be minimal. The pension managers keep on says that they are well funded. GRS says 84% and P&F says 96.1% funded. So who do the pensioners trust? Their representatives? Or Kevyn Orr? They cannot have it both ways. If they believe their representatives then they could lose 16% for GRS pensioners and 5.9% for P&F. Not the worst thing in the world if you employer goes bankrupt owing $18 Billion.

Meanwhile, Orr says the underfunding is much worse than the representatives tell their pensioners.

Frankly, it might be easier for Kevyn Orr to just tell the pension reps that they are right, that they are nearly fully funded and negotiate from that point. Then let the pension managers explain it all to their people. After all, they are smart guys – they just returned home from school in Hawaii.

[Wesley Mouch]

Ain’t that the truth.

The “haircuts” to the cash benefits could be minimal. The pension managers keep on says that they are well funded. GRS says 84% and P&F says 96.1% funded. So who do the pensioners trust? Their representatives? Or Kevyn Orr? They cannot have it both ways. If they believe their representatives then they could lose 16% for GRS pensioners and 5.9% for P&F. Not the worst thing in the world if you employer goes bankrupt owing $18 Billion.

Meanwhile, Orr says the underfunding is much worse than the representatives tell their pensioners.

Frankly, it might be easier for Kevyn Orr to just tell the pension reps that they are right, that they are nearly fully funded and negotiate from that point. Then let the pension managers explain it all to their people. After all, they are smart guys – they just returned home from school in Hawaii.

Orr has said just that to the pension trustees. He told them to be careful about statements that they are well funded. That's basically a statement that you don't need much money out of the bankruptcy and can do fine with what you have.

[Locke09]

Orr has said just that to the pension trustees. He told them to be careful about statements that they are well funded. That's basically a statement that you don't need much money out of the bankruptcy and can do fine with what you have.

I thought they should be careful myself - at least the Police and Fire Fund. For them, even if they only got 10 cents on the dollar, using Orr's number instead of theirs, they would be made whole. But for the General Retirement Fund, they would not.

It's not as simple as that though. They have to weigh whether to fight on one front or two. There is the question of whether Detroit's debt is being overstated and they don't belong in bankruptcy in the first place [[which is what I believe). Then there is the question of whether the pension money should be touched at all. They are opting to fight on both fronts.

And yes, I have thoroughly reviewed Orr's financial report. I know the City's budget [[which Orr had to approve by the way). I take into consideration: the deal they claim they already have with one creditor that saves 11 million per month, the fact that they can cut retiree healthcare outside of bankruptcy saving at least another 10 million per month, and the amount of debt service that is paid from the general fund - and I believe the City can pay its bills if it wants to.

[professorscott]

I believe the City can pay its bills if it wants to.

Nobody disputes that. The City, according to Mr. Orr [[and I believe him) can pay its bills or service its debt, but not both. For years it has been choosing to do a bit of each while borrowing more and more. This cannot go on forever, and now it won't.

[mwilbert]

If it is clear that the city can pay its bills and service its debts if it wants to, I don't expect the judge will approve a plan where the city doesn't pay its bills and service its debts. I don't personally believe that is the case, but presumably the judge will look at it more closely than I have.

[BankruptcyGuy]

BG, any comments on whether you think federal bankruptcy law will defer to state constitution, or the other way around.

Also, am I right that the Michigan Constitutional protections were more likely to stand under State EFM and less likely to stand under Federal bankruptcy law?

I've wondered why many were fighting against EFM-land when it seemed like a better place to politically fight for sacred cows than BK.

Meanwhile, in San Francisco..."BART management [[in current negotiations) has asked workers, who earn a median salary of about $80,000, to contribute to their pensions. BART employees currently pay nothing into the pension system." [[LA Times)

Just a guess [[as I've indicated, there are exactly zero experts on the topic), but when a state clearly indicates that certain bills are to be paid first, the court won't overturn that. In this case, I'm not sure how that plays out. Could:

a. the City be forced to pay into the pension hole forever, and the only way out is cutting services, even after giving bondholders 10 cents on the dollar; or

b. the State is forced to fill the pension hole, the City can upgrade services, bondholders get 10 cents on the dollar, and local control of pensions go away.

I'm thinking it's going to be [[B). You saw the first clue when the pensioners objected to having union reps on the retiree committee. Pensioners would rather have the pensions preserved for them, even if that means cutting them in the future. The unions want the pensions preserved for current workers as well. Their interests have diverged.

[Wesley Mouch]

...Pensioners would rather have the pensions preserved for them, even if that means cutting them in the future. The unions want the pensions preserved for current workers as well. Their interests have diverged.

Ah, of course. That was obvious. From all the media articles, I couldn't figure out what the game was between pensioners and unions. Thanks for speaking the obvious truth that the media in all their brilliance doesn't see.