Interesting thought not heard yet!

[Ray1936]

Constitution of the State of Michigan, Section 24:
"Pension plans and retirement systems, obligation.
The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractural obligation thereof which shall not be diminished or impaired thereby."

The question arises thusly: If, indeed, there is a shortage of funds in any particular plan or system, does Section 24 obligate the State of Michigan to, well, "pick up the difference"???

What say you, oh wise ones????

[Scottathew]

"This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding."


​Federal law trumps state law. A Federal bankruptcy judge can alter the pension liabilities of the city.

I've already seen plenty of news that indicates that pensions will only moderately be cut, and that it's the creditors that are taking the biggest bath here.

Things look to be happening rather favorably for pensioners when you consider other things that could have happened.

[Ray1936]

All this is granted, 48307, but it dodges the question. Could the state be liable?

[sumas]

Hi Ray, I have zippo info for you but I support unions and anyone promised a pension. Good luck.

[Ray1936]

Appreciate that, sumas. I think the vast majority are concerned for our plight; it will be interesting to see what develops.

I could take a hit without too much problem. Alas, many of my former colleagues are not quite so financially stable.

[BankruptcyGuy]

Ray, thank you for serving in DPD. I'm guessing you and my father-in-law chewed up some of the same ground.

To answer your question, that is EXACTLY the issue. In Michigan and many other states, localities [[counties, cities, townships) are creatures of the state. They are given what power they have from the state, which can take away that power just as easily. Many have concluded that an obligation of a city must eventually be paid by the state [[if the city does not pay).

The other factor is what is called "sovereign immunity." According to the US Constitution, states are immune from litigation of some sorts [[i.e. those not covered by federal law) unless the state waives such immunity. That means that the state can make itself immune from suit on a particular issue. Has the state waived sovereign immunity with respect to paying debts of a city? I don't think that's really been tested.

So the US Constitution reserves the power to the state to create subdivisions, and the power to render itself immune [[in some instances) from litigation. Chapter 9 [[which is a federal law, of course) opens up a whole new group of questions:

1. Did the passage of Chapter 9 effectively overrule state laws regulating municipal bankruptcy? Or can the state decide eligibility AND order of payments?

2. Can a Chapter 9 debtor seek to move the obligations from a local level to a state level? Some obligations or all obligations?

There are two ways this can happen, and neither is too foreign to bankruptcy courts:

First, the City can directly make a claim against the State in the bankruptcy proceeding. That has not happened, and if it did, I'm guessing that state law would dictate if that was possible. Currently, it is not possible.

Second, if the City gets a plan approved with a discount for pension obligations over the objection of the pensioners, the pensioners could then file suit in state court seeking recompense from the state. If a negotiated settlement is not reached, I view this as very, very likely. This would, however, be a matter of state law, not federal law.

Also, keep in mind that "accrued financial benefits" can mean different things to different people. The Michigan Supreme Court has already ruled that it does not mean healthcare benefits. What about a deferred retirement age? What about freezing the plan? What about a lump sum dissolution of the plan? Those would be very interesting questions, but again they would only come up if a plan like that were proposed.

I apologize if I've been unclear. Please ask away if you have more questions.

[Ray1936]

You've been quite clear, actually. Well, the answer is not as fuzzy as the question, anyway.....LOL!

Discussion among retirees seems to be in unanimous agreement that the healthcare plans are in grave jeopardy. Thusly [[is there such a word?) I've decided to have some long-delayed cataract surgery next month while my Blue Cross is still, well, 'healthy'.

Thanks for your thoughts. Interesting and logical.