Quote Originally Posted by Eber Brock Ward View Post
BKGuy, does your "probably yes [[again, to the extent of vested pension benefits)" consider the federal preemption issue, or does it assume that the disposition of that issue has been "constitution not preempted by BK law"?

Beyond that, I have a hard time drawing a non-illusory distinction between [[1) pensions as "a contractual obligation" of the city as one of "the state and its political subdivisions" under Article IX Sec. 24, and [[2) other "contractual obligations," such as bond covenants, vendor contracts, and so on.

To the extent that the pensions are unfunded, I have a hard time seeing how they would enjoy priority over other unsecured creditors.

[[There's also that pesky "thereby" issue, too, though.)
State sovereignty has always been the limiting factor to the Contracts Clause. The State can, within reason, adjust its own obligations, subject to Michigan's Constitution. The scope of the State's rights would likely be resolved by the state Supreme Court.

If the issue came before the judge [[which, again, I don't think either side really wants to have this fight), I would imagine that Chapter 9 allows for the readjustment of pension obligations, just like any other obligation. In my mind, it's a state law conflict in hiding--one state law [[Sec 24) does not allow for the adjustment of pensions, while another [[permitting the filing of Chp 9) doesn't rule it out. You could reconcile those by saying that, in Michigan, a municipality can file for Chapter 9, but not adjust pensions. That is, in the end, what the pensioners will argue [[if it ever gets there).

I think "thereby" refers to "state and its political subdivisions," but I guess the question is "which one?"

I guess the pensioners will affirmatively name the state in a suit after they get a plan they don't like. Suing the state in state court for a determination of the meaning of the state constitution might yield a result that the pensioners don't want, though.