Courtesy of Mish.
At long last, beleaguered taxpayers will not have to put up with nonsense from public unions about the sanctity of pensions.
In spite of Michigan constitutional provisions, the federal judge presiding over the Detroit bankruptcy filing ruled the city filed in good faith. More importantly, the judge ruled the provision in the Michigan Constitution protecting public pensions isn’t a bulletproof shield in a bankruptcy.
Yahoo!Finance reports Judge says Detroit Eligible for Bankruptcy
Detroit is eligible to shed billions in debt in the largest public bankruptcy in U.S. history, a judge said Tuesday in a long-awaited decision that now shifts the case toward how the city will accomplish that task.
Judge Steven Rhodes turned down objections from unions, pension funds and retirees, which, like other creditors, could lose under any plan to solve $18 billion in long-term liabilities.
“This once proud and prosperous city can’t pay its debts. It’s insolvent. It’s eligible for bankruptcy,” Rhodes said in announcing his decision. “At the same time, it also has an opportunity for a fresh start.”
Rhodes’ decision is a critical milestone. He said pensions, like any contract, can be cut, adding that a provision in the Michigan Constitution protecting public pensions isn’t a bulletproof shield in a bankruptcy.
The city says pension funds are short by $3.5 billion. Anxious retirees drawing less than $20,000 a year have appeared in court and put an anguished face on the case. Despite his finding, Rhodes cautioned everyone that he won’t automatically approve pension cuts that could be part of Detroit’s eventual plan to get out of bankruptcy.
Emergency manager Kevyn Orr, who had testified the city’s current conditions are “unacceptable,” release a statement praising the judge’s ruling and pledging to “press ahead with the ongoing revitalization of Detroit.”
Behind closed doors, mediators, led by another judge, have been meeting with Orr’s team and creditors for weeks to explore possible settlements.
Huge “Fresh Start” Win for Detroit
This was a huge, fresh-start win for the city of Detroit and its residents. The unions disagree.
Minutes after the ruling, a lawyer for the city’s largest union, said she would pursue an appeal at the 6th U.S. Circuit Court of Appeals in Cincinnati. City officials got “absolutely everything” in Rhodes’ decision, she told reporters.
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