Retirees Fear Losing Pensions In Bankrupt Detroit

A federal judge has given Detroit the green light to enter bankruptcy. Host Michel Martin speaks with Detroit Free Press columnist Rochelle Riley about what it means for Motown residents.

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MICHEL MARTIN, HOST:

This is TELL ME MORE from NPR News. I'm Michel Martin. Later in the program, we want to tell you about an increasingly lethal conflict that you might not have heard much about. It's in the Central African Republic. That's later. But first, we want to check in on an economic crisis much closer to home - that is, in Detroit. A judge cleared the way on Tuesday for Detroit to enter bankruptcy.

The ruling could allow the city to start digging its way out of $18 billion in debt. But it also means that retired city workers could lose pension benefits. And current workers may not get all the benefits that they've been promised - or rather, that have been negotiated on their behalf. We wanted to hear more about all this, so we've called, once again, Rochelle Riley. She's an award-winning columnist for the Detroit Free Press. Welcome back, Rochelle. Thanks so much for joining us once again.

ROCHELLE RILEY: Thank you, Michel.

MARTIN: As briefly as you can, can you explain the ruling?

RILEY: Well, Judge Rhodes said that, even though the city - the emergency management team that's running the city did not bargain in good faith, and there were other things that were bothersome, that there was no other route for Detroit to take. So he accepted the filing for the largest municipal bankruptcy in U.S. history.

MARTIN: Can I ask - it's such a - it's one of those subjective questions, but I am just asking your reaction to this. What's the mood in the city today?

RILEY: Chaotic, frightened - there are different groups of people and, as you can imagine, the largest group of people who are frightened are retirees. Many of them too old to go out and seek employment, but who are living paycheck to paycheck. And waiting to find out how much worse their lives will be. There are different camps on what should be done to make the bankruptcy easier.

There's the art versus people argument - the Detroit Institute of Arts, which is the largest and best-known museum in the state, has art that's owned by the city. It's a city asset. It's included in the assets for the bankruptcy. Some people want it sold. But, of course, if you sell one piece of art from that museum, you will kill it because no one will ever donate to it again.

MARTIN: And, it's not just - I wouldn't say people - retirees, but there are also people who receive benefits. For example, you spoke with Syri Harris. She is the widow of a Detroit firefighter. And I just want to play a short clip from the conversation you had with her.

(SOUNDBITE OF INTERVIEW)

SYRI HARRIS: My husband died in the line of duty almost five years ago after serving for 17 years on the fire department. So for us not to be eligible to receive his pension benefits, which he definitely worked for and gave the ultimate sacrifice, is pretty - it's a slap in the face.

MARTIN: But do we know whether that's, in fact, true? I mean, do we know, in fact, that beneficiaries like Mrs. Harris will, in fact, have their benefits cut?

RILEY: Well, this is the most important part of what Kevyn Orr has said that people are not paying attention to, and that we don't know the details of. He said there are going to be classes of beneficiaries and cuts, which means it will affect some people more than others.

He refused to give any details about whether that means older people might have smaller cuts. Or whether, you know, families like Syri Harris' might have fewer cuts because she's a working mom with six kids, three of whom live at home. Do you treat her differently than someone who's 80? Those are all questions that are going to be worked out in this plan of adjustment that he's working on - he and his team - that will then be given to city officials and stakeholders to look at.

MARTIN: Now, what about Detroit's creditors? Have they had a reaction to this so far?

RILEY: Their reactions are as different as how much money they're owed and whether they're secured or unsecured creditors. Secured creditors like your money in the bank. They have other ways to get their money back. They don't want to have to do that, but they can. Unsecured creditors want whatever - you know, by whatever means necessary. If that means selling art from the museum or cutting pensions or whatever takes, they want that. So you've got so many different groups of people who are fighting for what they want. There will be lawsuits for days.

MARTIN: One of the reactions, though, that we have heard - and we were - you actually alluded to this earlier - is that the ruling actually undercuts the city's credibility because it'll be difficult for the Detroit emergency manager, Kevyn Orr, to make deals with anybody because there's not, sort of, an understanding whether the city actually has the ability to negotiate in good faith. And can I just ask you to address that?

RILEY: Well, there are two schools of thought here. One thing is that Kevyn Orr, as the emergency manager, is the utmost authority for all city contracts and city decisions right now. And quite frankly, some people are feeling a little un-trusting of what might happen. I don't think he's going to cut any deals - particularly on paper - that he won't honor. But on the other hand, the types of deals that he's offering are deals that no one really wants and they aren't talking about.

I think that with this plan of adjustment, the creditors are already filing their briefs and already getting them ready because no matter what it says, they're not satisfied. They don't think that he is taking into account any of their needs, or the fact that Detroit did borrow money or owe money for different things. There's no way that you can take an $18 billion debt and not pay somebody pennies on the dollar. And everybody's trying to figure out who's going to be the one to get the pennies and who will be the one to get the dimes.

MARTIN: And you also mentioned the possibility and, in fact, the likelihood of ongoing lawsuits to that effect. So you said at the beginning of the conversation that the judge said, yes, he found credible the argument that these - that, in fact, there was kind of bad faith, but that there is no other choice. Do we know at this juncture who will be the ultimate authority? Or is the working assumption that all of these decisions will, at some point, be before a judge? And at what level will the ultimate decision actually be made?

RILEY: Well, right now, this plan of adjustment will go to the stakeholders. There may or may not be changes. And it will go to the judge. And the judge will decide whether this meets the needs of the bankruptcy. And then after that, there can still be lawsuits and appeals. I can tell you right now, Lee Saunders said that the union is going to fight tooth and nail forever.

MARTIN: Who is that?

RILEY: They're not going to get...

MARTIN: Lee Saunders is who?

RILEY: Lee Saunders - the union head. Head of the...

MARTIN: Who represents Detroit, yeah.

RILEY: Yeah, they represent a lot of these employees. But he's talking about all people. And I'm glad you mentioned that it's not just retirees, but all people who earned their pensions or whose dead spouses or other people earned their pensions - they have the right to know that they're going to get what they earned. Not more than what they earned, but what they earned. And the state of Michigan is one of the few states where your pension is covered by the Constitution. It is constitutionally illegal to do anything to the pension. But of course, Kevyn Orr, the emergency manager, has already said that federal law and a federal bankruptcy judge trumps state law. So there's that lawsuit.

MARTIN: Lee Saunders, just to clarify, is the president of the American Federation of State, County and Municipal Employees...

RILEY: Yes.

MARTIN: ...Which represents 1.6 million members. Finally, we have just about a minute left. You know, Detroit just had elections and a new mayor was elected, Mike Duggan. Does he have any role in this? Or the former mayor, Dave Bing, for that matter, the current mayor, Dave Bing, who's soon to be succeeded by Mike Duggan, do they have any role in this at this point?

RILEY: Well, that's an interesting question. And we asked that of Kevyn Orr when he came to the Free Press for an exclusive conversation. And technically, no, they don't. Mike Duggan has had lots of conversations with him. But he is not a part of writing this plan of adjustment. Dave Bing literally has less than a month in office. And while he has been appearing at the press conferences and saying, you know, sort of things that you expect a mayor to say, he doesn't really play a role anymore. So right now, the citizens of Detroit are being represented by the governor of Michigan.

MARTIN: Rochelle Riley is an award-winning columnist with the Detroit Free Press. She's been joining us to talk about these issues as Detroit works through this process. And she was with us once again from WUOM in Ann Arbor, Michigan. Rochelle Riley, please keep us posted. Thanks so much for joining us.

RILEY: Absolutely. Thank you.

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