By Susan Kelly
July 27 Michigan's Attorney General Bill
Schuette, a Republican, said on Saturday he would defend
retirees who risk losing public pensions because of Detroit's
bankruptcy, putting him at odds with the city's emergency
manager appointed by fellow Republican Governor Rick Snyder.
Schuette, an elected official, said the Michigan state
constitution is "crystal clear" in stating that pension plans
are a contractual obligation that may not be diminished or
"Retirees may face a potential financial crisis not of their
own making, possibly a result of pension fund mismanagement,"
Schuette said in a statement.
The attorney general said he would file in federal
bankruptcy court on Monday on behalf of the pensioners affected
by the biggest municipal bankruptcy filing in U.S. history.
A U.S. bankruptcy court judge on Wednesday dealt a blow to
Detroit's public employee unions and pension funds opposed to
the filing by suspending legal challenges in Michigan state
courts while he reviews the city's petition for protection from
The city's unions and pension funds had hoped to keep the
fight in state court, where they felt Michigan's constitutional
protections of retiree benefits would prevail against any
efforts by state-appointed Detroit Emergency Manager Kevyn Orr
to scale them back.
Judge Steven Rhodes ordered three lawsuits filed by city
workers, retirees and pension funds halted and said that applied
also to suits against Orr as well as Michigan's governor and
In a June 14 proposal to creditors, Orr called for
"significant cuts in accrued, vested pension amounts for both
active and currently retired persons."
A spokesman for Orr said on Saturday the bankruptcy court
would have the final say on the pension issue.
"The emergency manager plans to establish the city's
eligibility to file for Chapter 9 bankruptcy protection and then
move as swiftly as possible to propose a plan of adjustment that
will help create a strong and viable Detroit and will enable the
city to provide essential public services to its 700,000
residents," Orr spokesman Bill Nowling said in an emailed
Detroit, a former manufacturing powerhouse and cradle of the
U.S. automotive industry, filed for bankruptcy protection on
The city has struggled for decades with companies moving or
closing, rampant crime, shrinking population and political
corruption. The city's revenue failed to keep pace with
spending, leading to years of budget deficits and a dependence
on borrowing to stay afloat.
Detroit has more than $18 billion of debt and unfunded
liabilities. That includes $5.7 billion in liabilities for
healthcare and other retiree benefits and a $3.5 billion pension
Schuette said he would continue to represent governor Snyder
and state agencies in legal proceedings related to the
bankruptcy, even though he is taking a different view on the
In an emailed statement, Snyder's press secretary Sara
Wurfel said the governor's office expects that Schuette will
"vigorously defend" its efforts as well.
"Our response is that this is an important issue, and we
appreciate and support efforts to get clarity and help determine
the best path moving forward that respects and is fair to
pensioners and all parties," Wurfel said.