| DETROIT, July 19
DETROIT, July 19 When Paula Kaczmarek moved to
Detroit in 1978 to work for the city's public library system, a
guarantee of good retirement benefits was a key sweetener that
convinced her to leave her previous job in Boston.
"I basically came here for future security," said Kaczmarek,
who retired in 2012, two years earlier than she planned, as the
public library was facing potential layoffs.
Kaczmarek is among the more than 20,000 unionized retirees
whose pensions and healthcare benefits hang in the balance after
Detroit filed the largest municipal bankruptcy in U.S. history.
In an interview, Kevyn Orr, Detroit's state-appointed
emergency manager, said restructuring the city's crippling
legacy costs is critical to Detroit's recovery.
"We can't pay benefits with money that's not there," he
said. "It can't be done."
Retirees and labor officials acknowledged that the city's
finances were in shambles and they would have to share in the
sacrifice to help Detroit recover. But they said some of the
significant benefits cuts reportedly proposed by Orr in talks
with creditors would have a devastating impact on their lives.
"I do have some compassion for people who are investors in
Detroit, naturally, because a lot of my pension income is based
on investing," said 63-year-old retired city librarian Ellen
Simmons. "But it's hard to have a lot of sympathy when there are
20,000 real people who are not living high on the hog."
Although city retirement benefits are enshrined in
Michigan's constitution, there is no clear road map for what
will happen in a Chapter 9 bankruptcy, experts said. The
question is made more complicated by the fact that it is unclear
who has the legal authority to negotiate on behalf of the
Orr and labor officials have locked horns over how to manage
pension and retiree healthcare obligations. Orr was appointed by
Michigan Governor Rick Snyder in March to try to resolve the
city's financial crisis and tackle its $18.5 billion in
The city lists about $644 million in unfunded pension
liabilities, but Orr has said the number is closer to $3.5
billion if "more realistic assumptions" are taken into account.
Other unfunded post-employment liabilities, which include
retiree healthcare costs, account for $5.7 billion of the city's
The city of Detroit's two largest unsecured creditors are
the city's general retirement fund and the police and fire
departments' retirement fund.
In a court filing, Orr said the city intended to create a
committee of retired employees to represent those workers.
"The appointment of a retiree committee is adequate
representation for these individuals and to facilitate the
city's restructuring of its pension and other post-employment
benefit liabilities," Orr said in his filing.
Orr faced three separate lawsuits from current and retired
workers trying to bar his attempts to file Chapter 9.
The conflict ratcheted up when Detroit filed for bankruptcy
in federal court Thursday just minutes before labor lawyers
could block those efforts in another state court located 90
miles (145 km) away.
At this point, it's unclear how much of a haircut, if any,
the retirees will be forced to take. Still, they're preparing
for the worst.
Simmons, who retired in January after working for the public
library for more than 30 years, said she might have to go back
to work or even move in with one of her children depending on
how much is cut from her pension.
"My married kids, do they want mom living with them? They'll
be gracious about it, but that's not what any of us want," she