Feb 5 In what would be a major step toward
resolving Detroit's historic bankruptcy case, Michigan Governor
Rick Snyder on Wednesday unveiled plans to use state funds to
help pay for Detroit worker pensions in his proposed $52.1
billion state budget.
The insertion of the Detroit pension money is Snyder's first
official move toward previously announced plans to tap $17.5
million a year over 20 years from the state's share of a 1998
multi-state settlement with U.S. tobacco companies.
Last month, the Republican governor proposed adding $350
million in state funds to money pledged by U.S. foundations to
help fund Detroit's retired worker pensions and keep city-owned
art work out of the bankruptcy case.
Pension funds are Detroit's biggest unsecured creditors, and
Kevyn Orr, the state-appointed emergency manager running
Detroit, has pegged the unfunded pension liability at $3.5
billion. Pension cuts are among options Orr has said he is
considering in his effort to restructure Detroit's finances.
In a plan of financial adjustment circulated to major
creditors last week, Orr put forward proposals to use state
money, along with $470 million pledged by foundations and the
Detroit Institute of Arts, to help make the city's pension
Some lawmakers in the Republican-controlled legislature have
opposed any kind of state bailout for the state's biggest city.
But House Speaker Jase Bolger is open to the idea, according to
"Tobacco money is one potential source of revenue the
speaker is willing to consider to make the settlement (to get
Detroit out of bankruptcy) possible," spokesman Ari Adler said.
Detroit, which filed the biggest municipal bankruptcy in
U.S. history in July, has a March 1 deadline to submit an
adjustment plan to U.S. Judge Steven Rhodes, who is overseeing
Snyder's $52.1 billion all-funds budget for the fiscal year
that begins Oct. 1 includes $9.4 billion in general fund
spending and $13.9 billion toward a school aid fund.
His plan would boost Michigan's budget stabilization fund to
$700 million with a new deposit of $120 million. Another $122
million would launch the state's new health savings fund to
offset future costs.