D-Day for Detroit Pensions

Next Tuesday, December 3, at 9:am, according to a notice released this afternoon, is when Judge Steven W. Rhodes will render his decision on whether Detroit can go bankrupt to avoid pension and OPEB obligations.   Considering that our system of ‘justice’ often succumbs to the vagaries of expediency and whatever decision is read will almost certainly be appealed, I still have a hunch as to what will happen.

  1. Judge Rhodes will scold Detroit through 80% of his ruling and then allow for bankruptcy since the alternative (Detroit being bound by contract law and subject to hundreds of lawsuits) is the greater evil.
  2. Kevyn Orr will slash January, 2014 pension checks in half.
  3. Philadelphia will be next (of many).

I have no inside information and might be off on some details (Chicago?) but even if some other course is set upon on December 3, this destination scenario will remain.

4 responses to this post.

  1. Posted by Tough Love on November 25, 2013 at 10:01 pm

    John, While NJ has a few cities with pension (funding ratio) problems, my understanding is the VERY low funding ratio is primarily associated with the State Plans.

    Unless I miss some available options, this bodes real poorly for NJ’s Taxpayers because, as a relatively “wealthy” state, bankruptcy doesn’t seem to be an option to get this noose (the need to fund these grossly excessive pension promised) off our necks.

    And with a Democratic legislature, MATERIAL future service pension formula accrual rate decreases (even if legal) doesn’t seem like something that will happen until AFTER the catastrophe (meaning massive tax increases) has.arrived.

    Do you believe full funding of the ARC once the 7 year contribution grade-in period ends will be the trigger for change ….. via demands from Taxpayers?


    • New Jersey will be a unique case until 2016 as there will be a concerted effort by Christie and all those who expect to go with him to DC to put a happy face on this sad situation. Court rulings will go against legitimate lawsuits, data will be hidden or manipulated (already the monthly updates on asset values have frozen as of 6/30/13) and everyone will pretend that the 2011 tweaks have

      Based on what I’ve seen (primarily in Union County) I don’t see any tax revolt coming soon. Taxes escalate, debt piles up, and everyone blames the other party.


  2. Posted by bpaterson on November 26, 2013 at 3:14 pm

    an old analogy from 1964 still pretty relevant here: scenarios could be:

    1) the innocent taxpayer counting their retirement savings leading up to the public sector implosion, or

    2) the naïve public sector workers looking forward to their pension until it blows up.

    whatever you pick, it just doesn’t end well.


  3. […] on these remarks my original timeline prediction changes a […]


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