It looks like Detroit is making some progress in negotiating
with unions over pension cuts. Current uniformed (i.e., firefighter and police)
retirees will see no reduction in their benefits, but will see smaller cost of
living adjustments in the future. Current non-uniformed retirees will see a cut
of 4.5% in their pension benefits and will see no cost of living adjustments
going forward. This is a substantially better deal for retirees than the pension
cuts initially proposed by the City’s emergency manager—34% for non-uniformed
and 14% for uniformed retirees. Both of these groups will have to vote on the
proposed changes to their pensions as part of the bankruptcy plan approval
process. This differential treatment of non-uniformed retirees may seem unfair,
but apparently the two groups have entirely separate pension funds, and the
police and firefighter fund has been better managed than the non-uniformed
fund.
Even though the dominant message we hear is how
public-sector retirees are living the high life on the taxpayer’s dime, the
average pension figures in Detroit certainly belie that contention.
Non-uniformed retirees received average annual payments of $18,275, while police
and firefighter retirees received almost $30,000 on average. The U.S. Department
of Health and Human Services has set the 2014 poverty guidelines at $15,730 for
a two-person household, and $19,790 for a three-person household. Detroit’s
average pension payments for current retirees are simply not lavish by any
measure. Some pensioners may also have social security payments related to
other jobs they held over the years, but the reality is that many of these
retirees are probably barely scraping by.
See “Detroit Pension Cuts Hit Civilian Workers Hardest,” http://money.cnn.com/2014/04/17/retirement/detroit-pension-cuts/;
“Just How Generous Are Detroit’s Pensions,” http://money.cnn.com/2013/07/23/retirement/detroit-pensions/;
“Detroit Reaches Deal Limiting Pension Cuts,” http://money.cnn.com/2014/04/16/news/detroit-pensions/index.html;
2014 Poverty Guidelines, http://aspe.hhs.gov/poverty/14poverty.cfm.
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