The Michigan Senate on Tuesday passed a package of bills that includes state money to aid Detroit retirees, a key element in the city's plan to adjust its debt and exit the biggest municipal bankruptcy in U.S. history.

The action by the Republican-controlled Senate sends the nine bills to Governor Rick Snyder, who has pushed lawmakers for state money for Michigan's biggest city. The measures won approval from the Republican-controlled House of Representatives on May 22.

Under the so-called grand bargain in Detroit's debt adjustment plan, Michigan's nearly $195 million lump sum contribution, along with $466 million pledged over 20 years by philanthropic foundations and the Detroit Institute of Arts, would be used to ease pension cuts for city retirees. The deal would also protect city art works from being sold to raise money to pay city creditors and includes commitments from two unions to raise money for retiree healthcare costs.

All of the contributions are contingent on each other and on members of Detroit's two retirement systems agreeing to accept minimal cuts to their pensions to help the cash-strapped city deal with $18 billion of debt and other obligations.

Final approval of the bills by the Senate was hailed by Detroit Mayor Mike Duggan, who said it will help the city "honor the contract we made with our city retirees."

The legislation would allow Michigan to take the money out of its rainy day fund. The money would be paid back to the fund over time from Michigan's share of a national settlement with U.S. tobacco companies.

The bills also create a nine-member oversight panel that would stay active until Detroit meets certain financial thresholds and require the city hire a qualified chief financial officer and submit four-year financial plans.

The bills were first passed on Tuesday by the Senate Government Operations Committee, which sent the package to the full chamber. The committee did not take up a bill dealing with a property tax millage for the art museum.

State officials have warned that unless the state participates in the settlement, Michigan could be hit with big legal and social service costs in the wake of larger pension reductions for Detroit retirees.

U.S. Bankruptcy Judge Steven Rhodes has set July 24 for the start of a hearing on Detroit's debt adjustment plan to determine if it is fair and feasible. 

(Reporting by Karen Pierog; Editing by Chizu Nomiyama and Richard Chang)