Retirees Mike Shane, left, and William Davis protest near the federal courthouse in Detroit, Thursday, July 3, 2014. Ballots submitted by city workers, retirees, pensioners and other creditors likely will determine how quickly Detroit exits its historic bankruptcy. The city’s two pension groups have been pushing their members to vote “yes” on a restructuring plan that seeks to cut their income. Rejection of the plan could lead to what’s known as a cram down and steeper reduction in pension payments. (AP Photo/Paul Sancya)The Associated Press
DETROIT – The most anticipated vote in Detroit this summer isn't for a city office. Instead, ballots submitted by city retirees could determine how quickly Detroit exits its historic bankruptcy and how much of the financial weight pensioners will bear.
They are being asked to vote "yes" or "no" by Friday on a proposal to cut pensions for non-uniformed retirees by 4.5 percent and erase cost-of-living allowances. The proposal also eliminates some cost-of-living payments for retired police and firefighters.
Voting "no" could result in deeper cuts to pensions for the city's 32,000 retirees and current and former city workers.
Voices urging approval have been loudest and include Gov. Rick Snyder and Detroit emergency manager Kevyn Orr, the proposal's architect. Last month, the General Retirement System and Police and Firefighters Retirement System did the same, saying a "no" vote would lead to deeper cuts to pensions in what is known in bankruptcy as a cram down.
That "would be far worse than the settlement on the table," said Bruce Babiarz, spokesman for retired police and firefighters. "This is a very serious matter and people need to vote in terms of the impact on their pension, their family and their life."
Despite pressure to vote "yes," some retirees have said bankruptcy should not be a reason to break the state constitutional protections of public pensions. They would prefer to take the fight to a higher court, even if Detroit is broke and the pension funds are struggling.
The proposals are part of Orr's restructuring plan for the largest municipal bankruptcy in U.S. history. Orr has said the pension systems have $3.5 billion in unfunded liabilities.
The state, major nonprofit foundations and Detroit auto companies have pledged what over time amounts to $816 million in a "grand bargain" to lessen the impact on pensions and keep city-owned artwork from being sold to help satisfy Detroit's immense debt.
In May, Orr said the "yes" vote among retirees was running about 2-to-1. Bankruptcy Judge Steven Rhodes quickly told the city to stop speaking publicly about the vote.
Cecily McClellan, 61, voted "no," despite what she calls a political-style campaign to sway her and other retirees.
"I've never seen anything like it in my life," said McClellan, who worked 24 years in the city's human services and health departments. "I think this is coercion, intimidation. This is fear-mongering."
Boards of both pension systems sent letters to their members last month reminding those who mailed in ballots early that they can resubmit them before the deadline if their minds have changed. While allowed under the bankruptcy process, it still doesn't sit well with McClellan.
"The letter said if you want to change your vote, then you can change your vote pretty much from a 'no' to a 'yes,'" she said.
Retirees in the two pension systems vote in two separate classes and only are allowed to cast ballots on cuts that impact them. Both classes must approve the plan or the "grand bargain" money to support pensions is off the table. Deeper cuts would be needed to make up that amount, Orr has said.
Each pension system has held meetings for members to explain the voting process and what's at stake.
"At all times we made sure all of our membership knew these were not meetings to tell them how to vote," according to General Retirement System spokeswoman Tina Bassett.
"At the first four meetings, the GRS board had not endorsed the plan. By the last meeting, they had done so."
Time is short for those wanting to revote because a California consulting company hired to tabulate the votes must have them by Friday. Bassett suggested that retirees mail ballots by Monday or Tuesday.
All classes of creditors, including companies owed money by the city and bond insurers, also must vote by Friday on the aspects of Orr's plan of adjustment that affects them.