Michigan Attorney General Bill Schuette has issued a “clear and strong statement” on the state constitutional protection of Detroit workers’ and retirees’ vested pension benefits, according to Lisa Dedden Cooper, AARP Michigan Manager of Advocacy.
In his filing with the U.S. Bankruptcy Court, Schuette says the Michigan Constitution "unambiguously prevents public officials from diminishing vested public-employee pension rights... This provision prohibits the State, its officers, and any of its political units, including the City and its officers, from diminishing or impairing the pension benefits currently being received by retired City pensioners."
Following are other excerpts from the attorney general’s filing:
"It is imperative that this bankruptcy yield a new, revitalized City, but this process must occur in such a way as to ensure the City abides by its constitutional limitations. The State’s most fundamental law—its Constitution—cannot be sacrificed during the process."
""This constitutional promise thus ensures that there is never a time, a place, or a method for diminishing or impairing the State’s or a political subdivision’s obligation with respect to the accrued financial benefits of a pension plan or retirement system."
“... the City of Detroit is constitutionally obligated to keep the People’s promise as it proposes a plan that will allow the City to flourish while honoring the lifelong commitment of Detroit’s retired public servants."
"... a bankruptcy filing does not relieve the City and its emergency manager of their obligation to follow Michigan’s Constitution. And that restriction includes the constitutional provision that prohibits a political subdivision like Detroit from diminishing or impairing an accrued financial benefit of a pension plan or retirement system."
“when the City proposes its plan, it must act within all of the state-law limits that guide the City’s conduct.... the City cannot propose a plan that diminishes or impairs accrued pension rights of public employees."
“The constitutional protection is absolute. So the City can no more authorize a plan that reduces accrued obligations to public pensions than a plan that discriminates on the basis of religion. Accordingly, while the City has the ability to address health benefits or unaccrued pension benefits (neither of which Michigan’s Constitution specifically protects), vested pension benefits are inviolate."
" Article IX, § 24 makes the City of Detroit’s bankruptcy quite different than the one at issue in In re Stockton, because the California Constitution contains no specific protection for pensions, only a generic Contracts Clause."
"... Article IX, § 24 is an impermeable imperative, and its place in the pantheon of Michigan constitutional rights is akin to the prohibition on taking property without just compensation.... Constitutional provisions of this nature are innate to the People of Michigan—not subject to discharge by exigency including a Chapter 9 proceeding under the federal Bankruptcy Code. The City and its emergency manager therefore cannot jettison article IX, § 24 when they propose a reorganization plan."
See the entire filing here: http://www.michigan.gov/documents/ag/Detroit_Bankruptcy_Statement_Regarding_the_Michigan_Constitution_8_19_03_STAMPED_431282_7.pdf