Federal Court Ruling on Detroit Bankruptcy Jeopardizes Public Employee Pensions Nationally

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Posted Dec. 11, 2013

Interview with John C. Philo, legal director with the Maurice and Jane Sugar Law Center for Economic and Social Justice, conducted by Scott Harris


Detroit, an American city that once was the hub of the world’s leading automobile manufacturers became the largest municipality in U.S. history to enter into Chapter 9 bankruptcy after federal judge Steven Rhodes handed down his ruling on Dec. 3 in a controversial case being watched closely around the country.The ruling allows bankruptcy proceedings to move forward over the objections of 48 labor union groups and public employee retirees who had urged Judge Rhodes to reject Detroit's eligibility for bankruptcy. Opponents of the ruling have already taken steps to appeal the case. As part of the bankruptcy process, Judge Rhodes announced he will allow Detroit, which is $18 billion in debt, to cut pension benefits – but emphasized that he will only authorize pension cuts if he finds them to be fair and equitable.

Because Judge Rhodes’ authorization for cuts to city workers’ pensions is viewed as a possible landmark legal precedent for other cities in financial trouble, retirees and labor unions were quite naturally alarmed. Further, Detroit’s unelected emergency manager, Kevyn Orr, who was appointed by Michigan’s anti-union Republican governor, Rick Snyder, has moved forward on privatization of city services and signaled he may also sell off many masterpieces in the city’s Institute of Arts Museum. Between The Lines’ Scott Harris spoke with John C. Philo, legal director with the Maurice & Jane Sugar Law Center for Economic & Social Justice, who examines the recent court ruling in Detroit's bankruptcy case and the impact it may have on public employees pensions in the motor city and other municipalities across the country.

Find links to analysis and commentary on Detroit’s bankruptcy from the Maurice and Jane Sugar Law Center for Economic & Social Justice by visiting http://sugarlaw.org.

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