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Detroit Pensions CAN be CUT! Beware Rhode Island! State workers may be losing their powerful leverage.
When the money is gone....guess what, the money is gone. Fantastic news for the RI tax payer, as now the sense of entitlement that the state workers/municipal employees have enjoyed may have come to an end. This is such good news! Rhode Island cannot necessarily depend on private citizens to fund the huge pension fund to cover the fiscal mismanagement, and corruption RI has always been know for. For how many years have the city and state workers unions used extortion against legislators to receive benefits unheard of in the private sector. How many people retired people do you know who received a whopping 6% cost of living increase year after year to their pensions? It was a fact that retired employees were actually making more money retired, than the city and state workers working full time that replaced them, and many retirees retire well before age 65, many as early as in their early forties.
Rhode Island you are on notice: Federal law CAN preempt a state constitution in bankruptcy matters.
Judge rules pensions can be cut in Detroit bankruptcy
U.S. Bankruptcy Judge Steven Rhodes ruled today that pensions of city retirees can legally be cut in Detroit's bankruptcy -- a decision that came as a significant surprise to people observing the case.
Rhodes emphasized he won't necessarily allow pension cuts to be approved in the city’s final reorganization plan, called a "plan of adjustment."
Rhodes previously signaled that he planned to decide the issue of whether the pensions can be cut later in the case. But today he said he changed his mind and decided ruling on the issue now would expedite the bankruptcy.
Almost immediately afterward, Michigan Council 25 of AFSCME, the city's largest employee union, filed an appeal to the U.S. District Court for the Eastern District of Michigan. The union also plans to ask Rhodes to allow the case to be sent directly to the 6th Circuit Court of Appeals to expedite the case.
The judge said the city must propose an equitable reorganization plan that treats all creditors fairly.
"Pension benefits are a contractual obligation of a municipality and not entitled to any heightened protection in bankruptcy," Rhodes said.
The Michigan Constitution protects public pensions as a "contractual obligation" that cannot be "diminished or impaired." But the U.S. government allows contract cuts in bankruptcy -- and Rhodes ruled that federal law preempts the state Constitution.
I doubt it. Rhode Island's cities and towns are so much different from one another from the north to southern part of the state. In other words there are towns that are strictly rich and have always been and outnumber the poorer sections thus will keep the balance in check. Central falls situation is sad though in once was already a rough city to begin with before the bankruptcy, now it's just terrible.
Cities and Towns can declare Chapter 9 bankruptcy but States cannot.
There are examples though of 2-3 States who just stopped paying on bonds. Arkansas was one and I believe Mississippi was the other.
Exactly what i was trying to say you just clarified it better.
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