December 2013/January 2014 - Labor Issues
December 17, 2013

Union stays vigilant in wake of Detroit pension ruling

Author: By Deirdre Salsich, Wendy Star and Claude I. Hersh, NYSUT's New York City Office of General Counsel
Source: NYSUT United

A federal bankruptcy judge recently granted the request of the City of Detroit to reorganize its debts pursuant to the U.S. Bankruptcy Code. Detroit has been struggling with its debts for years and, several months ago, Republican Gov. Rick Snyder imposed an emergency manager on the city, over the city's vigorous objections.

The bankruptcy judge found that Detroit was eligible for reorganization and could move forward with a plan to restructure its debts. The judge also ruled that public employee pensions could be reduced for the purpose of restructuring Detroit's debt, despite provisions in Michigan's state constitution prohibiting any diminution of pensions for public employees.

The judge stressed that public sector unions will play an important role in negotiating with the emergency manager to reach a deal that will help Detroit become solvent while taking into account the needs of current and retired city workers.

While New York state has a constitutional provision similar to the one in the Michigan constitution, its employees' and teachers' retirement systems are statewide pension systems. New York state has maintained a balanced budget in recent years and has never faced a financial crisis of the magnitude that Detroit is experiencing.

"Right now, pensions invested in the New York State Teachers' Retirement System (TRS) and the state Employees' Retirement System are safe and secure," said Paul Farfaglia, one of three teacher representatives on the TRS Board of Directors. "We will continue to be vigilant and block attempts to undermine and underfund the retirement security of public employees."