Detroit retirees could face cuts to monthly pension checks as high as 40 percent if the state Legislature fails to approve a $195 million one-time infusion of cash for Detroit, the city's emergency manager said today.
Orr was in Lansing this morning to address a newly formed state House committee, Detroit's Recovery and Michigan Future, on the 11-bill package that would authorize the state's contribution. Lansing's pledge is the last piece needed to allow a $866 million so-called "grand bargain" to move forward that intends to shore up the city's pensions and save the Detroit Institute of Arts' collection from a potential fire sale in bankruptcy court.
"Without this settlement make no mistake about it we would have to go back to the drawing board," Orr told the five-member panel.
During his nearly hour-long testimony, Orr said the city's currently proposed bankruptcy-exit plan, called a "Plan of Adjustment," would slash more than $9 billion in long-term debt. At the pace the city's historic bankruptcy continues to move, Detroit is on track to exit bankruptcy some time "later this summer or fall," Orr said.
Though Orr appeared upbeat and confident, the overarching point of the hearing and the legislation came through in a crisp, easily Tweetable quote from the emergency manager to the panel that reporters seized upon: "To put it bluntly, we need your money."
By Orr's estimate, the numbers are drastic: Detroit police and fire employees who receive, say, $35,000 from their annual pension would be cut down to around $20,000 per year -- with no social security. For general retirees, an average $20,000 per year pension could go down to around $12,000.
Besides that, Orr said, the value of the Detroit Institute of Arts' collection would be dumped in a firesale. The proceeds from that would be split evenly amongst all creditors, not just pensioners, he said.
Among the lawmakers sitting on the panel, State Rep. Harvey Santana (D-Detroit) asked Orr the most pointed question about the feasibility of his proposed bankruptcy-exit plan: Does it take into consideration the potential loss of more residents in the city? Will Detroit be stabilized under the restructuring proposal? The city hemorrhaged nearly 25 percent of its population between 2000 and 2010, from over 950,000 residents to around 700,000 today.
Orr said the city's projections estimate a population drop to around 685,000 residents total by 2023, suggesting Detroit's numbers may have flatlined.
A detailed summary of the 11-bill package was released today by the nonpartisan House Fiscal Agency:
(If you've followed the development of the Grand Bargain and are unclear how the state's current $194.8 million pledge could match the previous $350 million pledge offered by Gov. Rick Snyder's -- it represents the present day value of the $350 million. Nancy Kaffer of the Freep has an explainer here.)
The committee is slated to meet again the next two days. The bills could be sent to the full House for consideration as early as next week.