If you aren’t following every twist and turn in the saga of Detroit’s bankruptcy, you may think things are well on track.
Today, in fact, came the good news that the city has apparently reached a deal with its unsecured bondholders, who are evidently going to settle for almost 75 cents of every dollar owed them.
But the biggest and toughest challenges are ahead.
And if you think the Detroit Institute of Arts is now safe, think again.
Here is how things stand:
Yes, there is a proposal on the table under which the state, the DIA, and a combination of foundations would contribute a little more than $800 million into the city’s undercapitalized pension funds. In return, all agree that the art would be saved.
The foundation and museum share of this money has been raised, but the state Legislature hasn’t voted yet.
There are a lot of lawmakers, especially Republicans, who aren’t eager to give Detroit a dime. This deal also hinges on Detroiters voluntarily agreeing to accept steep cuts in fairly meager pensions. And both things are far from certain.
Yesterday, Gov. Rick Snyder announced that there would be no money from the state unless Detroit pensioners agree to take the cuts first, before they are even sure what the Legislature will do.
That has to happen pretty soon, in fact, to give lawmakers time to act before they recess to begin campaigning for the August primary, but it is hard to see how this can be resolved quickly.
On May 1, complex ballots will be mailed out to all city employees and retirees.
As I understand it, they will explain what will happen to their pensions under various scenarios, all of which mean considerable pain.
To make the so-called “grand bargain” work, a majority of both the city’s general retirement and public safety employees have to vote to accept the cuts. This might not happen quickly, since they apparently will have up to two months to return them.
I talked to one retiree, a woman who happens to be college-educated and white, who said that no amount of art was worth cutting the pension she had spent her life working for.
There are also plenty of Republican legislators who wouldn’t vote money for Detroit if everyone in the city stood on their heads.
I don’t even want to think about the reaction in the city if the pensioners vote to sacrifice their income and the Legislature says, thanks but no thanks. That would be terrifying.
Today, we are in a situation where we have to hope that a bunch of modestly paid government workers and retirees vote to give up more than one-fourth of the pensions they’ve counted on all their lives. If they don’t, things will end up being much worse.
This is happening in a nation which is still supposedly the richest on earth, and where one percent of all families have household incomes of at least half a million a year.
You don’t have to be very far left to think that something about this doesn’t sound very right.
Editor's note: An earlier version of this essay incorrectly stated the amount some bondholders agreed to in a settlement announced today. Also, there have been significant developments on the DIA front that have changed the dynamic significantly. Michigan Radio will have more on that later today.
