In a landmark decision, a federal judge on Dec. 3 ruled that Detroit is eligible for bankruptcy and that the city can, in its financial restructuring, cut the pensions that retired municipal workers now receive.

Citing the city’s heavy debt load, U.S. Bankruptcy Court Judge Steven Rhodes said that although the Michigan state constitution explicitly protects public pensions, federal bankruptcy law trumps the state’s guarantee.

The American Federation of State, County and Municipal Employees (AFSCME), the biggest union of the city’s workers, is appealing the ruling.

“Many pensioners are getting $19,000 a year and it could go as low as $9,000,” said AFSCME attorney Sharon Levine. “Some will lose their homes.”

Retiree Amru Meah, 57, said a big pension cut “may force me to file for bankruptcy.”

Meah worked 32 years as the director of the city’s building, safety and engineering department.

Darwina Wallace, 69, who worked for the city 31 years, shares Meah’s concerns. Wallace’s monthly pension is less than $2,600 per month after taxes.

Detroit Free Press, Dec. 3, 4
Reuters, Dec. 3