A sudden change of fortune for 32,400 Detroit pensioners in the city’s historic bankruptcy — from the threat of draconian pension cuts to a modest reduction in lifetime benefits — could face mathematical scrutiny as the case proceeds, experts say.
In just 10 months, Detroit Emergency Manager Kevyn Orr has gone from offering pensioners double-digit percentage reductions in benefits to potentially settling for baseline cuts of as little as 4.5 percent.
Orr will have to justify the math and how the smaller reductions will keep the city from falling back into financial distress during a July trial on the feasibility of Detroit’s debt-cutting plan, bankruptcy experts say.
At some point, the city’s going to have to prove their plan works because Judge (Steven) Rhodes is not going to let the city confirm a plan that they cannot live up to,” said attorney Douglas Bernstein, a municipal bankruptcy expert at the Plunkett Cooney law firm. “A consistent theme from Judge Rhodes has been we can’t let the city keep doing bad deals.”