The Real Reason Detroit Went Bankrupt

As the story goes, the city of Detroit went bankrupt because of $18 billion in long-term debt, in large part caused by pension and health care benefitsA new report, written by Wallace Turbeville and released today from Demos, says that narrative is inflated, inaccurate and irrelevant to explaining the city’s bankruptcy.

Despite what the city’s emergency manager Kevyn Orr, who was hired by Gov. Rick Snyder (R), says, the $18 billion figure is not relevant to the city’s bankruptcy. To emerge from the bankruptcy, according to chapter 9 of U.S. bankruptcy code, Detroit only needs to address its cash flow shortage, a number that even Orr sets at only $198 million. But that number, much like the $18 billion number, is inflated because it goes with extremely aggressive assumptions for economic trends that are very unlikely to represent what really happens.

When projecting costs, governments often create several projections, often reflecting best-case scenarios, worst-case scenarios and some moderate position in between those two. Governments usually choose the moderate option in order to determine their budget projections. But Orr, Turbeville says, has chosen the worst-case scenario and isn’t at all based on a certain liability that the city will face. Furthermore, Orr includes in that total nearly $6 billion of debt from the Water and Sewage Department debt as city liability, despite the fact that this liability is based on an area much broader than the city. The department covers 3 million people in southeastern Michigan, not just the slightly more than 700,000 people who actually live in Detroit.

Turbeville notes that the city’s operating expenses have declined by 38% since the beginning of the Great Recession. During that same time, the city’s pension obligations only rose by $2 million. Health care expenses increased by 3.25%, less than the national average of 4%. The biggest proportion of increased costs for the city actually comes from debt service and financial expenses related to complex Wall Street investments that amounts to more than pension and health care increases combined. Other key components of the city’s deficit are:

  • A significant decline in revenue based, in large part, on the city’s declining population, which contributed to declines in tax revenue and property values.
  • A decline of $67 million in state revenue sharing with the city.
  • As much as $20 million annually in corporate subsidies that have provided questionable benefits to Detroit.

The report concludes:

Detroit’s bankruptcy is, at its core, a cash flow problem caused by its inability to bring in enough revenue to pay its bills. While emergency manager Kevyn Orr has focused on cutting retiree benefits and reducing the city’s long-term liabilities to address the crisis, an analysis of the city’s finances reveals that his efforts are inappropriate and, in important ways, not rooted in fact. Detroit’s bankruptcy was primarily caused by a severe decline in revenue and exacerbated by complicated Wall Street deals that put its ability to pay its expenses at greater risk. To address the city’s cash flow shortfall and get it out of bankruptcy, the emergency manager should focus on increasing revenue and extricating the city from these toxic financial deals.

Read the full report.

Reposted from AFL-CIO NOW

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Detroit Retiree Invites Governor Snyder Over for Dinner

Donald Smith is one of the 21,000 retired public workers in Detroit facing pension and health care cuts in the wake of Michigan Governor Rick Snyder and Detroit Emergency Financial Manager Kevyn Orr’s management of the city bankruptcy.

Detroit public workers have already made sacrifices to keep the city afloat, including a $160 million in annual savings from a 10 percent pay cut, health benefit reductions, and a 40 percent cut in future pension benefits, Orr is making public worker pension cuts a key part of Detroit’s restructuring.

Remember, Orr was appointed by Gov. Snyder to be “emergency financial manager,” a position that does not answer to voters yet can overrule any local elected official. Michigan repealed the governor’s ability to appoint such managers in 2012, but Snyder and the legislature simply passed the law again.

Donald Smith decided Snyder needed to see a human face on Orr’s proposed cuts. He wrote to the governor:

Dear Governor Snyder,

My name is Donald Smith and I worked for the city of Detroit for more than 29 years.

Over close to 3 decades of service to the city earned me a pension of about $800 a month.  After taxes and health care expenses are taken out, I am left with very little money each month to pay my rent, buy groceries and to cover my medical prescriptions.

Because of your decision to force Detroit into bankruptcy, I am starting to wonder which of my basic I needs can live without.  I did not bankrupt Detroit – in fact, I went to work every day to make it a better place to live. So I can’t understand why you would ask retirees like me to give up the pension benefits we earned.

If you believe that we can afford to make do with less, then you must not know us. That’s why I want to invite you to my home so you can get to know me and see what life is like for retired city employees.  I hope you’ll join my family for dinner and hear what really matters to us in Detroit.

We are willing to work around your busy schedule.  We look forward to sharing a meal and our perspective with you.

Smith gets $800 a month from his public pension and $1,000 a month in Social Security. “Sometimes I have to make up my mind between getting my medicine and food,” he told WXYZ.

Gov. Snyder refused the invitation when asked.

Take Action: Tell Gov. Snyder to protect Detroit public employee pensions.

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My Grandfather Spent 20 Years Working In A Detroit Factory

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My grandfather spent 20 years of his life working in a Detroit factory.

He worked hard for what he earned. He trusted that sacrificing some of his pay to invest it in a pension would pay off after years of hard work. So that’s what he did. He retired, and his pension allowed him to provide for himself and my grandmother.

He and his coworkers knew that the pensions that they invested in were a valuable part of their income, not just a handout from their employer.

Right now, in Detroit, Emergency Financial Manager Kevyn Orr doesn’t see pensions the same way.

A quick review: In 2011, Gov. Rick Snyder and his allies in the Republican-controlled legislature passed a bill allowing entire cities to be taken over by “emergency financial managers.” These EFMs, appointed by the governor, were allowed to completely overrule decisions made by local elected leaders.

In the 2012 election, Michigan voters decisively overrode the EFM law. Gov. Snyder and the legislature responded simply by passing another one.

In March, Snyder chose lawyer Kevyn Orr to single handedly manage the city of Detroit. From the beginning, it didn’t seem that Orr had his priorities in order. He said the city had been “dumb, lazy, happy, and rich,” while unapologetically living large in a penthouse, ordering room service, and employing an assistant at $225,000 a year.

In September, Orr proposed a sweeping wage freeze and essentially privatizing public employee pensions. Orr’s spokesperson suggested that city workers do not contribute at all to their pensions.

What Orr isn’t saying is what these workers sacrificed to protect their pensions. They accepted pay cuts, health insurance cuts and cuts to future pension benefits just to guarantee that the pensions they had worked a lifetime for would be there for them when they retired.

This is unacceptable, and we need to do better.

We can’t allow the wealthy elite like Snyder and Orr to take away hard-earned income from working families. Workers like my grandfather worked, saved, and sacrificed for years to make sure their pension would be there. It’s not a piggy bank for Orr and his rich friends to play with.

We need to send Snyder a message now and demand that he respects Detroit city workers.

Together, we can hold leaders like Gov. Snyder accountable and stand up for all working people in Michigan.

Send a message now.

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Need Some Wheels? UAW’s 2014 Union-Made Car List

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The UAW’s 2014 Union-Built Vehicles List features quality, variety and fuel-efficient vehicles along with a number of new additions that represent new jobs for America’s workers.

As a result of 2011 bargaining between the UAW and Ford, Fusion sedans are being made at the Flat Rock, Mich., Assembly Plant. The Fusion was previously made only in Mexico. Also, the Ford Transit Connect van, insourced from Europe, is now being produced at the Kansas City Assembly Plant in Claycomo, Mo.

The Chevrolet Equinox is being made for the first time in Spring Hill, Tenn., as a result of 2011 bargaining between the UAW and General Motors. Also new on the list are GM’s Cadillac ELR hybrid/electric-powered luxury sports car and the revival of the Jeep Cherokee.

Mpg-conscious consumers might also take a look at Ford’s C-Max hybrid plug-in and Focus electric models, which are made at the Michigan Assembly Plant in Wayne, Mich.

UAW President Bob King says that in 2011, UAW members won investment and product commitments that led to some real increases in jobs for UAW members and others in jobs that support the auto industry throughout the United States.

We continue to see the results from that round of bargaining and will continue to press for more jobs for communities that are still recovering from the economic recession.

As for consumers, King says, “There’s plenty to choose from on this list, no matter what kind of vehicle you are looking for.” He adds:

Be assured that when you buy any car on this list that you are doing the utmost to support decent-paying jobs in communities across the United States.

The list also includes Canadian-assembled vehicles built by members of Unifor, formerly the Canadian Auto Workers union, because they include significant UAW-made content and support the jobs of UAW members.

Read more here and download the list here.

Photo by autovivacom on Flickr

Reposted from AFL-CIO NOW

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Hundreds of Thousands More Michiganders Can Access Health Care. And It’s Because of You.

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Last summer, the Supreme Court ruled that states could reject federal funds to expand Medicaid under the Affordable Care Act. And until recently, it seemed that Michigan would be one of them.

But then something incredible happened. You started to speak about how unacceptable it was that the poorest of Michigan’s residents, an estimated 470,000 people, would needlessly lack access to health care. You started to ask why Michigan would miss out on millions of dollars every day in Medicaid funds just so legislators could look tough in their opposition to President Obama. Over 7,000 people signed our petition to Gov. Rick Snyder and the legislature, and even more Michiganders called, wrote, and rallied for Medicaid expansion.

It worked. First, in February, Republican Gov. Rick Snyder changed his tune and supported Medicaid expansion. Then, in dramatic fashion, expansion passed the Senate on a narrow bipartisan vote in August. It then sailed through the House, and was signed into law by Gov. Snyder on Monday.

This didn’t happen by accident. We’ve been through enough battles to know that politicians don’t do the right thing on their own, especially when it involves going against members of their own party. It happened because you demanded it. This is a victory you won, and hundreds of thousands of people in Michigan are going to benefit from it.

We’ll keep holding Michigan lawmakers accountable. In the meantime, we’re gearing up to make sure everyone in Michigan knows their rights and opportunities under the Affordable Care Act.

Sign up to get the best information on what’s happening with healthcare and how to make it work for you.

Thank you for everything you’ve done to expand health care access in Michigan. Together, we’ve proven that we can win.

Photo by swskeptic on Flickr

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AFSCME Presents GIFtroit: The Story of Detroit’s Bankruptcy

In a humorous treatment of a serious subject, AFSCME is using GIFs—those ubiquitous, short animated photos—to tell the story of Detroit’s bankruptcy.

Featuring goofiness from cat boxing, to “Seinfeld’s” Newman, corgis on a treadmill, Eminem’s out-of-it halftime interview with Kirk Herbstreit and Brent Musburger and 20 more, GIFtroit outlines the facts behind Detroit’s bankruptcy, including Gov. Rick Snyder’s (R) hijacking of state revenue due Detroit, his financial “martial law” edict that strips cities of the power to govern themselves, Wall Street’s role and more.

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GIFtroit also explains how more than 21,000 city retires are threatened with pension and health care benefit cuts while current city workers, including firefighters and police officers, face wage, benefit and job cuts.

While retirees and workers are the targets of the budget-gutting advocated by Snyder’s appointed “emergency financial manager,” Kevyn Orr, GIFtroit points out that Orr is:

Living in a taxpayer-funded hotel penthouse suite, spending extravagant amounts on room service and hiring assistants at $225,000 salaries.

Click here to see all of GIFtroit and share it on Facebook and Twitter.

AFSCME and other Detroit unions are challenging the city’s claims in U.S. Bankruptcy Court, and Judge Steven Rhodes is expected to rule on the city’s eligibility for bankruptcy protection later in the fall. Today, more than 100 Detroit workers, retirees and residents who filed objections to the bankruptcy are getting a chance to speak out before Rhodes.

Reposted from AFL-CIO NOW

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Judge: Detroit Bankruptcy Case Turns State Constitution to ‘Swiss Cheese’

The Michigan judge who ruled last week that Detroit’s bankruptcy filing violated the state constitution’s ban against tampering with public employees’ pensions, adjourned a hearing on the case this morning until July 29. Ingham County Circuit Court Judge Rosemarie Aquilina said:

As you all know, my decision last week was because there’s been a violation of constitution. I don’t believe the constitution should be made of Swiss cheese.

Detroit, with the backing of Michigan Gov. Rick Snyder, is seeking federal bankruptcy protection, including the right to cut pensions for the city’s more than 21,000 retired public employees, including police officers and firefighters. Kevyn D. Orr, the city’s emergency manager appointed by Snyder, has called for “significant cuts” to the pensions of current retirees.

Retired Detroit firefighter Dave Parnell told WXYZ–TV:

When is enough enough? I’ve given you 34 years. I’ve given you two ankles, a shoulder and a back. I’m not even sure about my lungs. What else do you need?

Aquilina ruled the bankruptcy violated the Michigan Constitution’s ban on “diminishing” or “impairing” the pension benefits for public employees. Today, she said:

This is a very important issue. I understand that there may be this question of moving it to federal court….But these are state issues. We’re dealing with the state constitution and an emergency manager who is a product of the state legislation.

Snyder and Orr and the state’s attorneys are asking the state Court of Appeals to overturn Aquilina’s ruling. But once a bankruptcy filing is made in federal court, legal experts say it generally trumps other litigation in state courts.

Meanwhile, Bloomberg News reports that Detroit’s police and fire pensions asked the federal judge overseeing the city’s bankruptcy to delay the start of the case until the state issues are resolved.

Last week, AFSCME President Lee Saunders revealed that Orr’s legal team two weeks ago refused to meet with AFSCME to discuss retirement issues and, shortly before they filed for bankruptcy, claimed the union would have “months” to address these issues and that meetings would soon be scheduled to do so.”

Public workers are not protected by federal pension insurance. The average public service pension is $19,000 per year. A bankruptcy and possible suspension or reduction in pension payments would result in profound hardship for workers, retirees and their families. Apparently Gov. Snyder and Orr want Detroit’s public-service workers to rely on their children for food and shelter, or have to work until they die.

Reposted from AFL-CIO NOW

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AFSCME and Michigan Working Families Respond to Detroit Bankruptcy Filing



Michigan Gov. Rick Snyder (R) authorized a bankruptcy filing yesterday  for the city of Detroit based on recommendations from financial manager Kevyn Orr, making it the largest city in the U.S. to ever take that step. AFSCME members and other public sector workers were not consulted for input before the filing.

AFSCME President Lee Saunders said in a statement:

Gov. Snyder’s plan to suspend democracy, drive one of America’s largest cities into bankruptcy and deprive workers of their hard-earned retirement security, moved dangerously closer to reality today when without a single negotiation with unions, workers or retirees, Snyder authorized Detroit’s financial manager to file for bankruptcy.

Despite assurances from Snyder’s hand-picked financial manager Orr that AFSCME would have ample opportunity to discuss alternatives, they unilaterally embarked on this treacherous path without meaningful input from those who would be most affected.

Orr had threatened weeks ago that the pension benefits earned by city retirees through their years of public service and in exchange for less pay could not be protected in bankruptcy.  Now it appears he and Governor Snyder are working hard to make good on that threat.  Detroit’s public service employees worked hard and played by the rules, and now their freedom to retire with dignity is in peril.

As recently as two weeks ago, Orr’s team refused AFSCME’s request to meet and discuss retirement issues. Just last week, Orr’s team claimed the union would have “months” to address these issues, and that meetings would soon be scheduled to do so.

This apparently wasn’t the governor’s true intent. According to published reports, Governor Snyder expressed disappointment with this pace to Orr on Monday, July 15, and the very next day, they began the process to rush Detroit into what could be a lengthy and what surely will be a very costly process.

It’s no secret why Orr and Snyder are in such a hurry: a Michigan court is scheduled on Monday to decide whether Orr and Snyder are using bankruptcy as a backdoor around the state constitution’s protection of pension benefits. Clearly, the Governor and the financial manager are eager to sacrifice the well-being of tens of thousands of workers and retirees, in violation of Michigan’s state constitution.

Public workers are not protected by federal pension insurance.  The average public service pension is $19,000 per year. A bankruptcy and possible suspension or reduction in pension payments would result in profound hardship for workers, retirees and their families.  Apparently Governor Snyder and Kevyn Orr want Detroit’s public service workers to rely on their children for food and shelter, or have to work until they die.

Metro Detroit AFL-CIO President Chris Michalakis and Michigan State AFL-CIO President Karla Swift released the following statement:

Every step of the way, the citizens of Detroit were told that they had to give up their right to democratic representation in order to avoid bankruptcy.  Now that this filing has come anyway, it is clear that either state control has failed or that Gov. Snyder and his emergency manager appointee were not honest about their intentions in the first place.

Today’s action can be taken as confirmation that Orr was hired, secretly and ahead of a declared financial emergency, because he is a bankruptcy expert.

As Chapter 9 proceedings begin, Detroit cannot afford any further attacks on working families, who have already sacrificed so much without a say in the process. City workers have already made severe concession to keep the city afloat.  It is time to put the needs of Detroit residents above the interests of out of town creditors.

Image via Ann Millsapugh on Flickr

Reposted from AFL-CIO NOW

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NLRB Truth: 10 Reasons Why the National Labor Relations Board Matters

A radical decision by Republican-appointed federal judges threatens to destabilize the National Labor Relations Board (NLRB) if the Board loses a quorum in August. The D.C. Circuit Court of Appeals ruled that two recess appointments made by President Barack Obama in January 2012 were invalid and now NLRB decisions made while those appointees served on the Board are being challenged based on the D.C. Circuit opinion and placed on hold pending resolution of this issue by the U.S. Supreme Court.  This puts many workers across the country in dangerous and unfair situations that hurt them and their families.  The Senate could go a long way towards fixing the problem by confirming five nominations the president has made to the Board, but Republicans continue to obstruct the process in an effort to disable the NLRB and prevent it from protecting the rights of American workers.  Some, like Lindsey Graham (R-SC), have taken the extreme position that the NLRB should be “inoperable” and have vowed to block all nominations to the Board.

Here are ten examples—real stories from workers whose jobs and lives are negatively impacted by Republican obstruction—of why we need a functioning NLRB:

1. Dexter Wray, Alaska: Dexter worked as a maintenance engineer at a Sheraton in Anchorage.  His manager pressured him and several of his co-workers to decertify their union and told them to lie to the NLRB.  When they told the truth, Dexter and two of his co-workers were fired.  The NLRB ruled that the firings and coercion were illegal, but the hotel has refused to rehire them.  Dexter didn’t work for six months and incurred a large medical debt when he lost his health insurance.

2. Michelle Baricko, Connecticut: Michelle is a certified nursing assistant at West River Health Care.  She and her co-workers were locked out for months during contract negotiations.  The hospital’s owner, HealthBridge/CareOne, declared that negotiations were permanently stalled and implemented its own contract, which the employees did not agree to.  The NLRB obtained a court injunction for the company to stop its unfair labor practices, but HealthBridge declared bankruptcy and was able to escape its obligations to the employees. The Board and the employees’ union have appealed the decision.  Michelle was forced to sell her home and still struggles to provide for her three sons.

3. Kathleen Von Eitzen, Michigan: Kathleen is a baker at Panera Bread who organized 17 of her coworkers to form a union.  The company fought back, firing one employee and cutting Kathleen’s pay, giving her a negative evaluation because of her organizing.  The NLRB found that Panera violated the workers’ rights and ordered the company to pay back and compensate employees for cutting their hours. Panera appealed and the case is now stalled in federal court.  Kathleen’s husband has had two heart attacks and can’t work full time.  They can’t afford insurance because of her low pay and their home is now in foreclosure.

4. Susana Salgado Martinez, Nebraska: Susana was fired from Greater Omaha Packing Co., a meat packing plant, after she and fellow employees were accused of planning a strike.  She and her co-workers complained that the production line was moving too fast for several new, inexperienced workers to keep up with and that they were not being paid adequately.  A judge found that Susana and her co-workers were illegally fired and ordered that they be reinstated with back pay.  The case is pending before the NLRB.  Over the last year, she has been unable to find steady work and her family had to file for bankruptcy.

5. Juan Lopez, New Mexico: Juan worked as a janitor for Merchant Building Maintenance.  He and several of his fellow employees complained about sexual harassment, disrespectful treatment by a supervisor and the failure to receive a promised pay raise.  The company temporarily lost the contract that Juan was working on in the Santa Fe Public School District.  When the company was rehired by the school district, Merchant refused to rehire the workers who complained.  The NLRB found that failure to rehire those employees was illegal and that they should be reinstated and given back pay.  The company has refused to comply with the ruling.  Juan has been unable to find steady work since then and has had to skip paying some of his bills.

6. Clarence Adams, New York: Clarence is a Marine and Iraqi veteran who was fired by Cablevision for asking to meet with management, under the company’s “open-door” policy, to discuss stalled contract negotiations.  Two regional offices of the NLRB issued complaints against the company for illegally firing workers and for failing to bargain in good faith.  The company has filed suit in the U.S. Court of Appeals to prevent the complaints from being enforced.  Meanwhile, Clarence is struggling to provide for his family.

7. Jack Conway, Ohio: Jack and 15 other workers at aluminum products company KLB Industries were locked out during union negotiations.  Five years later, KLB has refused to reinstate the workers or give them back pay as the NLRB and U.S. Court of Appeals have ordered.  Conway hasn’t found regular work since the lockout and has exhausted unemployment insurance.  He barely survives on the $200 a week that the United Auto Workers (UAW) provides to him and the other locked-out workers.

8. Anonymous, Virginia: An employee at BaySys Technologies posted a comment on Facebook about not receiving paychecks on time.  The company fired him or her and threatened to sue the employee for violating a non-disclosure agreement.  The NLRB ruled the firing was illegal and ordered the company to reinstate him or her with back pay.  An appeals court enforced the order, which couldn’t have happened without a functioning NLRB.

9. Richard Salinas, Washington: After Richard and his fellow employees at Oak Harbor Freight Lines went on strike in 2008, the company stopped paying into the workers’ pension and health care trust funds.  The NLRB found this to be an illegal action and ordered the company to reimburse the funds for the missed payment and make up for personal losses the employees incurred when their health coverage lapsed.  The Court of Appeals has delayed enforcing the decision because of the uncertainty about the NLRB.  Richard said he’s close enough to retirement that the missed payments won’t affect him much, but he’s worried about how the loss will affect his younger co-workers.

10. Dave Preast, West Virginia: Dave was a miner at the Cannelton mine in Smithers, W.Va., when the mine was purchased by a new company.  The new owner refused to give him a job because of his union membership.  The NLRB has ruled twice that the refusal was illegal, but Dave and 84 other miners have not been rehired or given the back pay they deserve.  Dave has a 16-year-old son who has needed several surgeries for a life-threatening heart condition.  Luckily, he was able to cover the surgeries through the state’s CHIP program and Medicaid, otherwise the costs could have bankrupted the family.  As of now, Dave is doing odd jobs to make ends meet, but without reinstatement he’ll be forced to live on $500 a month when he retires.

There are many more stories of workers whose lives and livelihoods are in crisis because of this NLRB fight.

Reposted from AFL-CIO NOW

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Progress on Medicaid Means Real Coverage for Real Families—Roadblocks Remain

In Arizona, 300,000 people will get the health care coverage they need, thanks to Gov. Jan Brewer’s change of heart on a key program of the Affordable Care Act. Brewer signed a bill into law accepting federal funds to cover low-income families under Medicaid—a bill that she had to fight against members of her own party in the state legislature to get passed in a special session she called.

It was a hard fight, but one we’re glad to see turned out the right way. The Medicaid provision was one of the key components of the ACA, but it was put at risk by a Supreme Court decision that left it up to the states to accept or decline the funds. Many states have—but others, like Texas, are refusing, leaving millions without coverage.

In other states, the process is still unfolding:

  • About half a million people are waiting on the Michigan state Senate, who should vote this week on a state House-passed proposal to accept expanded Medicaid funds. Gov. Rick Snyder has promised to sign the bill into law.
  • As the state legislature in Ohio debates accepting expanded funds, a new poll shows 63 percent of Ohioans want the expansion, which would cover an estimated 275,000 people.
  • In Virginia, a commission to study accepting expanded Medicaid funds had its first meeting this week. The next meeting will take place in August.
  • In New Hampshire, the state House—which supports accepting expanded funds—is working to craft a measure that will be able to get through the Republican-controlled Senate. This may mean a commission will be created to review the issue.
  • Unfortunately, in Maine, Gov. Paul LePage vetoed a measure to accept expanded funds. The bill, which would cover 60,000 people, passed by strong but not quite veto-proof margins, so the fate of Medicaid in Maine remains unclear.

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