Michigan House Approves Funds To Help Settle Detroit Bankruptcy
LANSING (AP/WWJ) – The Michigan House voted Thursday to spend $195 million to help prevent steep cuts in Detroit retiree pensions and the sale of art, a measure that would link the state with a broader deal designed to end the largest public bankruptcy in U.S. history.
The Republican-led chamber, on a bipartisan 74-36 vote, approved legislation that would contribute state funds to join $466 million in commitments over 20 years from 12 foundations and the Detroit Institute of Arts. The pool of money would shore up Detroit’s two retirement systems while the city-owned art museum and its assets would be transferred to a private nonprofit.
A state-dominated board would oversee the city’s finances for at least 13 years. The House passed 11 bills, which now go to the GOP-controlled Senate.
The legislation would transfer $194.8 million from Michigan’s savings account to an authority that would disburse the money to Detroit’s two retirement systems, if the bankruptcy judge approves a restructuring plan resolving the city’s debts and other conditions are met.
“This is good stuff,” Gov. Rick Snyder told reporters at a media briefing just following the vote. “We rose above the politics; this is a great afternoon.”
In a statement, Snyder added, “Today we saw lawmakers from across our state coming together to help make a brighter future for Detroit – and all of Michigan. I thank state House of Representative members for their bipartisan work on a settlement that will help Detroit pensioners and ultimately save taxpayers millions of dollars. This is a thoughtful plan that provides key safeguards protecting Michigan’s taxpayers while helping resolve Detroit’s long-standing challenges.
“I especially appreciate the leadership of Speaker Jase Bolger, House Democratic Leader Tim Greimel, Rep. John Walsh, and Rep. Thomas Stallworth III. I’m looking forward to consideration of the package in our state Senate.
“This settlement will allow us to more quickly resolve the bankruptcy issues, and create a solid, sustainable fiscal foundation to support Detroit’s continuing turnaround. This is essential for the city’s 700,000 residents, who are seeing improved vital services and quality of life. But these efforts are about helping all of our state. Detroit is an important part of Michigan’s identity. Let the city’s resurgence show the world that Michiganders are standing together and growing stronger as we accelerate our continuing comeback.”
The up-front state payment, the equivalent of $350 million spread over 20 years, would come from the state’s rainy day account – called the Budget Stabilization Fund, it now has $580 million – and would be repaid with annual $17.5 million withdrawals from Michigan’s tobacco settlement over 20 years.
“Choosing to do nothing means putting billions of debt and uncertainty on our kids and our grandkids,” said Rep. Al Pscholka, R-Stevensville. “Michigan and southwest Michigan are in a strong position by settling this matter, by settling this bankruptcy.”
Bond insurers have pointed to the art as a possible billion-dollar source of cash in the 10-month-old bankruptcy case. But the city is firmly opposed to that and instead is banking on the separate deal brokered by mediators that would protect the art forever and soften pension cuts for thousands of retirees.
WWJ Lansing Bureau Chief Tim Skubick reported such a show of bipartisanship is rare in the Michigan legislature.
“I think the critics will conclude they did rise above the politics and they did what lawmakers are saying is good for Detroit,” Skubick said.
“Although some in Detroit say we still don’t have our democracy back … the governor says this commission that has oversight authority is there to help the finances of Detroit, and not to govern Detroit,” Skubick said.
In voting against the bills, Democratic Rep. David Nathan of Detroit said he fears Michigan’s “takeover” of Detroit could go on forever.
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