Author: Ted Ballantine

Detroit Emergency Manager backtracks on pension freeze

Just hours after news broke of an order to freeze some workers’ pensions, Detroit Manager Kevyn Orr is eating his words.

Earlier today, Reuters received a copy of an order issued last week by Orr ordering the freezing of the city’s General Retirement System fund, which halted accrual of benefits and closed the plan to new employees.

But now, Orr says he is holding off on the freeze to allow more time for mediation between representatives of Detroit and the city’s pension funds in federal bankruptcy court.

Orr stated he is putting the freeze on hold indefinitely, but he reserved the right to reinstate it at any time.

If the freeze is reinstated, affected workers will have access to a savings plan styled after a 401k plan.

Details, from the Detroit Free Press:

Instead of pensions, Orr’s order said the city would create a 401k-style savings plan…Under [the proposal] by Orr, the city would no longer pay into pension plans but would contribute an amount equal to a percentage of workers’ base pay — 5% for non-uniformed workers and 10% for police and fire — into retirement accounts. Employees also could contribute their own money into the accounts.

Orr ordered the freeze initially because he was frustrated by lack of progress in mediation between the city and its pension funds.

“Time is running short, and the city’s financial status remains dire,” Orr said after he rescinded the freeze order. “An additional delay without the prospect of a mediated solution threatens to further erode essential services and public safety.”

National security insiders overwhelmingly support military pension cuts, according to poll

Reducing pension benefits is a political minefield, and that sentiment applies two-fold when the benefits in question are for military personnel.

But no one sent that memo to House Rep. Paul Ryan (R-WI) or Sen. Patty Murray (D-WA), who last month passed a bi-partisan budget that cuts the annual cost-of-living adjustment (COLA) of military pensions by 1%.

The move caused anger among veterans, but was supported by national security insiders, according to a poll conducted by the National Journal, a magazine widely read by Washington insiders.

According to the poll, 52% of insiders support the COLA decrease and 38% think the cutbacks should have been deeper.

Only 10% of insiders think military benefits should be off-limits entirely.

The Washington Post explains the rationale for cutting military pensions:

Overall, military compensation — including health benefits and salaries paid to active-duty personnel — eats up roughly half the defense budget, a proportion that is steadily rising. In a speech in November, Defense Secretary Chuck Hagel warned that “without serious attempts to achieve significant savings” in military compensation, “we risk becoming an unbalanced force.”

Military pensions would appear to be particularly ripe for reduction. Anyone who puts in 20 years can receive payments immediately and look forward to annual cost-of-living adjustments, or COLAs, for life. That means service members who signed up at 18 could find themselves with a full pension — roughly half their ­active-duty paycheck — at 38. And the government finds itself doling out cash to former troops who have launched lucrative second careers, often with defense contractors that draw their profits from government coffers.

A 1% decrease in COLAs may not sound like much, but the decrease is projected to save the federal government $6 billion over the next 10 years.

Click here to read a summary of the budget deal.

With pension lawsuits on horizon, Illinois Supreme Court justices take contributions from players in reform

It’s been less than a month since Illinois Governor Pat Quinn signed into law the state’s massive pension overhaul. There have already been lawsuits filed against the legislation, and many more are expected in the near future.

If any of those lawsuits should end up in the Supreme Court of Illinois, the subsequent judgment would have lasting, important effects on pension politics in Illinois and beyond.

But can the Supreme Court justices be trusted to judge the case impartially? A new investigation into the justice’s campaign donations raises doubts.

The Chicago-Sun Times explains:

All told, state records show six of seven justices have taken close to a combined $3 million in campaign contributions tied to those with a stake in the pension debate: labor unions, business groups and a political committee controlled by House Speaker Michael Madigan, D-Chicago, who last month said the legislation could not have passed without his muscle.

The largest beneficiary of pension-related money is Democratic Justice Thomas Kilbride, a former chief justice of the court who in 2010 was immersed in the nation’s most expensive judicial retention battle in nearly a quarter century.

During that fight, Kilbride took in $1.47 million from the Democratic Party of Illinois, which is controlled by Madigan, the state party chairman. That fund chipped in another $688,000 in 2000, when Kilbride was first elected as a justice, assuring another decade-plus of Democratic control of the state’s highest court.

In his 2010 retention battle, Kilbride accepted another $467,360 from the Illinois Federation of Teachers, $100,300 from AFSCME Council 31 and $16,000 from the Illinois AFL-CIO, all of which fought aggressively against the pension legislation Quinn signed.

For observers following Illinois’ pension reform, some of those organizations should sound familiar. The Illinois Federation of Teachers, for one, plans to file suit against the pension overhaul early in 2014. The Illinois AFL-CIO is part of the union coalition We Are One Illinois, a group that plans to file suit against the state’s pension law soon, as well.

There is one justice who appears to be clean: Justice Bob Thomas, according to the Sun-Times, is the only member of Illinois’ highest court not to have taken money from any players in the pension reform game.


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