Workers and community activists took to the streets on March 23, 2010 in opposition to the plans to close schools and reconfigure the city under corporate direction. The Kresge and Skillman Foundations are designing the plans over local objection.
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Plan to steal pensions opposed
By Cheryl LaBash
Detroit
Published Apr 7, 2010 3:02 PM
On March 29 more than 500 Detroit workers, retirees and community members filled the Detroit City Council’s auditorium to oppose the $6 billion giveaway of city pension assets initiated by Mayor Dave Bing. They shouted out, applauded each other’s one- minute public comments and challenged the City Council to stand up against the backdoor maneuver. Bypassing not only the City Council but the elected pension boards and unions, the mayor secretly initiated state legislation for “distressed pensions” that, if passed, will allow him to transfer the control of the city’s two fully funded pension plans to a state-authorized Municipal Employees Retirement System. In a unanimous rebuke, the City Council demanded the mayor reverse his action. But it cannot be withdrawn, only blocked in the legislative committees.
Councilmember JoAnn Watson pointed out, “It is not our pension systems which are ‘distressed,’ It is Detroit that is distressed. We need a state of emergency declared so we can enact a moratorium on foreclosures and sell city-owned homes to Detroiters for a dollar.”
This majority African-American city has suffered racist disinvestment for decades as auto plants closed, moving jobs to rural areas. Automation increased productivity and profits using fewer workers. Highly profitable new housing construction spread suburbs farther and farther from the city center while insurance and mortgage redlining disadvantaged city residents. Underfunded schools deteriorated. Freeway construction destroyed Paradise Valley, the historic Black business center, and then bypassed neighborhood businesses on major city streets. During the housing mania, subprime loans were disproportionately forced on African-American homeowners in Detroit fueling foreclosures and causing the transfer of assets built through generations of homeownership. More than 50 percent of Detroiters are unemployed, especially youth, whose futures are being stolen. It is a crisis imposed on Detroit residents.
Now a substantial concentration of pension capital — $6 billion — controlled by Detroiters is on its way to being handed over to be controlled by a nine-person pension board assembled from small towns across the state. Detroit pension funds have subsidized hotel and other development in Detroit, where its residents now work. It’s like having an absentee landlord, said a firefighter at the council meeting.
Certainly the most concerned about this shock and awe attack are city workers and retirees who gave up wage increases to lock in some security for their post-work years. Currently the American Federation of State County and Municipal Employees is resisting the imposition of a 10 percent pay cut through furlough days. AFSCME represents the lowest paid job classifications; many of their members are women single heads of households.
The city administration claims the move is to protect the pensions of city workers — still traditional, defined-benefit, life-time pensions for most — and also save the city $20 million per year to help offset a much publicized $350 million budget deficit. Although no reduction of current pensions has been suggested yet, the practice of distributing earnings in excess of 7.9 percent to retirees, which especially helps pensioners and survivors whose income has been eroded by inflation — termed thirteenth check — will disappear. Instead, the mayor proposes to reduce the city’s required contribution to the pension fund. And it is the mayor’s stated position that new hires will be forced into defined contribution, 401(k) type retirement plans instead of the “for-life” pensions for current workers and retirees.
Banks deepen debt crises
The global capitalist economic contraction is exposing the ruthless rule of the banks, which demands more and more from local and state governments, forcing them to borrow to cover debts incurred before the crash as the tax base is eroded by unemployment and foreclosures and capitalist laws that prohibit unbalanced budgets for any but the federal government. In one transaction, a full one-seventh of Detroit’s reported budget deficit — $50 million annually — is mandated to pay international financial giant UBS and other banks and financiers for pension obligation certificates and an interest rate swap that crashed. In the renegotiation, payment is essentially garnished from the city just like creditors take part of a worker’s pay before it is even received. All of Detroit’s proceeds from casino taxes are currently deposited with a third-party bank to pay $4.2 million per month before the remainder goes to the city accounts. How much of the “deficit” is owed to the banks remains an unanswered question. The pension obligation certificates fully funded the two Detroit pension funds that the mayor is giving away.
Detroit and the state of Michigan are not alone. “California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.” (N.Y. Times, Mar. 29) The banks were bailed out with tax dollars, are paid full value by federal mortgage insurance for inflated mortgages in foreclosure, and squeeze cities and states to cut budgets, wages and benefits to transfer wealth from the workers who created it to capitalist financiers as production for profit contracts.
Squeezing wealth from the working class and our communities is not the only possible solution. The urban Marshall Plan advocated by Councilmember Watson calls for massive federal funding for jobs and community-driven economic development. In 1935 the Works Progress Administration provided jobs for more than eight million unemployed. The WPA in Detroit dismantled blighted buildings, and constructed roads and schools. More than 33,000 Detroit structures are on the city’s demolition list, providing enough work to absorb every unemployed Detroiter immediately in a deconstruct/recycle program. The Rev. Martin Luther King Jr.’s last struggle was for jobs or income for all. It is still an urgent task that calls out for completion now. Pension benefits are deferred wages.
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