Detroit’s City Workers Facing Poverty and Debt

They never dreamed they’d have to fight for their pensions and health care after decades of service to the city.

People, mostly union and retired city workers, protest in front of the courthouse where Detroit's bankruptcy-eligibility trial began Oct. 23, 2013, in Detroit.
People, mostly union and retired city workers, protest in front of the courthouse where Detroit's bankruptcy-eligibility trial began Oct. 23, 2013, in Detroit. Bill Pugliano/Getty Images

The largest annual salary Donald Smith ever collected while working for the city of Detroit was $28,000. But the lure of a pension and a lack of skills to pursue higher-paying jobs kept him at the city for 29 years, even as he watched the industrial stalwart become a faded remnant of its former self.

So until his retirement about eight years ago, he held down various jobs, including working as an emergency medical technician for Detroit Receiving Hospital, a parking-enforcement officer for the Detroit Police Department and a security officer at the Detroit Institute of Arts Museum, where he stood guard over priceless masterpieces.

But now the $679 that he nets in monthly pension payments could be dramatically reduced, which could further plunge him into an interminable web of poverty and hardship. Federal Judge Steven W. Rhodes ruled last week that the city of Detroit could formally file for bankruptcy. He made it clear that public employee pensions were not exempt from the federal Chapter 9 bankruptcy, even though they are protected by the Michigan Constitution.

The ruling essentially states that federal bankruptcy law usurps state law regarding protections for public employees’ pensions, which enables the city to include the pensions of 23,000 retirees in its financial-restructuring plan. The pensions for general workers in the city average approximately $19,000 per year, while police and firefighters average about $30,000.

“I feel like I’ve been robbed,” Smith told The Root. “I did what I was supposed to do for 29 years, but they didn’t do what they were supposed to do, and now I have to pay for it. I feel like they’re picking on us because most of us are old or disabled. They figured they’d hit us because we’re easy pickings. I never dreamed I would have to fight for what I’ve earned. You sit around and talk about the American dream—welcome to my American nightmare.”

The ruling paves the way for Kevyn D. Orr, an emergency manager sent by the state of Michigan in March to oversee the city’s finances, to begin etching out a plan immediately to repay a portion of the city’s $18 billion in debts and restore crucial services. He has said that he plans to submit the blueprint by the first week of 2014.

But appeals are expected to be filed against the ruling. At least one union filed a notice of appeal Tuesday, the Times says, and other unions and pension-fund representatives said they were considering challenging the decision.

Jordan Marks, executive director of the Washington, D.C.-based National Public Pension Coalition, which represents public-sector workers across the nation, told The Root that the group is working with local unions to appeal the decision. Many of the workers, such as firefighters, do not qualify for Social Security because they did not pay into the system.

“What a dark day it is for Detroit’s firefighters, police officers, sanitations workers and other city employees, many of whom do not receive Social Security, [who] will now be left in poverty based on the bankruptcy,” Marks said. “We certainly have our arguments before the court.”