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Two protestors hold a sign during a May Day protest against the Detroit Emergency Manager and the municipal Bankruptcy in downtown Detroit, Michigan May 1, 2014. REUTERS/Rebecca Cook Two protestors hold a sign during a May Day protest against the Detroit Emergency Manager and the municipal Bankruptcy in downtown Detroit, Michigan May 1, 2014. REUTERS/Rebecca Cook  

Detroit Retirees Set To Face Major Pension Cutbacks

Detroit retirees are being asked to vote Friday on whether the city should exit its historic bankruptcy, the Washington Examiner reports.

Michigan Gov. Rick Snyder and the state-appointed emergency manager Kevin Orr have advocated for the “yes” option, with the result being a 4.5 percent cut in pension payouts for all pensioners, and an end to cost-of-living allowances. Retired police and firemen, on the other hand, while still facing a reduction in pension payouts, will only face a reduced cost-of-living allowance.  The outcome of the vote will determine how quickly Detroit exits bankruptcy.

Although a lot of pressure exists to vote yes on the proposal, some pensioners oppose slashing pensions and argue that the matter should be taken to court, despite the fact that emergency manager Kevin Orr is struggling with the largest municipal bankruptcy in U.S. history.

City pensioners like Cecil McClellan, who formerly worked in the city’s human services department, are not budging, insisting on voting “no.” “I’ve never seen anything like it in my life,” said McClellan, Fox Business reports. “I think this is coercion, intimidation. This is fear-mongering.”

The pension system currently has $3.5 billion dollars in liabilities. The main issue is that pensions are protected under the Michigan Constitution, which could potentially give rise to legal action. However, voting “no” could result in even deeper cuts for the city’s 32,000 retirees than the proposed 4.5 percent amount.

James Hohnan, assistant director of fiscal policy at the Mackinac Center, argues that the choice confronting retirees on Friday is unfortunate, given that it could have been avoided if the city had managed its affairs more responsibly.

“We should never have had to vote on this proposal in the first place,” Hohnan told The Daily Caller News Foundation. ”First, Detroit should’ve properly funded its pension system instead of underfunding it. Second, the city should’ve undergone a more aggressive campaign in terms of selling assets, improving its services, and contracting out.”

“But even if they vote yes, unless Detroit fixes its structural issues — and it doesn’t look like Kevin Orr is deferring to the mayor and city council to doing that — then Detroit will still run into the same problems,” he added. Since pensioners, through the bad fate of Detroit, have become the largest creditors of the city, they’re going to bear the brunt of the risk stemming from poor fiscal management.”

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