Detroit will be first big city to axe pensions

The Detroit News reports:

Detroit emergency manager Kevyn Orr met Thursday with labor groups to tell them what they already know: He won’t spare public employees in his mission to make the city solvent. Orr’s preliminary report to creditors, released last Friday, says “there must be significant cuts in accrued, vested pension amounts for both active and currently retired persons.” That would be a game-changer. If it takes effect, Orr’s proposal would mark the first time a large government pension plan sponsor has rescinded benefits for both active and retired employees. It could set a precedent for cities — as well as states — in financial emergency to restructure pensions the same way as other debts by paying out cents on the dollar instead of making them whole. The emergency manager also announced he has ordered a probe into the city pension funds and employee benefit programs to investigate possible waste, fraud and abuse.