DETROIT (Det. Free Press) -- Detroit's two pension funds today sued emergency manager Kevyn Orr and Gov. Rick Snyder in an attempt to block Orr from slashing pension benefits for thousands of current and active city workers as part of his plan to restructure the city's massive debt.
The lawsuit asks the Ingham County Circuit Court to declare that Snyder cannot authorize Orr to take any actions - including filing for municipal bankruptcy - that would cut pension benefits, which the lawsuit says are protected by the state constitution.
The lawsuit comes in the midst of tense negotiations between Orr and Detroit's creditors that will determine whether the city files for bankruptcy. It also represents a strong pushback from the pension boards against Orr's plan to make "significant cuts" to active and retired workers' pension benefits.
"It appears imminent the governor will grant the emergency manager the unconditional power to proceed under Chapter 9 (bankruptcy) and the emergency manager will seek to have the city's pension debts impaired pursuant to Chapter 9 unless the retirement systems and their participants accept the emergency manager's unilateral imposition of significant impairments to their accrued financial benefits," the lawsuit says.
Orr has not said specifically the degree to which pensions would be cut under his restructuring proposal to resolve up to $20 billion in Detroit's debts and long-term liabilities. Orr and his consultants are in discussions with the city's two pension boards - the General Retirement System and the Police and Fire Retirement System - over the potential cuts.
George Orzech, chairman of the Police and Fire Retirement System, said he could not say how the lawsuit would affect negotiations because he had not seen it yet.
Orzech said the board's special restructuring counsel, the Clark Hill law firm, filed the suit without an explanation, adding the firm has the authority to file suit without the board's approval. Nevertheless, Orzech said he supports the lawsuit.
"You got to support what they're doing on your behalf," he said. "They've shared no reason or strategy with me."
Orr spokesman Bill Nowling said he does not comment on pending litigation as a matter of policy.
The pension boards' suit is similar to two other lawsuits that groups of Detroit city workers and retirees filed earlier this month to prevent cuts to their pensions.
One of the lawsuits, filed by city retiree Gracie Webster and current city worker Veronica Thomas - who are vested in the city's General Retirement System - seeks to have the state's emergency manager law, Public Act 436, ruled unconstitutional because it allows the state to seek to cut pension benefits in violation of the Michigan Constitution. Webster and Thomas asked an Ingham County judge for a declaratory ruling that PA 436 is unconstitutional and a court injunction preventing Snyder or state Treasurer Andy Dillon from allowing a bankruptcy filing.
Separately, a group of three retirees and two current city workers also sought a preliminary injunction to preclude Snyder or Dillon from approving a bankruptcy filing. The plaintiffs are Detroit library worker Robbie Flowers; library retirees Michael Wells and Janet Whitson; law department employee Bruce Goldman, and city retiree Mary Washington.
The pension boards' lawsuit also asks the court to declare the emergency manager law unconstitutional if it finds that the law gives Snyder the authority to allow Orr to cut pension benefits through the bankruptcy process.
Orr has said the two taxpayer-backed pension systems are underfunded by $3.5 billion, and the city cannot make payments to cover the liabilities. As a result, pension benefits will have to be cut, he has said. The pension funds have disputed Orr's claims that they are so deeply underfunded.
The pension funds have combined assets of more than $5 billion and represent more than 30,000 active and retired city workers.
By Joe Guillen, Detroit Free Press staff writer