Article

The Need for Transparency in Detroit

Detroit’s Emergency Manager Kevyn Orr should immediately make public the methods that he and his actuaries are using to claim that the city’s pension funds are in dire condition.

State-appointed Emergency Manager Kevyn Orr speaks during a news conference in Detroit, Michigan, Thursday, July 18, 2013. (AP/Paul Sancya)
State-appointed Emergency Manager Kevyn Orr speaks during a news conference in Detroit, Michigan, Thursday, July 18, 2013. (AP/Paul Sancya)

Read the full column (CAP Action)

As Detroit’s Emergency Manager Kevyn Orr presses to advance the city’s bankruptcy filing as quickly as possible, a worrying lack of transparency undermines his claims that the city has no choice but to cut deeply into government workers’ retirement benefits. Until Orr makes public the methods he and his actuaries have used to claim that the city’s pension funds are in dire condition, no cutbacks to worker benefits should be allowed to go forward, and no claims of “good faith negotiations” can be taken seriously.

At the heart of the dispute between Orr and city workers is a basic disagreement over just how much long-term debt Detroit’s two city pension funds are facing. Publicly available data indicate only a relatively small problem, while Orr claims the pensions are in dire shape.

Orr is essentially asking the city’s janitors, librarians, and firefighters to give up the retirement benefits that they and their families have been promised for decades because, according to Orr, the benefits are just too expensive. The last official evaluation conducted by the funds’ retained actuaries, however, found that the police and firefighters’ pensions were nearly 100 percent funded and the general retirement system was 83 percent funded—figures that many public pensions across the country would envy. According to the public data, the pension funds had $644 million in combined unfunded liabilities in 2011—a significant but relatively manageable sum.

Read the full column (CAP Action)

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Authors

David Madland

Senior Fellow; Senior Adviser, American Worker Project

Keith Miller

Senior Research Associate

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