Michigan House Approves Detroit Bankruptcy Funds
Michigan’s Republican-led House approved spending $195 million to help prevent steep cuts in Detroit retiree pensions and the sale of valuable art, a measure that would link the state with a broader deal designed to end the largest public bankruptcy in U.S. history.
By a bipartisan 74-36 vote, the chamber approved legislation Thursday contributing state funds to join $466 million in commitments from 12 foundations and the Detroit Institute of Arts. The pool of money would shore up Detroit’s two retirement systems while the city-owned art museum and its assets would be transferred to a private nonprofit.
A state-dominated board would oversee the city’s finances for at least 13 years. The House passed 11 bills, which now go to the GOP-controlled Senate. The plan has the support of the Republican governor and legislative leaders, but its passage has been no sure bet in the bailout-averse, GOP-controlled Legislature.
"Choosing to do nothing means putting billions of debt and uncertainty on our kids and our grandkids," said Rep. Al Pscholka, R-Stevensville, who noted his district is closer to Chicago than Detroit. "Michigan and southwest Michigan are in a strong position by settling this matter, by settling this bankruptcy."
The legislation would transfer $194.8 million from Michigan’s savings account to an authority that would disburse the money to Detroit’s two retirement systems, if the bankruptcy judge approves a restructuring plan resolving the city’s debts and other conditions are met.
The up-front state payment, the equivalent of $350 million spread over 20 years, would come from the state’s rainy day account - called the Budget Stabilization Fund, it now contains $580 million - and would be repaid with annual $17.5 million withdrawals from Michigan’s tobacco settlement over 20 years.