Judge delays hearing on Detroit bankruptcy, pensions

A hearing on whether Detroit's bankruptcy filing violates the state's
constitution rules against tampering with pension benefits was
adjourned to July 29. Despite the state's desire to move the case to
federal court, Judge Rosemarie Aquilina of Ingham County Circuit Court
said Monday that she believes the case should be heard in state court.
"This is a very important issue," she said. "I understand that there
may be this question of moving it to federal court. ... But these are
state issues. We're dealing with the state constitution and an
emergency manager who is a product of the state legislation." The
city's emergency manager, Kevyn Orr, filed for Chapter 9 bankruptcy in
federal court Thursday, and Detroit became the largest city government
ever to declare bankruptcy. Aquilina ruled last week that the
bankruptcy filing violated the state constitution. "As you all know,
my decision last week was because there's been a violation of
constitution. I don't believe the constitution should be made of swiss
cheese," she said. Detroit emergency manager Kevyn Orr plans to pursue
"significant" cuts to the pensions of the city's 21,000 retirees.
Although the Michigan Constitution protects public pensions, Orr
believes that U.S. bankruptcy law, which allows contracts to be
slashed, will take precedent. The state also believes that the
bankruptcy filing in federal court will supercede a lawsuit that the
pension boards for city employees and the police and fire department
employees have filed. Bankruptcy experts say retiree pensions probably
won't be completely wiped out, but monthly payments could be reduced.
Ronald King, lawyer for the pension systems, said his case does not
enjoin the city from proceeding in bankruptcy. "But you have to
respect the constitutional provision in Michigan that protects accrued
pension benefits," he said.