Detroit Considers Cutting Some Retiree Health Care Payments

The city's emergency financial manager has slashed the mayor's budget by 33 percent.

Posted: 07/12/2013 12:21 PM EDT

As a sign of the desperate conditions facing Detroit’s finances, the city’s emergency financial manager has started talks with leaders of labor unions to eliminate health care coverage for some firefighters and police officers who retire early.

Orr’s office has determined that the city’s pension and health costs, coupled with other debts, amounts to as much as $20 billion, with $5.7 billion going to health care costs. Orr has maintained that the city is not in a position financially to make those payments.

Kevyn Orr, the emergency manager, has also canceled a bus tour of some of the city’s most blighted areas that his office had planned for some of the city’s major creditors.

The emergency manager’s office said that the cancellation of the bus tour was at the request of the creditors.

“The city's creditors informed our office that they would like to spend more time conducting due diligence research into the city's financial state while they are in Detroit," Orr spokesman Bill Nowling said, in a prepared statement. "It became apparent Tuesday that postponing the tour was necessary."

Orr, who was appointed by Michigan’s governor, Rick Snyder, issued an executive order that enacts a city budget for the fiscal year 2013-2014 which slashes funding for the mayor’s office by 33 percent. The budget had been approved by the city council.

Detroit’s mayor, Dave Bing, had opposed the cut, which amounted to about $1.1 billion in savings, but his veto was overridden by the council.

In a statement, the Detroit Police and Fire Retirement System said it was willing to work along with Orr’s office, which has asked for an audit of the system’s finances.

“The police and fire pension fund, while cognizant of the absence of a legal obligation to do so, voluntarily agrees to comply with all reasonable requests for information,” said Matt Gnatek, the chairman of the system.

“There is no legal basis for this audit, however in the spirit of cooperation we, within reason, will open our records to this process.”

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(Photo: REBECCA COOK/LANDOV)

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