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The future of Detroit's pensioners at stake

Updated: Saturday, August 3, 2013
The future of Detroit
KALAMAZOO, Mich. (NEWSCHANNEL 3) - It's a question financially troubled cities all over the U.S. are going to be paying close attention to, as Detroit tries to figure out who gets what in the wake of its declaration of bankruptcy two weeks ago.

What happens to the city's pensioners--those 23,000 people, with more to come--who rely on their monthly checks for survival?

Tom Van Howe has more in tonight's edition of Tom's Corner.

=====================

When we on this side of the state think about Detroit, it's all too easy to remember the excesses and the decades of perceived political obstinacy flaunted by its leaders.

From individual limousines for school board members to the costly criminal behavior of former Mayor Kwame Kilpatrick.

We tend to think, 'Well, you guys created the mess you're in; you let it happen. You fix it.'

And by virtue of the deafening silence from Lansing and Washington on the issue of bailouts, we aren't alone.

But none of the 23,000 former city workers who rely on pensions now, nor any of the 9,000 or more who will be retiring someday with pensions as a key ingredient to their plans for a secure retirement had anything to do with the mismanagement that resulted in where things stand today.

They were police officers, firemen, linesmen, secretaries and so on. They worked for the city and as part of the package was the promise of retirement income. And its not as though the payouts are exorbitant. Police and fire: $30,000 a year.

Other city employees: about $19,000. Not enough to live a life of leisure with exotic vacations three times a year. But, its enough to help them live their lives with dignity.

And more than anything else—it was promised to them.

So now the city of Detroit may try to take that promise back.

The city owes a mind-bending $20 billion. It's trying to find ways to settle those debts for pennies to the dollar, but it would be an ethical blunder to do the same to pension recipients.

Detroit's Emergency Manager, Kevyn Orr, says the long-term pension liability is about $3.5 billion. And according to news reports, the city was a hundred million dollars short on its contribution to the pension fund.

Last year alone. Again—that's not the fault of the pensioners.

Attorney General Bill Schuette has jumped into the fray pledging to  defend the pensioners' constitutional right, under state law, to receive what they have coming. If Schuette is successful in making that argument stick, he'll become a hero to lot of people who have, perhaps, never heard of him.

But whether it remains merely a moral obligation, or an ironclad legal one; it's crystal clear the city of Detroit doesn't have the money.

And that means its going to fall to us—to you and me—the State of Michigan, to help make good on a multi-billion dollar promise the city of Detroit, on its own, cannot keep.

Why? Because, at the bottom line, we're all in this together, and  it is the right thing to do.

In this corner...I'm Tom Van Howe.

Business News

Last Update on January 30, 2015 18:13 GMT

ECONOMY-GDP

WASHINGTON (AP) -- The U.S. economy slowed in the final three months of 2014 as a big burst in consumer spending was offset by weakness in other areas.

The Commerce Department says the overall economy grew at a 2.6 percent rate in the October-December period, down from sizzling gains of 4.6 percent in the second quarter and 5 percent in the third quarter.

Consumers did their part in the fourth quarter, pushing up spending by fastest rate in nearly nine years. But businesses investment, trade and government spending weakened.

For the year, the economy grew at a moderate rate of 2.4 percent. But economists believe 2015 could be a breakout year for growth, with consumer spending boosted by strong employment gains and falling gas prices. Many expect growth above 3 percent this year.

EMPLOYMENT COST

WASHINGTON (AP) -- Wages and benefits rose at the fastest pace in six years last year, a sign strong job gains could be forcing companies to pay a bit more for workers.

The Labor Department says the employment cost index, which measures pay and benefits, rose 2.2 percent in 2014, up from 2 percent the previous year. That's the biggest gain since 2008. It's also ahead of inflation, which rose 1.3 percent.

Yet the increase is still sluggish by historical standards. In a healthy economy, the index usually rises at about a 3.5 percent pace.

The Federal Reserve is closing watching wages as it considers when to raise the short-term interest rate it controls. Fed Chair Janet Yellen considers rising wages a key sign that the job market is nearing full health.

US-CONSUMER-SENTIMENT

WASHINGTON (AP) -- U.S. consumers are more confident than they've been since January 2004.

The University of Michigan says that its index of consumer sentiment rose to 98.1 in January from 93.6 last month.

Consumers say the prospects for the U.S. economy are the strongest in a decade, and half of consumers expect the expansion to keep going another five years.

The Michigan survey was the latest evidence that strong job growth and tumbling oil prices have lifted consumers' spirits. The Conference Board on Tuesday reported that its consumer confidence index climbed to the highest level since August 2007. And the Commerce Department reported Friday that consumer spending rose from October through December at the fastest pace in nearly nine years.

AMERICAN AIRLINES-PILOTS

DALLAS (AP) -- Pilots at American Airlines and US Airways have approved a single labor contract. That's a step toward combining workforces at the two carriers, which merged in December 2013.

The multiyear deal gives pilots a 23 percent pay raise retroactive to Dec. 2.

The pilots' union said Friday that the contract was approved 66 percent to 34 percent, with 95 percent of eligible pilots casting a vote.

TOYOTA-FATAL CRASH

MINNEAPOLIS (AP) -- A jury of six men and six women is continuing deliberations in a case alleging a 1996 Toyota Camry had a design defect that caused a fatal crash.

Jurors received the case late Wednesday afternoon and deliberated all day Thursday without reaching a verdict. They returned to a federal courthouse in Minneapolis on Friday to keep working.

The jurors must decide whether Toyota's design of the 1996 Camry had a defect that was unreasonably dangerous. If they find there was a defect, they must decide if it directly caused injuries to those hurt or killed when Koua Fong Lee crashed into another car in 2006.

Lee spent 2 1/2 years in prison before being released after reports suggested some Toyota cars had sudden acceleration problems.

GERMANY-BMW-SECURITY FLAW

BERLIN (AP) -- German automaker BMW says it has fixed a security flaw that made 2.2 million of its vehicles vulnerable to break-ins.

The company says the problem affected BMW, Mini and Rolls Royce models equipped with its ConnectedDrive technology, which allows drivers to access certain car functions with a smartphone.

German automobile club ADAC, which discovered the flaw last summer, says hackers could have used a fake cellphone base station to intercept network traffic from the car and lower the windows or open the doors. There are no reports such a break-in ever took place.

BMW spokeswoman Silke Brigl said Friday that hackers wouldn't have been able to start or stop the engine.

Brigl said the problem has been fixed with an automatic update and customers don't need to take any action.

POM JUICE-RULING

WASHINGTON (AP) -- A federal appeals court says many advertising claims for POM Wonderful juice were deceptive in asserting that it curbs the risk of heart disease, prostate cancer and erectile dysfunction and is clinically proven to work.

In a 3-0 decision, the U.S. Court of Appeals for the District of Columbia Circuit upholds the conclusion that many of POM's ads made misleading or false claims. The conclusion was reached by the Federal Trade Commission.

The ads appeared in national publications, on Internet sites, bus stops, billboards, newsletters and on tags attached to the products.

POM Wonderful LLC produces a number of pomegranate-based products.

RUSSIA-FINANCES

MOSCOW (AP) -- Russia deputy sports minister Yuri Nagornykh says his country's economic crisis is forcing athletes to scale back their training plans for next year's Olympics in Brazil.

Training camps abroad can be crucial in acclimatizing athletes for Rio de Janeiro's tropical conditions, but they are rapidly becoming unaffordable after the ruble lost almost half of its value against the U.S. dollar in the last 12 months.

Nagornykh tells Russian agency R-Sport that, with the ruble's value low and the Sports Ministry's budget facing cuts, athletes should stay in Russia rather than train abroad "in order to spend less of the currency reserves."

Officials will select priority sports and athletes for scarce funding, Nagornykh said.

The measures affect athletes for the Rio Olympics, and the 2018 Winter Olympics, he added.

OHIO STATE-ROYALTIES

COLUMBUS, Ohio (AP) -- The Ohio State University is cashing in after the Buckeyes' national championship victory.

The Columbus Dispatch reports the university expects a $3 million increase this year in royalties from licensed merchandise sales as fans continue to buy national championship gear and keepsakes.

Retailers say the team's special story has helped boost sales. The Buckeyes, who defied naysayers in their 42-20 victory over the University of Oregon, earned the final playoff spot after losing two starting quarterbacks to injuries.

Licensing officials also attribute increased sales to the fact Ohio State hadn't won a championship since 2002.

More than half of each dollar that comes into the school's licensing office goes to academic affairs. The athletics department, alumni association and student life program also receive portions of the revenue.

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