LANSING, Mich. (AP) — 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
could potentially oversee the city’s finances for at least 13 years,
longer if the city’s books are not balanced. The oversight commission
would go dormant in as little as three years if Detroit’s finances stay
solid post-bankruptcy.
The House passed 11 bills, which now go to
the Senate, which is also controlled by Republicans. The plan has the
support of the Republican governor and legislative leaders, but its
passage has been no sure bet in the bailout-averse Legislature.
Lawmakers stood and applauded after the votes, saying politics was put aside to help rebuild Detroit.
"Choosing
to do nothing means putting billions of debt and uncertainty on our
kids and our grandkids," said Republican Rep. Al Pscholka of
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 pension funds, if the
bankruptcy judge later this year 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 and would be repaid with annual
$17.5 million withdrawals from Michigan’s tobacco settlement over 20
years.
Bond insurers have pointed to the art collection — which
includes Van Gogh’s "Self Portrait" — as a possible billion-dollar
source of cash in the 10-month-old bankruptcy case. The city firmly
opposes that and instead is banking on the separate deal brokered by
mediators that would protect the art forever and limit pension cuts for
approximately 30,000 retirees and city workers to no more than 4.5
percent instead of as much as 34 percent.
In voting against the
bills, Democratic Rep. David Nathan of Detroit said he fears Michigan’s
"takeover" of the city could go on forever.
"This bill tramples on
democracy," he said. "I don’t think anybody in this room would accept
what you are asking the citizens of the city of Detroit to accept."
Supporters
of the legislation countered that it is modeled after oversight of New
York City that began in the 1970s. Doing nothing is not an option, they
said.
"Do you really want to open up the gates of financial
Armageddon and see what’s on the other side?" said Democratic Rep.
Harvey Santana of Detroit.
After the votes, Gov. Rick Snyder — a
big supporter of the "grand bargain" — hailed the bipartisan support for
the legislation. Except for a largely party-line vote for a bill not
allowing the museum’s three-county property tax millage to be renewed in
eight years, the 10 other bills were passed on votes ranging from
between 74-36 and 105-5.
Conservative groups such as Americans for Prosperity oppose the state payment as wasteful.
"One
thing that could be important for (the Senate) to look at is the
margins that this passed with, to say there’s very strong support for
it," Snyder said.
By backing the deal, the governor and
legislators are hoping to avoid a protracted bankruptcy and putting city
retirees potentially into poverty, costing the state an estimated $270
million in social safety net costs over 20 years.
Rep. Ken Goike,
R-Ray Township, said his bill would give homeowners some tax relief
since they are being asked to help Detroit with state dollars. The
museum and Democrats said it is outside the scope of the broader
agreement and would wrongly deprive voters from deciding.