Detroit Bailout Package
Handy link to descriptions of all 10 bills
A bipartisan 10-bill package has been introduced in the Michigan House related to a proposed Detroit bailout. A link to the concise, objective, plain-English MichiganVotes.org descriptions of all 10 bills is here.
It’s worth noting that the grant (or bailout) bills do not require passage of the reform bills to become law. Also, nothing would prohibit a future Legislature from repealing the reform measures, although in practical terms this could get complicated given that a potential federal court bankruptcy settlement may be all wrapped together with the grant and reforms — if they are approved.
The state money is intended to ease the tough choices the city must make to get relief from its debt and other obligations in federal bankruptcy court. Six of the bills would institute fiscal reform measures for the city. Most notably, one bill would establish a state oversight panel with authority over city budgets, borrowing, union contracts, etc. (House Bill 5566), and another that would end offering defined benefit pensions and post-retirement health insurance to new city employees hired starting in 2015 (subject to current union contracts), instead granting them generous 401(k)-type defined contribution benefits (House Bill 5568).
One reform bill would cap the value of city employee health insurance benefits (House Bill 5569), and another would prohibit any extension of a 10-year Detroit regional arts tax authorized by a 2010 law and 2012 ballot initiative (House Bill 5571).
Four of the bills would enable payment of a state grant to Detroit that many regard as a partial bailout (House Bills 5572 to 5575). Two of these grant bills envision a one-time $195 million up-front payment, while another would authorize state borrowing of $350 million as a means of ensuring future Legislatures follow through on the current Legislature’s commitment to deliver the money in annual $17.5 million installments over 20 years. The value transferred by either approach is about the same — $195 million right now is worth roughly the same as $350 million over 20 years. The Legislature would pick one or the other method, but not both.
People who have downloaded the VoteSpotter app can follow the progress of the package and give feedback to their legislators when votes are taken.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.