Judge: Detroit Can Cut Pensions; Illinois Oks ReformDecember 3, 2013 – In The News
Michael Sweet was quoted in the Investor’s Business Daily article "Judge: Detroit Can Cut Pensions; Illinois Oks Reform." While the full text can be found in the December 3, 2013, issue of Investor’s Business Daily, a synopsis is noted below.
Judge Steven Rhodes ruled Tuesday that Detroit is eligible for bankruptcy, a decision allowing the city to remake itself in the largest municipal bankruptcy in history.
But Judge Rhodes went one step further, ruling that public pensions are subject to the same cuts bondholders face.
Michael Sweet said Rhodes’ embrace of the pension issues was a bit surprising, but noted that the judge also pointed out he would not “casually” approve pension cuts.
While it’s unclear if the case will set national precedent, Judge Rhodes made clear that he considers pensions to be contracts, and federal bankruptcy court exists to break contracts, even those protected under the state constitution, Sweet said.