THE BIGGEST LOSERS IN DETROIT’S BANKRUPTCY

ABSTRACT: The biggest losers in Detroit’s bankruptcy appear to be school children, current and former city employees, and poor residents. The emergency plan for Detroit’s public schools calls for increasing class sizes from 38 to 43 students in grades 6 – 12. Spending on classroom instruction has been cut 19% (falling from 58% of the school budget to 47%), while spending on central administration has grown by 64%. Detroit’s workers and retirees have agreed to accept cuts in their pensions.

Since March, over 15,000 households in Detroit have had their water cut off. While residents’ water has been shut off if they owe more than $150, 40 commercial users that owe a total of $9.5 million have not been shut off.

This country spent hundreds of billions of dollars to bail out huge financial corporations (that had engaged in egregious misconduct) so that they wouldn’t go bankrupt. We should be able to help poor and unemployed residents of Detroit so their water isn’t shut off, to ensure Detroit’s children get a good education, and to provide reasonable cost of living increases for city employees’ pensions – all for a tiny fraction of the cost of the bank bailout.

FULL POST: The biggest losers in Detroit’s bankruptcy appear to be school children, current and former city employees, and poor residents.

The emergency manager of Detroit’s public schools has put forward his emergency plan. It calls for increasing class sizes from 38 to 43 students in grades 6 – 12. Since control of the budget was removed from the elected school board, spending on classroom instruction has been cut 19% (falling from 58% of the school budget to 47%). Meanwhile, spending on central administration has grown by 64%. [1]

Detroit’s workers and retirees have agreed to accept cuts in their pensions (reluctantly I’m sure). Regular municipal employees’ pensions would be cut by 4.5% and they will get no annual inflation adjustments. (The average municipal workers’ pension is less than $23,000 per year.) Police and firefighters will lose only a portion of their annual inflation adjustment. [2]

Since March, over 15,000 households in Detroit have had their water cut off. The Detroit Water and Sewage Department has announced plans to shut off up to 3,000 households per month. A recent 15 day moratorium on some shutoffs was announced, but it is temporary and some shutoffs will continue. A human rights complaint has been filed with the United Nations, where a spokesperson noted that, “when there is genuine inability to pay, human rights forbids disconnections.” While residents’ water has been shut off if they owe more than $150, 40 commercial users that owe a total of $9.5 million have not been shut off. For example, the water is still on at a golf course that owes $200,000 and two sports venues that owe $80,000 and $55,000. [3]

Water bills in Detroit have more than doubled in the last 10 years and an 8.7% increase was recently approved. Meanwhile, over 40% of Detroit residents live below the federal poverty line (roughly $20,000 for a family of 3) and unemployment is at record levels.

This country spent hundreds of billions of dollars to bail out huge financial corporations (that had engaged in egregious misconduct) so that they wouldn’t go bankrupt. We should be able to help poor and unemployed residents of Detroit so their water isn’t shut off, to ensure Detroit’s children get a good education, and to provide reasonable cost of living increases for city employees’ pensions. All of this, together, would cost a tiny fraction of the cost of the bank bailout – on the order of $1 for every $1,000 given to the banks.

[1]       Clawson, L., 7/18/14, “Detroit schools emergency manager raises class size to emergency levels,” Daily Kos (http://www.dailykos.com/story/2014/07/18/1314775/-Detroit-schools-emergency-manager-raises-class-size-to-emergency-levels)

[2]       Daily briefing, 7/22/14, “Detroit retirees agree to pension cuts,” The Boston Globe

[3]       Prupis, N., 7/24/14, “Canadian group delivering water to Detroit to protest shutoffs,” Common Dreams (http://www.commondreams.org/news/2014/07/24/canadian-group-delivering-water-detroit-protest-shutoffs)

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4 comments

  1. Thank you for sharing your knowledge. You have a wonderful blog! Keep it up!

    1. Thanks for the kind words! I’ll keep this up. Please share it with others who would find it informative.

  2. Detroit has suspended further shut-down of the local water services for another week or so. Regardless, it is shocking that they pass down these burdens onto the children of Detroit. I hope these bankruptcy proceedings end soon.

    1. I agree. Are there changes to our bankruptcy laws that would put more of the burden on others who are more capable of absorbing the blow? For example, my understanding is that banks that had provided financing to Detroit, including some with complex variable interest rate provisions, got paid in full while the children and pensioners of the city suffer. Is that true? If so, could changes in bankruptcy laws change this?

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