Detroit Went Way Overboard Paying Pensions: Report

Money went to workers who hadn't retired

By Matt Cantor,  Newser User

Posted Sep 26, 2013 2:23 AM CDT | Updated Sep 26, 2013 7:52 AM CDT
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(Newser) – In its path to declaring bankruptcy, Detroit didn't help itself on the pension front: The city, it seems, was overly generous with its pension payments to the tune of billions of dollars. The city offered extra cash to workers still on the job, while retirees got bonuses and families received payments following the deaths of workers not yet qualified for pensions, the New York Times reports. Some 23 years of above-and-beyond payments cost Detroit $2 billion, according to an outside actuary.

The payments were "like dandelions," says a former independent top auditor for the city. "You just accept them. They were there, something you’ve seen all your life." Detroit's pension boards consist largely of organized labor representatives whose votes could override any effort to change the system, the Times notes. But a rep for pension officials says the actuary's account isn't telling the full story. For one thing, payments came from an internal "excess earnings" account, set up by officials and unions, she says. "People were having a hard time, living hand-to-mouth, and we thought we would give them some extra." City watchdogs are due to release a report addressing the matter today. Click for more details, including where the city might go from here.

Detroit paid far more in pensions than it was supposed to, to its own detriment.
Detroit paid far more in pensions than it was supposed to, to its own detriment.   (Shutterstock)
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