Two Detroit city pension plans sued Michigan Gov. Rick Snyder, asking a federal court to declare unconstitutional a new law granting state-appointed financial managers emergency powers to terminate employee contracts and suspend collective bargaining.
The complaint was filed Monday by the $2.4 billion Detroit General Retirement System, the $3.4 billion Detroit Police and Fire Retirement System, and four individuals, including the chairs of both boards.
Mr. Snyder said the law, signed March 16, would help keep Michigan communities out of bankruptcy. Michigan has emergency managers running the schools in Detroit, as well as the cities of Pontiac, Ecorse and Benton Harbor.
The law would “impermissibly modify the Detroit city charter and various collective bargaining agreements between the city of Detroit and its uniformed and non-uniformed workers,” the pension boards said in the lawsuit filed in U.S. District Court in Detroit. The law authorizes “the modification and termination of constitutionally protected contract rights and the seizure of control of retirement systems,” according to the complaint.
The pension boards, which also named Andy Dillon, Michigan state treasurer, as a defendant, asked for a court order blocking the law from taking effect.
The Detroit pension funds have “performed in the top 20% of municipal pension funds nationwide in recent years,” despite “the recent global economic meltdown,” they said in the complaint.
Tigi Habtemariam, Mr. Snyder's spokeswoman, didn't immediately return a call for comment.