Judge delays hearing on Detroit bankruptcy, pensions

A hearing on whether Detroit's bankruptcy filing violates the state's

constitution rules against tampering with pension benefits was

adjourned to July 29. Despite the state's desire to move the case to

federal court, Judge Rosemarie Aquilina of Ingham County Circuit Court

said Monday that she believes the case should be heard in state court.

"This is a very important issue," she said. "I understand that there

may be this question of moving it to federal court. ... But these are

state issues. We're dealing with the state constitution and an

emergency manager who is a product of the state legislation." The

city's emergency manager, Kevyn Orr, filed for Chapter 9 bankruptcy in

federal court Thursday, and Detroit became the largest city government

ever to declare bankruptcy. Aquilina ruled last week that the

bankruptcy filing violated the state constitution. "As you all know,

my decision last week was because there's been a violation of

constitution. I don't believe the constitution should be made of swiss

cheese," she said. Detroit emergency manager Kevyn Orr plans to pursue

"significant" cuts to the pensions of the city's 21,000 retirees.

Although the Michigan Constitution protects public pensions, Orr

believes that U.S. bankruptcy law, which allows contracts to be

slashed, will take precedent. The state also believes that the

bankruptcy filing in federal court will supercede a lawsuit that the

pension boards for city employees and the police and fire department

employees have filed. Bankruptcy experts say retiree pensions probably

won't be completely wiped out, but monthly payments could be reduced.

Ronald King, lawyer for the pension systems, said his case does not

enjoin the city from proceeding in bankruptcy. "But you have to

respect the constitutional provision in Michigan that protects accrued

pension benefits," he said.