One of Detroit’s two pension funds handed out nearly $1 billion in bonus cash payments over two decades to retirees and active employees’ retirement accounts instead of reinvesting the extra earnings for the future, according to a Detroit Free Press review of city records. The payments contributed to Detroit’s financial crisis and its historic chapter 9 bankruptcy filing by increasing the amount the city needed to contribute each year to keep the pension fund solvent. Had the city’s General Retirement System held on to the excess cash, the city might not have felt the need to borrow $1.44 billion in 2005 to plug the city’s unfunded pension liabilities gap, the Free Press found. That debt has ballooned to nearly one-fifth of the city’s total debt today and played a role in pushing the city into filing the largest municipal bankruptcy in the nation’s history in July. The average annual pension for retired Detroit police officers and firefighters is about $34,000, and for retirees from Detroit’s general city pension fund the average is less than $20,000. No one is getting wealthy off of the pension checks, but the cumulative effect of distributing the bonuses to about 20,000 retirees and also as annuity bonuses for active employees over time has destabilized the funds and the city’s budget, Detroit emergency manager Kevyn Orr and others contend.
