One of the three main credit rating agencies calls Michigan Governor Rick Snyder’s proposal to use $350 million to defray Detroit municipal pension losses “troubling” and could damage the state’s image with investors, the Detroit News reported today. Fitch Ratings said in a report yesterday that it “believes that the Michigan governor’s recent proposal to contribute $350 million towards Detroit’s unfunded pension liabilities demonstrates continued weak support for bondholder security and repayment stemming from Detroit’s bankruptcy. In Fitch’s opinion, action that suggests pensions’ claim on limited resources should be given priority to that of bondholders could establish a troubling precedent, at least in Michigan and perhaps beyond.” Snyder said last week that his administration is considering whether to borrow $350 million to pump into Detroit’s pension funds or set aside $17.5 million in annual payments for the next 20 years from the state’s tobacco lawsuit settlement fund.
