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Financial Guaranty Insurance Co. (FGIC) and Syncora said on Tuesday that they plan to fight Detroit in federal court on the grounds that the city is giving a much better deal to city pensioners and is unfairly discriminating against bondholders from whom the city has borrowed heavily, The Christian Science Monitor reported yesterday. Their complaint comes a day after two pension groups, made up of retired police, firefighters and other public workers, voted to accept slightly reduced pensions under the city's plan to restructure its crippling debt. The two insurers say that Detroit is legally bound to a $1.4 billion debt deal established in 2005. Detroit Emergency Manager Kevyn Orr has argued that the debt deal — brokered by former Mayor Kwame Kilpatrick, now in federal prison on a corruption conviction — is illegal. Orr is set to bring the debt restructuring plan before Hon. Steven W. Rhodes starting Aug. 14. It is possible that proceedings will move forward even without bondholders being in full agreement, said University of Michigan Prof. John A.E. Pottow. If there is no settlement that eliminates the need for a trial, Judge Rhodes can force cuts to creditors, or can determine that the city and its creditors need to reach a new deal.

Detroit's city workers and retirees overwhelmingly agreed to accept the city's debt-adjustment plan, according to results filed late Monday, potentially clearing the way for the struggling city to exit bankruptcy in the next few months, Reuters reported today. Documents filed in bankruptcy court show that the city's current and retired police and fire employees, along with other active and retired city workers, will accept pension reductions to help adjust $18 billion in debt in the largest-ever U.S. municipal bankruptcy case. Most bondholders rejected the plan, along with insurers that are backing some of the debt. The city declared that the "overwhelming" vote by members of its two retirement systems to accept changes to their pensions puts it on track for a coming trial to determine whether the plan is fair and feasible. That phase is scheduled to begin on Aug. 14 and will be overseen by Bankruptcy Judge Steven W. Rhodes. "The voting shows strong support for the city's plan to adjust its debts and for the investment necessary to provide essential services and put Detroit on secure financial footing," said Detroit Emergency Manager Kevyn Orr.

The share of U.S. firms giving pay raises has nearly tripled since last fall, according to a new survey of business economists by the National Association for Business Economics, although official data on U.S. workers’ earnings haven’t shown any broad acceleration in wage growth, The Wall Street Journal reported yesterday. Some 43 percent of survey respondents said that wages and salaries at their firms have risen in the past three months. No respondents said that wages had fallen, and 57 percent said that wages were unchanged in the second quarter. In the October 2013 survey, just 16 percent of economists said that their companies had given raises in the prior quarter. That number has risen steadily since to 23 percent in January, 35 percent in April and 43 percent now. Raises were spotty by sector, with just 11 percent of goods-producing firms and 35 percent of service firms reporting wage hikes. Some 59 percent of finance, insurance and real estate firms reported a rise in wages, as did 50 percent of transportation, utility, information and communications companies. In the NABE survey, 35 percent of respondents said they expected wages at their firms to rise in the third quarter versus 65 percent who expected no change.

New Jersey Governor Chris Christie won a key budget battle when a judge ruled he had legal authority to cut payments to the state pension system because he faced a fiscal emergency, Bloomberg News reported yesterday. Christie was confronted with “staggering” shortfalls in his $33 billion budget for the year ending June 30, Superior Court Judge Mary Jacobson said yesterday. Christie acted reasonably in paying $696 million to cover current employees, while deferring $887 million to help close the gap left by previous governors, the judge ruled. Unions for teachers, firefighters and other public employees sued to stop Christie, seeking full payment into a pension system underfunded by $38 billion. Christie, a Republican, said an unanticipated drop in revenue forced him to trim pension payments to balance the budget, as required by law.

A legislative fight between North Carolina Treasurer Janet Cowell and a state employee association is signaling growing tension over disclosure practices as public pensions seek to improve returns with alternative investments, Bloomberg News reported today. Cowell, a 45-year-old Democrat, opposed a bill by the State Employees Association of North Carolina to require more disclosure about deals with Wall Street firms hired to manage alternatives to stocks and bonds for the $87 billion pension she controls. Cowell warned that giving out more information would cost more than $1.8 billion for violating secrecy agreements, and instead supported a bill that would conceal details for five years after a contract is completed. The dispute comes as states invest more in private equity and hedge funds in a bid to meet average return targets of 7.7 percent. Since 2001 states have increased allocations to alternatives to $460 billion, or 15.3 percent, from $66 billion, or 3.3 percent in 2001, according to the National Association of State Retirement Administrators.

Early ballots from Detroit city employees and its retired workers are strongly supporting Detroit's debt-cutting plan, giving new hope to city leaders who aim to exit bankruptcy court by this fall, the Wall Street Journal reported yesterday. The city of Detroit sent ballots to roughly 32,000 pension recipients, offering them a stark choice: Vote for the plan to cut most pensions and eliminate a future cost-of-living increase, or reject the plan and risk additional cuts. The initial tally from votes of roughly 5,000 current and former city workers with pensions mailed in so far is favoring the city's plan at a more than two-to-one margin, city officials said. Support from pension-holders is seen as being key to the success of Detroit's plan. A coalition of philanthropic foundations, private donors and state leaders have pledged $816 million to help make up a shortfall in the city's pension plans to protect the city-owned art collection at the Detroit Institute of Arts (DIA) from the auction block, but they'll only release the funds if a majority of pension-holders vote for the city's debt-slashing plan. A city-commissioned appraisal last year for some of the most valuable city-owned artwork pegged its value at up to $866 million. Some retirees and other creditors, however, have raised questions in bankruptcy court about whether the city lowballed the value of its city-owned DIA collection.

Bankruptcy Judge Sean H. Lane ruled that former American Airlines parent AMR Corp. doesn't have the unilateral right to terminate benefits to about 46,930 retirees, Dow Jones Daily Bankruptcy Review reported today. Judge Lane on Thursday denied AMR's request, brought during its chapter 11 case, for a summary judgment that it could unilaterally modify the health and welfare benefits it offered its retirees because its benefit programs "lack language categorically reserving" its right to do so. AMR had sought to shift the cost of the benefits to its retirees, who include union and nonunion members.

The former maker of Broyhill, Lane and Thomasville furniture struck a deal to trim more than $340 million in pension liabilities, Dow Jones Daily Bankruptcy Review reported today. The former Furniture Brands International Inc., which last fall sold its assets to buyout firm KPS Capital Partners LP, on Friday filed papers seeking bankruptcy court approval of a deal that resolves issues with its underfunded pension plan and will allow the company to file a creditor-payment plan. The company, which now goes by FBI Wind Down Inc., sought chapter 11 protection in September to confront the issues surrounding its pension plan, which covers about 19,000 people and is underfunded by more than $270 million.

Bankrupt San Bernardino and its biggest creditor, the California Public Employees' Retirement System (CalPERS), said on Thursday that they have made substantial progress in recent negotiations over how much the city will pay the pension fund as part of any bankruptcy package, Reuters reported yesterday. The California city has been in court-ordered mediation talks with its creditors since late last year. It filed for bankruptcy in August 2012 with a budget deficit of $45 million. It is likely to set a precedent on whether retirees or Wall Street bondholders should suffer the most when a local government goes broke. San Bernardino took the unprecedented step of halting its bimonthly employer payments to CalPERS, America's largest public pension fund, for an entire year after filing for bankruptcy protection. It resumed payments in July 2013. It owes more than $17 million to CalPERS, which has assets of $277 billion. A key question in San Bernardino's case is whether the city will seek to reduce its monthly payments to CalPERS through federal bankruptcy protection. More mediation sessions are set for April. The San Bernardino chapter 9 case has progressed slowly, and it is still not clear when the city will produce a bankruptcy plan.

Ten senators, including members of both parties, have reached a deal extending by five months long-term unemployment insurance benefits that have already expired, Breitbart News reported yesterday. More than two million Americans would be affected, and the retroactive payments would be marked from Dec. 28, 2013, to the end of May 2014. Although Sen. Susan Collins (R-Maine) said that the aid would be "paid for," the cost, roughly $10 billion, would be offset partly by "pension smoothing," an accounting trick in which a timing shift is used in calculating the pension interest rate. Both the Heritage Foundation and Center on Budget and Policy Priorities have called it a gimmick. The bill has to pass the Senate and then pass the House, which seems unlikely. All of the Democrats must vote for the bill, along with five Republicans, for it to reach the 60 votes that it needs in the Senate. The deal would end federal unemployment insurance payments to those whose adjusted gross income in 2013 was $1 million or more. It would also fortify reemployment and eligibility assessment and ReEmployment Services programs.