Filing felt throughout city

Detroit bankruptcy another setback for unions
Associated Press
Jul 27, 2013

Detroit's historic bankruptcy filing is a major setback for public employee unions that have spent years trying to ward off cuts to the pensions of millions of government workers around the country.

If the city's gambit succeeds, it could jeopardize an important bargaining tool for unions, which often have deferred higher wages in favor of more generous pensions and health benefits.

It also could embolden other financially troubled cities dealing with pension shortfalls to consider bankruptcy, or at least take a harder line with their unions in negotiating cuts.

"This is essentially the union's worst nightmare, said Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass. "It means that the most sacred of sacred things they've negotiated for, the pensions of their retired members, are going to be severely cut."

Detroit's bankruptcy filing comes on the heels of some public unions losing most of their collective bargaining rights in Wisconsin. At the same time, the unions have shed thousands of members as state and local governments shrink public payrolls. The crisis of underfunded public pensions could further erode union clout.

From Chicago to Cincinnati to Santa Fe, N.M., dozens of cities and counties are struggling with massive debt linked to pension liabilities. Critics say state and city employees won generous defined benefit pensions and lifetime health care from elected officials trying to curry favor with public sector unions.

Unlike private employers that must fund such defined benefit pensions under the Employee Retirement Security Act, government employers are not covered by that statute. As a result, many elected officials approved such plans, leaving the financial consequences for future leaders to handle.

If cities such as Detroit can use bankruptcy or other tactics to reduce pension obligations, government employees could become less interested in union membership, said Charles Craver, a George Washington University law professor specializing in labor relations. That would be another dose of bad news for the steadily shrinking labor movement, especially because public employees now make up over half of all union members.

"Union leaders should go to the bargaining table and try to address this issue through negotiations, but they fear being thrown out of office if they agree to any cutbacks," Craver said, referring to pensions.

Detroit's financial woes were aggravated by widespread corruption, financial mismanagement, the auto industry collapse and a dramatically shrunken tax base as people moved out. The city has long-term debts of at least $18 billion, including $3.5 billion in unfunded pensions and $5.7 billion in underfunded health benefits for about 21,000 retired workers. The rest is owed to bondholders and other unsecured creditors.

About 7.3 million government workers belong to a union. The union membership rate for public sector workers is about 40 percent, much higher than the 6.6 percent rate in the private sector.

The fallout from Detroit could lead to more acrimonious contract negotiations between cities and union, said John Beck, a professor of labor relations at Michigan State University.

"If I'm a union and bargaining, where I used to be willing to defer wages in form of pensions, I'm going to bargain for what I can get right now because I can't be sure whether those future wages are going to be protected," Beck said.

Unions, led by the American Federation of State, County and Municipal Employees, have launched a furious legal challenge to the Detroit's bankruptcy petition, arguing that Michigan's constitution law does not allow public pension obligations to be diminished. But a federal bankruptcy judge dealt a blow to that tactic last week, halting any state lawsuits that would interfere with the bankruptcy proceeding.

"Government entities declaring bankruptcy, it's really a government going to war with its own people," said Steven Kreisberg, director of collective bargaining for AFSCME. He said trying to reduce pensions is unfair to those who worked for years in good faith and expected to depend on those benefits in old age.

The average pension for retired city employees other than firefighters and police officers is quite modest, Kreisberg said, at about $19,000 annually. Retired fire and police get about $30,000 in pension benefits, higher since they are not part of the Social Security system.

While other cities in financial trouble might be willing to follow Detroit's lead, Kreisberg said the stigma of bankruptcy and its long-term damage to a city's financial future make that unlikely. But if there is a national epidemic of pension defaults, it could change what unions would demand in terms of funding levels.

"We may seek legislation to guarantee that employers are making their payments," Kreisberg said.

The AFL-CIO has called on President Barack Obama and Congress to offer immediate financial aid to Detroit. The labor federation also wants any federal aid to be matched by the state of Michigan.

"As the nation emerges from the worst of the Great Recession, it is time for Congress and the White House to make it clear they will not turn their backs on our urban centers," said Lee Saunders, president of AFSCME and chairman of the AFL-CIO's political committee.

But the White House appears reluctant to intervene. White House spokesman Jay Carney has said the city's insolvency should be resolved by local leaders and creditors and that the Obama administration has no plans to provide a federal bailout.

Carney said the administration was ready to provide other forms of assistance, such as investment opportunities or help for blighted neighborhoods hit hard by the recession.

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Follow Sam Hananel on Twitter: http://twitter.com/SamHananelAP

 

Comments

kURTje

You'll adapt too. When YOU lose what you worked for. Admit it - you & my father knew a better economy. You'd probably talk different if you were younger. The Unions are similar to America. Not perfect, but they both reflect people's attitudes.

The Big Dog's back

Exactly Kurt.

Nemesis

Whose attitudes. Union members make up 11% of the labor force - talk about the tail wagging the dog.

grumpy

Go check the years of 77 through 82 and come back and we can talk when you learn something. Every generation has had bad times in them. I was just starting out when the Carter recession invented the pain index. double digit unemployment, double digit inflation, double digit interest. I could go on but I lived through it by working several side jobs, saving and just not buying. I have saved from the time I was 9 years old and still haven't stopped. I never borrowed except for real estate, or for business that I had on the side. Never borrowed for a car, never carried a balance on a credit card. The last 18 years I have made more on investments than I have working a building trades job 50-75 hours a week and getting well above average wages That I earned because I was good at what I did.. I have spent money on toys, vacations, a second home, paid for college for 2 kids, and paid off my wife's college loans, I could go on but it isn't needed. My kids both have saved, worked and not borrowed. They saw what can be done when you live life intelligently, and within your means.

If you wish to talk about how it is done now, I suggest you speak to those young folks who are succeeding, not those who are sliding by. It is hard to find those young folks who are succeeding... cause they are working 50-70 hours a week, they don't have time for much besides family, a few friends, a church if they happen to believe, home and work. When they play they do so with others like themselves.

The Big Dog's back

The big difference between now and then is that the jobs and companies were still here. Now they are gone.

grumpy

The big difference is that some people don't go out and FIND what they can do to make money. if they find a 40 hour job they are satisfied with that. Both my kids work 50 hours and my daughter spends the rest of the time with her family, till the kids are in bed then has work on the side she does. My son work 50-60 hours per week and spends time with his wife and still does work on the side, his side job is also his hobby, he gets paid doing his hobby. Their friends do much the same, as I stated above. They are NOT unique in what they do. Those young folks who are succeeding in life are doing much the same in their lives. Not whining on a blog about how tough it is now compared to before.

kURTje

While my friends humped 85+lbs. in triple digit heat while being shot at (combat). See I don't act like someone owes me. Military life would be good for you REMF's. Most you oldsters are weak.

grumpy

Exactly where do you think I was before 77? If you wish to make sweeping statements about me and others you don't know, at least look into the possibility that you have your head up your rear. As it is that was what I was doing before 77, or I did for 4 years. But then with your cracked crystal ball, you didn't see that. You are able to make statements that you have no clue about. If you were around back then, you sure haven't learned much in your time here on Earth. try harder from here on out.

kURTje

You might have gone to ROTC Reserves(exempt), or college - no combat. Most in that age group DID not serve in Vietnam. My relatives did though. Glad I knocked it oudda the park on you. Thanxs for proving what I thought.

The Big Dog's back

You've got him pegged Kurt.

grumpy

Sorry you struck out. Didn't go to college till I was in my 30's, and finished in my 40's. Never was in the reserves, didn't waste my time there. Now figure out what I meant when I said 4 years. You really aren't very bright. It is best to stop digging when you are in a hole that rises above your head. I don't need to rely on what my relatives told me, unlike some posting here.

This is what I expect from those that haven't done things, they sit and whine on the computer instead of doing. Then wonder why life is tough for them. They wonder why they don't get breaks, you work for your breaks. You don't sit in your mom's basement on her old computer.

grumpy

Can't answer what 4 years in the military meant in the mid 70's? Can't find out from your betters who actually did something in his life? It is not something the internet will tell you when you search. Dman sure can't look into your own sorry life's experience and have an answer. That would take someone who actually accomplished something more than working a 40 hr per week job and complaining about how your life sucks. As I said before, you work to make your breaks. You don't sit in your mom's basement and whine on her old computer. Keep digging that hole.

Contango

FYI:

IMO, based on his postings, to say that your new-found blog buddy is a sociopathic "nut," while living in some weird G.I. Joe fantasy land would be putting it mildly:

“I do love my 40cal. Glock. “ (kURTje, June 25, 2011)

http://www.sanduskyregister.com/...

“My Glock is my sweet.” (kURT, Dec. 10, 2010)

kURTje

Thanks non-Christian troll. Now you hate my Marine Corps? (There are crossed rifles on each arm sleeve). Blo-on oldster.

kURTje

Opps forgot. This paper wanted an interview regarding war (Iraq). They got turned down. Norwalk Reflector did do a small piece. Don't hate facts.

grumpy

"don't hate facts"

I have seen how you use "facts" you don't have when speculating about others. Your cracked crystal ball seems to fail you. You like to make up things and state them as "facts" Most folks "in my age group" call that lying, in your "age group" you call them "hoped to be" facts. (guesses/assumptions) and try to pass them off as "facts". Sorry, strike three, you're out.

kURTje

Geez - thought Rob Perry died. Live up to your name grumpy. Old people like you HAVE know a better economy. Keep sending me my $$ also. (I like my military compensation). Unlike you I've been privileged to do & see more of this world than most 80year olds. You can't sully me. pdb.

grumpy

As stated before every generation has had better and worse times. The late 70's and early 80's were far from better. The early and mid 2000's were better. In fact the early to mid 2000's were dman good. So I guess that would include this generation having good times also. Low 5% unemployment, low inflation, home values only going up. But then you wish to focus on poor you now, instead of making your own breaks in life. I am receiving a pension, working part time getting paid for doing one of my hobbies, also have a business on the side doing another of my hobbies. I made my own breaks, instead of whining on the internet complaining that mean old guys have all the breaks and never saw bad times... even when your lack of knowledge of the bad times is smacked across your face, you prefer to ignore the facts. Much like children do when corrected. I don't mind your mistakes, but when the facts are smacked across your face you still make the same false claims. Every generation has had years of bad economies, also years of good economies. Mid 80's up to 98 or so was great. 2002 till 07 were also. 77 through 82 sucked as has the last 5 or 6 years. I have also worked and lived through the last 5 or 6 years.... but then you don't seem to realize such facts.

The Big Dog's back

"The early and mid 2000's were better. In fact the early to mid 2000's were dman good". Are you kidding me? We darn near had another Depression after 9/11/2001. Re-writing history again pooh?

grumpy

doubled

grumpy

"Rewriting history again"

http://www.cbpp.org/cms/?fa=view...

Hardly, piddle puppy. You seem to enjoy getting your nose rubbed in it, sad.

It now appears likely that the economic expansion that began in 2001 drew to a close in 2007. Whether or not it is ever formally declared a recession, the period since the third quarter of 2007 has seen sub-par growth (including a negative fourth quarter in 2007), shrinking payroll employment, and a rising unemployment rate, and so looks more like an economic slump than an economic expansion. Now is therefore a good time to take stock of the 2001-2007 economic expansion as a whole. We examine the expansion from 2001, when it began, through the third quarter of 2007, before the recent slow-down in economic growth.

--------------------------------------------------------------------------
"After 9/11/2001"

yeah it was a bad 6 weeks, and then the expansion took over again... 6 weeks and shutting down almost everything and we are back in expansion mode in 6 weeks.

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