News Story

Government Unions Protest to Bankrupt Local Governments

Public-sector unions in Michigan protested in Lansing against reform bills that would prevent local governments from declaring bankruptcy. The Michigan Senate is discussing reforms to the Local Government Fiscal Responsibility Act that would provide more objective standards to declaring a fiscal emergency and give the state-appointed manager more ability to fix the government’s finances.

It is a rare occasion when a local government has a fiscal crisis and an emergency financial manager needs to be placed. Out of the thousands of local government units, only eight managers have been placed since the law began in 1990. But considering that managers have failed to resolve crises in two of the governments and that four governments currently have managers in place, beefing up the law is a good idea.

Besides, because the falling real estate market will continue to pressure local government revenue and employment costs will stress their costs, it’s a good time to revisit these rules.

While it might make sense in the long term for union-members to have the governments that they work for remain solvent, the bills do one thing that is untenable to unions: When an emergency manager is placed, he or she would have the power to walk away from the union bargaining table and offer what the manager believes is prudent compensation that still preserves essential government services.

This reform is essential for righting a local government’s finances. Employment costs tend to be a major expense in Michigan governments. This is true whether it’s Michigan State University, Oakland County, or Dundee Community Schools. And Michigan’s public workforce tends to be highly unionized. Overall, 52 percent of Michigan’s government employees are covered by union contracts.

If the word “emergency” has any meaning, it is that normal routines are set aside so that the most pressing problems can be fixed. If that emergency is financial, this means that niceties such as collective bargaining have to take a back seat to cutting costs and maintaining services. That’s especially true when collective bargaining agreements are the source of so much of the excessive cost of government. The unions’ position seems to be “we want our benefits no matter what happens to citizens.” Citizens might have a different set of priorities.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.