News Story

Flint Union Contracts A Major Reason For City's Financial Problems

City workers plummeted, expenditures skyrocketed

In 2006, the city of Flint operated at a $5.9 million surplus. Four years later, the city was $48.1 million in the red.

Examining how Flint ended up with an emergency manager in 2011 reveals a laundry list of issues that hit municipal finances at the same time.

“It’s hard to tie it to one thing,” said Michael Brown, the city’s current emergency manager.

At a time when the city’s revenue was evaporating, its expenses were rapidly escalating.

For example, the city’s revenue from property tax, income tax and state-shared revenue dropped a combined $19.2 million from 2006 to 2011. Yet, the city’s contributions to the pension and benefit trust funds increased by $6 million over five years. It jumped from $22.2 million in 2006 to $28.2 million in 2011, a 27-percent increase.

And while its revenue was drying up, the city had to deal with rising employee costs. Michigan Capitol Confidential examined the two contract settlements of two public safety unions from 2006 and 2007 after getting them from a Freedom of Information Act request.

In May 2006, an arbitrator ruled that the Police Sergeant’s Union members should get bonuses totaling $7,350 in the agreement. Some police sergeants saw their base salary increased 14 percent. All members received additional 2.5 percent increases in each of the two years of the contract. Then in September 2007, the city agreed to a two-year contract with its fire department union. The city gave firefighters with five years experience a $6,000 signing bonus and pro-rated the bonus for those with fewer than five years. They then gave an 11-percent raise retroactive to 2006 and then followed that with 2 percent raises in 2007 and 2008.

City records show that Flint spent $45.2 million on public safety in 2006. Within two years, the city spent $78 million on public safety.

And the costs were climbing despite dramatic cuts to police and fire. Flint had cut its sworn police officers from 259 in 2006 to 132 in 2011 and had reduced its fire department from 130 full-time employees to 75 in 2011. Yet the public safety expenses increased from $45.3 million in 2006 to $53.1 million in 2011.

In a 2011 study on the city of Flint’s finances, Michigan State University’s Eric Scorsone, a former senior economist at the Michigan Senate Fiscal Agency, wrote, “Expenditures, especially those related to labor costs, are at alarming levels.”

Overall, the city’s workforce dropped from 1,104.5 full-time jobs in 2006 to 835.3 full-time jobs in 2011. Despite a 24 percent reduction in the full-time workforce,  the city’s expenses went up 28 percent. Expenses for “total government activities” increased from $109.9 million in 2006 to $140.8 million in 2011. Brown said about 80 percent of the city’s costs are tied to employees’ costs.

By the end of 2011, Brown took over as emergency manager of a city deep in red ink, and with expired union contracts.

Instead of thousands of dollars in signing bonuses and 11 percent retroactive raises some unions received years earlier, city employees were forced to take 5 percent cuts in pay and an overall 20 percent cut in total compensation, Brown said.

“That’s a major step,” Brown said. 

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.