By Sam Hananel
Associated Press
WASHINGTON (AP) — 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.
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