Detroit gets union deal, but state oversight looms

Reuters News
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Posted: Mar 23, 2012 7:18 PM
Detroit gets union deal, but state oversight looms

DETROIT (Reuters) - Roughly half of Detroit's unionized public employees accepted pay cuts and other concessions designed to save the cash-strapped city $68 million a year, but it may not be enough to save Detroit from state oversight of its finances.

The leaders of 30 unions, representing over 6,000 of the 12,600 municipal workers in Michigan's largest city, said their members voted to accept pay cuts, layoffs and changes to city pensions.

But a spokesman for Governor Rick Snyder said the unions' actions did not go far enough.

"The state's concern is that the agreement does not generate the savings needed to address (Detroit's) long- and short-term crisis," said spokesman Terry Stanton.

He also noted the city's deal with the unions allows them to approve any consolidations and does not address retiree health-care benefits.

Detroit is expected to run out of cash by the spring as a result of a huge debt load, a steep population drop and sinking revenue.

A review team appointed by Snyder concluded on Wednesday the city is in severe financial stress, but any further actions by the team have been clouded by a court challenge to its ability to meet in private.

The Michigan Appeals Court on Thursday agreed to hear the state's emergency motion to overturn a lower court ruling that forced the team to meet publicly and prohibited it from approving a consent agreement aimed at fixing Detroit's financial problems.

The state hopes to have a ruling in its favor by Monday, the deadline for the review team to complete its work. A review team meeting has been scheduled for Monday afternoon, according to Caleb Buhs, a spokesman for the Michigan Treasury.

Eric Scorsone, an assistant professor of economics at Michigan State University, said under his reading of the 2011 law that made it easier for the state to intervene in financially troubled local governments, the review team goes out of existence after Monday.

According to Scorsone, the option of a consent agreement is gone unless the appeals court quickly overturns the order by Ingham County Court Judge William Collette, limiting recommendations the team could make to the governor.

Snyder, who has repeatedly said he does not favor the option of appointing an emergency manager for Detroit, last week proposed a consent agreement that city officials rejected.

Detroit Mayor Dave Bing, who was hospitalized on Thursday for a non-life threatening illness, sent Michigan Treasurer Andy Dillon new consent agreement language on Wednesday, said Treasury spokesman Buhs.

SHARED SACRIFICE

"This is a fix that we've all got to take part in," said Ed McNeil, special assistant to the president of American Federation of State, County and Municipal Employees Council 25 at a news conference.

The concessions include a 10 percent pay cut, he said, adding that the plan approved by union members calls for other cost-saving measures, including 10 percent revenue cuts for city vendors and contractors, which would boost the annual savings to at least $99 million a year.

Mayor Bing's chief of staff Kirk Lewis said, however, the ratified deals were "not just about concessions, but more about shared sacrifice."

"These ratified agreements, reached before their existing contracts expired, reflect how labor and management can work together in a fair and constructive way," Lewis said. "The agreements also provide checks and balances that hold both unions and Mayor Bing's administration accountable."

The deal calls for Detroit and union officials to meet quarterly to review the city's finances, according to one official. Some union leaders expressed opposition to state intervention in Detroit, calling on Michigan officials to stop cutting revenue sharing due the city.

Last month, Bing said the city had reached tentative cost-cutting deals with some of its 48 unions as "the first meaningful step" toward resolving Detroit's financial crisis and avoiding the potential appointment of an emergency manager.

But Friday's announcement did not include Detroit's police and fire unions, which also had tentative deals. The Detroit Fire Fighters Association, which has 1,014 members, declined to comment. Spokesmen for the city's police unions were not immediately available for comment.

(Reporting by Ben Klayman, additional reporting by Karen Pierog in Chicago; editing by Andrea Ricci, Gary Crosse)