In the fall of 1978 the city of Detroit was beginning to turn a corner. Crime rates were dropping - they had plummeted 19 percent in 1977 alone - and as the Detroit News observed "People are beginning to return to the downtown, spurred by the Renaissance Center and a reduction in crime...people are beginning to lose their wariness about venturing into the city."2
Yet the Detroit "Renaissance" was far from a done deal. The city's budget was tight. Funding it received through federal employment training and revenue sharing programs for funds was under assault in Congress. City taxes were at the maximum allowed by state law.
But the budget was balanced, and Mayor Coleman Young had negotiated a very lean master contract with the American Federation of State, County, and Municipal Employees (AFSCME), which represented the vast majority of city employees. Employees not covered by the master contract were those in the police and fire departments - and there was the rub. If the city could have signed similar contracts for police officers and firefighters, it might have been able to hold things together long enough for new businesses to take root, which (even if the mayor himself didn't realize it) was the key to the city's future health.
But it was not to be. In October, a three-man arbitration panel, chaired by former Michigan Employment Relations Commission Chairman Robert Howlett, handed down its decision on a contract for sergeants and lieutenants in the Detroit Police Department.3 Arbitration panels for lower ranking policemen and for firefighters were expected to follow the precedent set by Howlett's panel.
The arbitration panel was imposed by Public Act 312 of 1969.4 Up to that point the city had held firm - it could afford to give the police no more than it had given AFSCME. The final offers from the police and firemen's unions were only a bit higher than the city's on base pay, but the unions demanded a generous cost-of-living allowance, quite expensive in those days of high inflation. Unable to reach agreement, the city and the union went into arbitration.
The panel, as dictated by P.A. 312, was made up of Howlett, a union delegate, and a city delegate. The law further stated that on the critical issues of wages and benefits, such as the cost-of-living allowance, the panel must choose between the last best offers of the two parties. The union and city delegates, as one would expect, each held out for their own sides' positions, leaving it up to Howlett.
Robert Howlett came down on the side of the union. Arbitration panels deciding the contracts for lower ranking police officers and firefighters followed suit.
As a state senator in 1969, Coleman Young had been an enthusiastic supporter of binding arbitration. But as mayor of Detroit Young had gained a different perspective: "Our budget for next year would be balanced if it were not for the short-sightedness of our police and fire associations and the ill-considered decisions of the arbitration panels" he said. The city was forced - by budget considerations and the arbitrators' ruling - to allow attrition to remove 350 officers and to cut 2,300 employees from other departments. The city then hoped the courts would set the arbitrators' ruling aside.
But the law was clear - arbitration awards were only to be set aside when they were the product of fraud or corruption, went beyond the arbitrators' authority, or had no rational basis. Howlett's decision failed to accommodate the city's financial condition, but, under the law, that is not enough to warrant action by the courts. The award stood, and the city was forced to pay $46 million more in police and fire salaries than it had budgeted.5
Mayor Young eventually resorted to large-scale layoffs of police officers. In the two years after the first arbitrators' rulings, the Detroit police force would dwindle from 5,400 officers to fewer than 4,000. Crime rates, which had been dropping as late as the end of 1979, jumped 15.2 percent in 1980, as police failed to answer calls for assistance. A fragile "Renaissance" failed. In 1981, the union agreed to a three-year wage freeze.6
It would be unfair to blame binding arbitration alone for the current condition of the city of Detroit. Racial discord, setbacks in the automobile industry, and the controversial policies of Mayor Coleman Young all played their part. But there is reason to believe that the city had a chance to turn things around in the 1980s, had it not been for the impact of binding arbitration.
It is quite possible that, had Howlett and the other arbitrators sided with the city, police layoffs would have been modest, crime rates would have continued to drop (or at least they would not have worsened), more businesses would have been able to recover, and the city would have experienced an economic and cultural resurgence. One need not be an admirer of Coleman Young to recognize that the police arbitration awards of 1978 made his job much more difficult, and may have prolonged and deepened the decline of Detroit.
The binding arbitration process that created a fiscal crisis in Michigan's largest city has not been substantially changed since 1978. Proposal 3 would force state government into that same system, and expose it to the same sorts of risks.