Fix Public Employee Law to Avoid City Bankruptcies

(Editor's note: The commentary is an edited version of an Op-Ed that originally appeared in The Detroit News on Oct. 15, 2009.)

The people of Michigan have long had an admirable sympathy for workers, which often translates into support for unions and collective bargaining. But labor agreements in Detroit have run smack dab into the public interest, which has had to give way to the stubbornness of union officials and an inflexible state law.

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It's bad enough when reckless union contracts drag down the competitiveness of auto companies; collective bargaining agreements should never be allowed to drive a city into bankruptcy.

The best thing for Detroit right now would be for Mayor Dave Bing to tell the various unions that all city employees will be taking immediate 10 percent pay cuts. Ordinarily one would hate to see workers treated in such a draconian fashion, but Detroit has a $300 million deficit. The city may well find itself bankrupt by the end of this year.

Cuts in employee compensation could go a long way toward preventing insolvency while allowing the city to maintain important services.

But Detroit cannot reduce wages for its employees because union officials refuse to allow it and because the state's Public Employee Relations Act in effect gives them the power to block such a move. A contract is a contract — no matter how unrealistic. Not even an emergency financial manager, should one be appointed by the governor, can set aside contracts.

As long as the unions refuse to make concessions, there appears to be no certain remedy for the city short of bankruptcy court.

One might wonder what union officials have done to deserve this power. Under PERA, government employee unions can rely on hundreds of dollars of dues and agency fees annually from every worker they represent, money that can and has found its way into political activism.

Detroit's unions have been especially powerful. It is rare for a person to be elected in Detroit in the face of determined union opposition.

Union bosses were in an excellent position to demand accountability from Detroit's elected officials, yet a mayor and an influential City Council member have been forced to resign due to scandals, and the U.S. attorney's office is signaling more investigations. The corrupted culture of Detroit politics is one that the union movement has tolerated. That alone should give union sympathizers pause.

State law gives union officials tremendous power over local governments. Unions have used that power irresponsibly. One might want strong unions, but should they have the power essentially to drive Michigan's largest city into bankruptcy?

If Michigan's leaders want to help Detroit, they could start by tearing up a counterproductive Public Employees Relations Act.


Paul Kersey is director of labor policy at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.