Detroit judge rules against union workers and pensions
By Tom Burke
Detroit, MI - In a blow to Detroit unionized public workers and their pensions, U.S. Bankruptcy Judge Steven W. Rhodes ruled on Dec. 4, that workers’ pensions are not protected. The judge overruled the Michigan constitution, which protects pensions as contracts between government and workers. Judge Rhodes said the Detroit bankruptcy could proceed anyway. This means that city of Detroit workers will not hold a special place in the bankruptcy proceedings versus municipal bond holders, insurers and others jockeying to collect in court.
This is the second great setback for workers and unions in Michigan, coming on the heels of last year’s ramming through of so-called ‘right to work’ laws by Republicans and right-wing Governor Snyder. That same Republican-dominated legislative session overrode a fresh, legally binding referendum passed by Michigan voters that rejected Governor Snyder’s use of Emergency Financial Managers (EFM). The Republicans simply tinkered with the old law and passed a new EFM as part of an appropriations bill - which cannot be put to a referendum.
For union workers in Detroit, a city which is 84% African American, the bankruptcy is a disaster. Despite union givebacks and changes to retirement and pension plans, workers are hearing bankruptcy experts say they can expect between 10 and 20 cents on the dollar for their years of hard work and dedication. So despite years of union contracts, negotiated with local elected officials and approved under state laws, a judge will ultimately decide how much of a pension workers will get.
The American Federation of State, County, and Municipal Employees union, or AFSCME, represents about 70% of Detroit city workers, excluding categories like police and firefighters. AFSCME says their pension benefits were reduced by nearly 40% since 2012. In addition, on the job workers took a 10% pay cut in the past fiscal year to help avoid bankruptcy. Right now the average yearly pension is $19,000, but could go down to $9000 after the judge’s ruling.
There is no doubt that Detroit is a suffering city, whose manufacturing base along with hundreds of thousands of jobs largely disappeared since the 1970s. In previous decades Detroit was seen as a successful and exciting city, popularly known throughout the world for cars, sports, Motown music and good jobs. African Americans and their labor were a large part of this success. People in Detroit were proud of their city, their struggles and their accomplishments and they exercised more control over their lives than ever before.
However the big capitalists began to abandon Detroit starting in the 1970s, taking their investments and production elsewhere - to the suburbs, the South and overseas. Population began to fall, reaching less than half of what it once was, down to 701,000 today. With population falling steeply after 2000, Detroit now has a smaller tax base and the same and sometimes greater responsibilities. Corporations that did stay paid less in taxes. The good jobs dwindled. The great economic crisis that hit in 2008 left even more workers unemployed - today around 18% - hurting city income even more.
During the great economic crisis, the U.S. government spent billions to bail out banks and insurance companies, but there is no lifeline for Detroit and its workers. Instead they are being punished with bankruptcy, as if it is the only option. In the process, the politicians and judges are breaking contracts and abandoning long-held promises to workers and unions. Republican Governor Rick Snyder, instead of working with Detroit to avoid crisis, cut state funding in recent years ($66 million was cut between 2011-2012) and then took over local government by appointing an Emergency Financial Manager, sidelining the Mayor and other elected officials. The Governor has used the EFM to take over in small blue-collar towns, local school districts, and now the city of Detroit. The result of the EFM is always the same: cuts in social programs, privatization of schools and services and a refusal to negotiate with union workers, followed by their eventual replacement. In most cases thus far, the targets of EFM are government bodies run by African Americans.
Detroit faces real problems, but the rich and their politicians take advantage of the situation, and turn it into a crisis so they can seize power. Next they privatize valuable assets, like the Detroit Water and Sewage Department, at bargain basement prices. Wall Street wants to get their hands on the water works, so they can charge higher prices to homeowners and make a profit off of what should be a public utility. The EFM for Detroit, Kevyn Orr, has outside experts providing ‘valuations’ of the full range of city assets, including the parking meters and parking garages, publicly owned land like Belle Isle and other parks, the Detroit-WindsorTunnel (to Canada) and the Coleman A. Young International Airport. It may soon all be up for sale.
Even the public works of art in the Detroit Institute of Art are not safe. Emergency Manager Kevyn Orr had all the art appraised this week by Christie’s auction house. Orr’s representative, the New York investment banker Ken Buckfire, had secretly sent Christie’s appraisers to the art museum in June on an ‘informal’ basis. This past week, Buckfire was forced to cancel an ‘informal’ tour of Detroit. ‘Advisers’ were going to be shown the assets of the city that are going up for sale.
Judge Rhodes’ ruling is an attack on pensions, workers and unions across the country. It opens the door for other cities to run out on their contracts and displace unions. With Illinois pensions being called into question and some California cities facing similar funding problems, Detroit is now a test case. Republicans are leading the charge to force bankruptcy, suspend and override election results, to sell off assets and to cut and privatize social services. The Democrats are shrugging their shoulders and promising things will be different at the next election. The unions are in a life and death fight in Detroit. Workers have a lot at stake.
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