One need look no further than two Michigan officials — William Cooper, the city manager of Hamtramck, and Tom White, associate director of labor relations for the Michigan Association of School Boards — to grasp the seriousness of the financial crisis exploding across the country.
Cooper told The New York Times that his city government “maybe” can pay its bills through March 1. Hamtramck has already cut what it could from its budget, reducing spending for parks, senior centers and road maintenance. Now city leaders say their only remaining option is to file a municipal bankruptcy. If Hamtramck is allowed to do that, according to the Times, at least 30 other Michigan cities will quickly follow suit, so state government leaders are not likely to permit such bankruptcy filings.
White said public school districts across Michigan face similar dilemmas. Their situation could be quickly and dramatically improved “with the stroke of a pen.” But that stroke likely will not be made for the districts for the same reason it will not for Michigan’s desperate localities — public employee unions reflexively oppose cuts in their tax-funded compensation programs, including salaries, retirement and health benefits.
White estimates that as much as $300 million could be saved merely by requiring public school employees to pay for 20 percent of their health benefits — they currently pay nothing. By contrast, private sector employees with company health plans pay a nationwide average of 26 percent, according to the Kaiser Family Foundation. And Cooper said Hamtramck’s police and firefighter unions have steadfastly refused to renegotiate pay and benefits contracts that eat up 60 percent of the city’s annual budget. “They kind of have the Cadillac plan, and we’d kind of like the Chevy,” he told the Times.
Michigan authorities are not alone in facing years of collective-bargaining agreements that promised public workers far more pay and benefits than taxpayers could afford. The Heritage Foundation’s David John observed that “Chicago has only about $22 billion in pension assets to pay for $66 billion in pension promises to its city workers, while New York City has $93 billion available to pay $215 billion in city pension promises, and Boston has only $3.5 billion available to pay $11 billion in promises.”
The Pew Center for the States estimated total state obligations at $2.8 trillion, with only $2.3 trillion available to cover them.
It is no coincidence that President Barack Obama and congressional Democrats want federal taxpayers to bail out state and local governments in order to save municipal jobs and services. The real beneficiaries of the bailouts would be the very public employee unions whose excessively generous pay and benefits caused the fiscal crises.
Sooner or later, union leaders must realize the only alternative to major concessions today is facing the reality of no benefits being paid at all tomorrow. And voters should reject politicians who lack the will to confront unions on this issue.