Locally, the outcome of negotiations between Detroit's emergency manager and leaders of city unions and pensions funds that began Thursday will have a personal impact on about 8,000 city workers and 20,000 retirees.
Nationally, the stakes could be even higher if no settlement on reduced pay and pension benefits is reached and the city files for bankruptcy, suggests a public affairs magazine's editor. Here's why, according to Walter Russell Mead of The American Interest, a bimonthly:
By holding out, the city’s unions and pension funds would be setting up a legal battle that could lead all the way to the Supreme Court.
At issue is a conflict between federal and state law: Michigan’s state constitution specifically protects pensions and retirement benefits, but that clause is in tension with federal bankruptcy law. The unions would likely argue that the 10th Amendment “trumps the notion that federal law is supreme.”
If the Supreme Court rejected that argument, it would deal a major blow to public sector unions across the country.
Municipal bankruptcy attorney Michael Sweet of San Francisco tells Mead why unions don't want the question decided in court:
"If the judge ruled against them, it would open the floodgates.”
In other words, Mead explains, "every public sector union in the country would then be on notice that underfunded pension programs will ultimately be welshed on by cities and states."
Separately, in The Detroit News, business columnist Daniel Howes says Emergency Mmanager Kevyn Orr's effort to reach a settlement with unions outside of bankruptcy court is "not likely."
Union leaders and the city’s pension funds vow to fight any attempt outside of bankruptcy to cut benefits for retirees and vested active workers, a prospect that all but guarantees Detroit likely will become home to the largest municipal bankruptcy in American history.
Who can blame them? The constitutional protection, enshrined in 1963, is a cornerstone for public-sector unions. It guarantees the state, its municipalities and its school districts would honor their commitments.
