Sunday, April 10, 2011

Detroit Budget Crisis: Workers Face Big Blow to Benefits

Detroit budget crisis: Workers face big blow to benefits

Bing makes threat of emergency manager

1:26 AM, Apr. 10, 2011

Mayor Dave Bing's budget is expected to call for deep cuts to employee health care and fringe benefits.


• What: Mayor Dave Bing presents 2011-12 budget to Detroit City Council
• Where: Coleman A. Young Municipal Center, Woodward at Jefferson
• When: 10 a.m. Tuesday

713,777: population
11,396: number of city employees
48: collective bargaining units
$3.1 billion: 2011-12 proposed budget
$155 million: city's deficit

Detroit Mayor Dave Bing is expected to present Tuesday both a proposed 2011-12 financial plan that contains $200 million in cuts and additional revenue needed to balance the city's $3.1-billion budget, and a five-year deficit elimination plan that will include deep cuts to employee health care and fringe benefits.

Bing's budget address before City Council will lay out his plan to suspend payment of a special allocation to the city's two pension funds next fiscal year, and his intent to ask the city's 48 collective bargaining units to renegotiate contracts in the hopes of gaining concessions.

Bing is expected to explain that without the concessions, the city is in danger of having the state name an emergency financial manager -- someone with the power to dissolve the existing contracts anyway, according to sources familiar with the mayor's plan.

City unions would have to agree to reopen labor talks just months after a three-year contract was imposed on the American Federation of State, County and Municipal Employees, the city's biggest union.

"I don't believe we would be inclined to do that," said Catherine Phillips, AFSCME's lead negotiator. "There is an anti-union movement in this country, and Detroit and Mayor Bing are no different."

Bing trying to cut deficit, avoid emergency manager Detroit Mayor Dave Bing has created a financial plan that would enable the city to be deficit-free by the end of 2015, but he first needs to keep the city afloat during the new fiscal year that begins July 1.

Bing will present his 2011-12 budget to City Council on Tuesday. Sources within his administration familiar with the plan told the Free Press that Bing is taking drastic steps to slice into the city's $155-million deficit and avoid the appointment of an emergency financial manager.

Details of Bing's budget plan include:

• A suspension in payment to the city's general retirement and police and fire pension systems accumulation fund. The fund acts as an investment supplement to cover money lost to the market. The savings is expected to be significant, based on previous payments. Annual reports show that for the fiscal year that ended June 30, 2009, the most recent data available, the city contributed $77.4 million to the pension systems.

• The collection of fees from insurance companies for EMS patient transports is expected to yield $7 million.

• The recovery and collection of personal income and property taxes from individuals and corporations is projected to bring in more than $20 million. The city will begin cross-referencing with the state those who file tax returns, and go after those who do not file in the city. State law would enable the city to recover owed monies from the past six years.

• A savings of $7 million through statewide and regional procurement contracts that would encourage municipalities to essentially buy services and supplies in bulk.

• A 10% citywide reduction in personal service or consulting contracts is expected to shave $6 million off the budget.

"Mayor Bing will lay out a five-year plan to eliminate our deficit and put the City of Detroit back on solid financial ground," said Karen Dumas, Bing's chief of communications and external affairs.

Bing will ask all of the city's 48 collective bargaining units to renegotiate labor contracts in an effort to increase the amount that retirees and current employees pay for health care by 20%.

Bing's newest spending plan uses a combination of cuts and revenue generation to achieve the $200 million needed to balance the proposed $3.1-billion budget. But the mayor says long-term savings must come in the form of concessions.

"We have never faced a challenge like this: sharp declines in revenue, a decreasing population and tax base with structural costs no city could afford," Bing said in a statement. "It's time to take on those issues and make the tough but necessary choices and that's exactly what we're going to do."

Bing hasn't established the friendliest relationship with some of the city's unions, including its largest, the American Federation of State, County and Municipal Employees, which represents about 3,200 employees. After more than two years of bitter negotiations, a three-year contract that included a 10% pay cut in the form of 26 furlough days was imposed on the union.

"Our members are going to be furloughed through November of 2013 -- what else can you take from us?" asked Catherine Phillips, AFSCME's lead negotiator. "At this point, we are not even considering opening the contracts early."

But Bing will have in his arsenal the threat of the city potentially having an emergency financial manager oversee its operations.

A state law signed last month by Gov. Rick Snyder gives sweeping powers to financial managers, including the ability to terminate collective bargaining agreements with municipal employees and retirees.

Members of Bing's administration have individually met with most members of City Council to explain the proposed budget prior to Tuesday's address. Council members did not want to talk about specifics, though, until they heard Bing's presentation.

"There are a lot of things that I saw overall projected in the budget that I think need to be done," said Councilman James Tate. "It does feel more aggressive, certainly, than what we've seen in the past.

"In order to keep the potential of an emergency manager out of the City of Detroit, we are going to have to make some real tough decisions, and we're going to have to make those decisions together," he said.

Contact Suzette Hackney: 313-222-6678 or

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