THE BLOG
10/08/2013 10:34 am ET | Updated Jan 23, 2014

Detroit Bankruptcy Is About Union Busting, Not Being Bankrupt

Most of the national discussion of the "Detroit bankruptcy" has been a cautionary tale about what can happen when a once great American city is run into the ground by poor leadership and pensions run amok. While there is some truth to this narrative, what is being overlooked by everyone is that what is happening in Detroit is yet another battle between Republicans and public employee unions.

The fights between Wisconsin Governor Rick Scott and the public employees are well known, and Michigan's Governor Rick Snyder may be more under-the-radar than his neighbor to the West, but is in many ways cut from the same cloth.

Snyder, a Republican, has made a name for himself, both in Michigan and in conservative circles nationwide, for his opposition to unions. The former CEO of Gateway Computers, Snyder, who refers to voters as "customers," was elected in 2010 by running as "one tough nerd." His promised non-partisanship vanished two years later when he was swept up in a Republican assault on unions in Michigan.

On December 6, 2012, with no advance warning during a lame duck session of the legislature, Republicans announced a plan to pass "right to work" legislation -- that day. On December 11, Snyder, who had once called right-to-work legislation a "very divisive issue," signed the bill, making Michigan a Right to Work state and prompting AFL-CIO president Richard Trumka to label him a "puppet of extreme donors" whose actions "will diminish the voice of every working man and woman in Michigan."

Those "extreme donors" included the DeVos family, owners of Amway Products -- and outspoken conservatives -- whose $21,220 made them Snyder's eleventh largest contributor. What's more, political insiders point out that during 2010 David Koch, who with his brother Charles funds Americans for Prosperity (AFP), gave $988,604.44 to the Republican Governors Association Michigan PAC, which supported Snyder.

Then, in 2012, AFP paid for the booklet Unions: The Good, the Bad, and the Ugly: How forced unionization has harmed workers and Michigan, and delivered hundreds of protesters to the statehouse to counterbalance union workers protesting the right-to-work legislation. The Koch brothers also gave $70,000 to the Mackinac Center for Public Policy, a strong supporter of the right-to-work push in Michigan. When the law passed, AFP declared on its website that the event was "the shot heard around the world for workplace freedom."

It was now that Rick Snyder placed himself in the company of union-busting governors like Scott Brown of Wisconsin and John Kasich of Ohio. Indeed, some critics contend Snyder is using the Detroit bankruptcy to burst Detroit's city unions. Snyder believes, according to one writer, that "the police, fire, and city retirees are unsecured creditors, like bondholders, under U.S. bankruptcy law and aren't exempt from potential cuts." In fact, Snyder claims the 20,000 retired city workers represent a major portion of Detroit's debt with $3.5 billion due for pensions and $5.7 billion for retiree health coverage. Should the retirees be forced to give up as much as 90 percent of their pensions -- union officials say the cuts could be that large -- it would represent a devastating blow to organized labor not just in Detroit but across the state and country.

In July, Kevyn D. Orr, the emergency manager appointed by Governor Rick Snyder to oversee Detroit's finances, filed a motion seeking Chapter 9 bankruptcy protection. Since the city was so far in debt -- $18 billion in long-term debt to bondholders, pensioners, and other creditors -- it couldn't pay for basic public services, Orr claimed bankruptcy was the only option. But opponents, especially the unions, argued the filing violated Michigan's state constitution. Moreover, these critics charged that Orr overlooked valuable assets owned by the city -- Belle Island, the Coleman A. Young International Airport, the art collection at the Detroit Institute of Arts -- whose worth far exceeds the city's debt, meaning Detroit was actually not eligible for bankruptcy protection.

On September 19, in the ongoing bankruptcy drama in Detroit, the political turned personal when city-worker retirees, facing the devastating prospects of seeing their pensions cut, had their day in court. One after another, Judge Steven Rhodes heard 45 of 109 individuals who filed papers to be allowed to speak to the court and explain why the bankruptcy should not be allowed to proceed. The speeches were often emotional.

A widow of a Detroit police sergeant said without her husband's pension she would land "directly onto the welfare rolls." William Howard, retired from the Water and Sewage Department after 35 years, said: "We worked on holidays, such as Christmas, New Year's and Thanksgiving, as others enjoyed their families, working to serve the citizens of Detroit. I pray that you, your honor, will object to this bankruptcy." Tearfully, Sheilah Johnson, a 28-year veteran of the city, relayed a question her grandson posed to her -- "He said, 'Grandma, are they trying to make us slaves again?'" -- before she added, "This is not a dictatorship. I am not a slave. I earned my pension."

Calling the day's hearing "extraordinary," Judge Rhodes was so moved by much of the retiree testimony he ordered Orr and Governor Snyder, who were not present in court, to listen to a recording of the hearing. "I think," Rhodes said from the bench, "democracy demands nothing less than they personally listen to what the citizens of this city said in this court today."

What is happening in Detroit would not be the first time bankruptcy has been used in a high-profile case to hammer unions. In November 2011, even though the company had $4 billion in cash in the bank, American Airlines declared bankruptcy. The company threatened to dismiss a collective bargaining agreement with its unions. This prompted the United Federation of Teachers to warn: "Wanting labor costs down 20 percent, American chose to file for bankruptcy in order to break its union contract and lay off 13,000 workers - 16 percent of the workforce. Some 130,000 current and former workers risk losing pensions and retiree health care as management seeks to offload $9 billion in unfunded pension obligations to a federal insurance program."

Whether or not Detroit city workers will see such draconian cuts will be determined in the coming weeks by Judge Rhodes who will decide, after more hearings in October, if he will allow the bankruptcy to proceed. As for Snyder, now notorious for his opposition to unions in arguably the nation's most union-friendly state, his fate will be determined next year when he runs for re-election -- by the voters of Michigan.