Cities such as Stockton and Riverside have entered bankruptcy largely because of their pension obligations, and much blame is being focused on the unions that represent the workers for those municipalities. There’s no question those unions have their share of fault. But let’s be honest. Those labor contracts had to be signed by both sides. The city councils had to sign off on them, too.
Now, the councils, who have to shoulder their share of the responsibility for the messes in which they find themselves, seem amazed because the unions want to have their contracts honored. It would be surprising if they didn’t. Their members expect the unions to keep the contracts from being dishonored by the politicians.
Those politicians often were quick to approve hard-to-afford pensions, for a couple of reasons. First, they knew some other politicians besides themselves would have to worry about actually making the payments to fund the pensions. Second, the unions and/or their individual members often provided campaign money, and with that came expectations.
The bankruptcy of Detroit has unions rightfully scared. Can Detroit through bankruptcy shed itself of its long-term pension obligations? A judge said no right from the get-go, but that decision will be challenged. If Detroit is able to shed its pension obligations, there will be very few municipalities that might be in financial trouble that won’t at least consider Chapter 9 bankruptcy.
If that happens, and the unions get stiffed, look for significant changes in how people look at public employment. Many people seek and stay in government jobs because of the pension benefits. If those pension promises go away, or are easily put at risk, expect a big migration from public to private payrolls. If public-pension dreams shatter, a lot of the advantages of being a public employee likely will go up in smoke.