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Bankruptcy Reform for Public Sector Workers

WHEREAS:

            State and local government finances have suffered as a result of and since the Great Recession and fiscal crisis that began in 2007; and

WHEREAS:

            Public service workers did not cause these economic crises, but have disproportionally paid for them in the form of lost jobs, pay cuts, furloughs, reduced pensions, reduced retiree health benefits, higher health care costs and restricted collective bargaining rights; and

WHEREAS:

            Rather than timely and effectively acting to address the real causes of financial distress, some states and municipalities have resorted to the harsh, scorched earth strategy of authorizing Chapter 9 municipal bankruptcies; and

WHEREAS:

            One intended purpose of authorizing Chapter 9 municipal bankruptcies is to attempt to avoid state and federal constitutional provisions and other laws protecting public sector retirement benefits; and

WHEREAS:

            Unlike in the private sector, no federal guarantee program exists to protect public employee pensions; and

WHEREAS:

            Chapter 9 does not include a specific provision governing the rejection of collective bargaining agreements and instead, public employers can reject collective bargaining agreements using easy to meet court-made standards; and

WHEREAS:

            Chapter 9 allows municipalities to avoid bargaining with unions and others in a bankruptcy if doing so is “impracticable,” effectively eliminating the good faith negotiation requirement out of the bankruptcy code; and

WHEREAS:

            The process for appealing a bankruptcy court’s eligibility decision is unclear and inefficient, and this lack of clarity and efficiency can jeopardize a union’s ability to challenge eligibility; and

WHEREAS:

            Chapter 9 does not provide specific rules for dealing with non-pension retiree benefits like retiree health benefits; and

WHEREAS:

            The declaration of bankruptcy by the City of Detroit reflects the intensification of a profound social crisis affecting working families, our nation’s great urban centers, and other municipalities across the country; and

WHEREAS:

            The scheme of discharging municipal debt through bankruptcy in no manner resolves the underlying structural causes that confront Detroit or residents of cities, towns, and counties in similar circumstances; and

WHEREAS:

            Bankruptcy for Detroit and other municipalities only sets a dangerous precedent of a race to the bottom for city residents, employees, and retirees, while providing a potential opening for banks and other wealthy investors to profit from the liquidation of public resources; and

WHEREAS:

            AFSCME contributed to the creation of our nation’s middle class by elevating public sector employment into steady, fairly-paid jobs that provide economic stability to not only Detroit and its immediate environs, but as well to other cities and the nation as a whole; and

WHEREAS:

            That according to the Nobel Prize winning economist Joseph Stiglitz, Chapter 9 proceedings provide an opportunity to place Wall Street where it ought to be — at the back of the queue — so that workers and retirees are properly given the higher priority as they labored with the understanding that they would be paid. Pensions are nothing but deferred compensation and therefore it would be morally unacceptable to tell workers, “sorry, we aren’t paying you what we promised for work you’ve already done.”

THEREFORE BE IT RESOLVED:

            That AFSCME will stand by and fight for public service workers under attack by those who wish to unfairly, unjustly, and/or unlawfully eliminate or reduce their hard earned retirement benefits, whether through Chapter 9 of the federal bankruptcy law or other means; and

BE IT FURTHER RESOLVED:

            That AFSCME will seek reforms of the federal bankruptcy code to prevent Chapter 9 from being used as a sword to eviscerate the modest retirement benefits and collectively bargained wages and benefits of public sector workers and to reform the Internal Revenue Code to ban cutbacks of pension benefits; and

BE IT FURTHER RESOLVED:

            That AFSCME will seek reforms of the federal bankruptcy code to prevent Chapter 9 from being used to sidestep, invalidate, preempt or otherwise take precedence over state constitutions and state and municipal laws protecting pensions, retiree health care, and other retiree benefits and to reform the process for appealing a bankruptcy court’s eligibility decision to be clear, fair and efficient; and

BE IT FURTHER RESOLVED:

            That AFSCME will seek reforms of the federal bankruptcy code to eliminate or change the impracticability standard in Chapter 9 to make clear that a debtor must engage in good faith negotiations prior to any claim of the impracticability of doing so, and that good faith negotiations require genuine efforts to reach an agreement; and

BE IT FINALLY RESOLVED:

            That AFSCME will seek reforms of the federal bankruptcy code to prohibit debtors in Chapter 9 from voiding, modifying or rejecting collective bargaining agreements and their provisions unilaterally or in violation of non-bankruptcy municipal, state and federal laws.

SUBMITTED BY:
Albert Garrett, President and Delegate
AFSCME Council 25
Michigan

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