Friday, February 10, 2012

Benefit Costs Sunk Benton Harbor's Finances

I grew up just a stones throw from Benton Harbor and have watched it self destruct slowly for many years. It's a microcsm of Detroit. Across the river is St. Joe, about the same size and doing quite well under a similar economic environment. The difference, St. Joe is almost all white and Benton Harbor is almost all black. Don't get me wrong, it's not racial but political. BH has been electing liberal Democrats since the beginning of time and St Joe is far more Republican and conservative.
The story of Benton Harbor's financial troubles has been well known since the town made national news when Gov. Jennifer Granholm appointed former state Auditor General Joseph Harris as the emergency manager in April of 2010.

Benton Harbor was in the midst of a six-year cycle where it had overspent its budget by $8 million.

What may not be as well known are the details of a union contract that played a part in the city’s financial crisis. The city had worked under the contract for eight years, an unusually long life for a union deal.

Under that contract, the city was giving raises as high as 15 percent to some of its employees and paying for 100 percent of health care premiums for all its employees. Also, employees contributed just 3 percent of their salary to their defined-benefit retirement plans.

In 2002, the city’s Michigan Council No. 25 AFSCME AFL-CIO Local 1433 contract was signed. It expired in 2008, but stayed in place until the new contract was passed July 1, 2011.

“This situation didn’t happen overnight,” said Paul Kersey, director of labor policy at the Mackinac Center for Public Policy. “The difficulties they were having certainly didn’t just pop out of nowhere.”

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