ABSTRACT
In April 2012, Detroit and Michigan entered into a strategy for dealing with the city’s fiscal mismanagement and its ever-deepening financial troubles. With the municipality swimming in red ink and facing the looming specter of insolvency, the city and the state entered into a Financial Stability Agreement. Prior to mid-2012—despite shedding public-sector jobs, cutting pay, trimming benefits, and curbing services—the city could never reduce its operations to match its shrinking tax base, in large measure, because of municipal employee unions’ intransigency. This chapter analyzes budgetary events leading up to the agreement and its impact, particularly with respect to the city’s unionized employees. However, the agreement proved inadequate. It is probable that the March 2013 appointment of an emergency manager will put Detroit on the path to financial solvency—fixing the city’s budget by balancing revenue with expenses, while enabling the municipality to provide essential public services to its residents, although bankruptcy remains a possibility.
