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Detroit needs to cut $200 million in spending to avoid a state takeover of the city’s finances, Mayor Dave Bing said today. Outlining his 2011-2012 budget proposal, Bing warned that the city’s $155 million deficit could balloon to $1.2 billion without a drastic financial overhaul, including worker concessions.
Bing’s five-year plan to balance Detroit’s budget by 2015 is largely based on a 20% reduction in the city’s worker and retiree healthcare costs, the Detroit Free Press reports. The move, which would cut $75 million by 2015, requires the city’s public-sector unions to renegotiate their contracts, something they have so far refused to do.
Bing also wants the unions to allow Detroit to suspend a $65 million payment to its two public pension funds and end the city’s practice of paying its employees a 13th check annually.
He warned that, under a new law signed by Michigan Gov. Rick Snyder last month, the state has the power to appoint an emergency financial manager to take over the city’s troubled finances and renegotiate – or nullify – union agreements.
The mayor’s budget proposal would also boost Detroit’s casino tax revenue by $20 million to make up for a loss in state funding and revenue from other taxes. It also relies on the continued ability to collect income and utility taxes.
Under Michigan law, a city must have a population of least 750,000 to collect those taxes. The 2010 U.S. Census puts Detroit’s population at 713,777, the lowest it has been since 1910.
Bing is confident the figures will be revised upward, but acknowledged that Detroit is fighting an uphill battle:
“We face challenges unlike any other city has every seen, challenges that demand bold action and a business approach,” Bing said. “We don’t have the luxury of waiting for someone else to solve our problems.”
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