(Zerohedge) – The city of Detroit, Michigan, crossed the line today, officially defaulting on debt obligations by announcing a moratorium on debt servicing obligations and “Certificates of Participation” today. But in reviewing the press release, this is what struck me most:
“Detroit will Honor Pay, Medical and Vacation Obligations to Current Employees”
But how do you reconcile that with the fact that the City of Detroit, long burdened with growing debts and a shrinking tax base, has consistently agreed to increase pay and benefits to municipal employees.
Just in the Detroit School District for the 2010-2011 school year, “contractual obligations” with the teachers union resulted in payments to teachers’ union members of $41.7 Million above and beyond their base salaries and benefits. The majority of this money ($16.1M) was tied to municipal stipulations in the teachers’ labor agreement for things such as automatic “step raises” and “super-step” raises.








