The Constitution Forbids Michigan’s Governor From Using His Anti-Union Power Grab

Michigan Main Street Movement Protesters March Against Gov. Snyder's "Financial Martial Law" Bill

Although Wisconsin Gov. Scott Walker’s (R) anti-union crusade has received the biggest headlines, Michigan Gov. Rick Snyder (R) is poised to sign an even more drastic assault on working Americans into law. Yesterday, the Michigan legislature passed a “financial martial law” bill that allows Snyder to appoint “emergency financial managers” with the power to terminate collective bargaining agreements:

Contracts & Collective Bargaining Agreements. The bill would authorize the emergency manager to reject, modify, or terminate one or more terms and conditions
of an existing contract.
After meeting and conferring with the appropriate bargaining representative and, if in the emergency manager’s sole discretion, a prompt and satisfactory resolution were unlikely to be obtained, the emergency manager could reject, modify, or terminate one or more terms and conditions of an existing collective bargaining agreement.

There’s a pretty serious problem with this power grab, however — invoking it would violate the Constitution. The Constitution forbids state laws “impairing the Obligation of Contracts.” This provision provides a robust limit on a state’s ability to dissolve contracts between the government and a private party. As the Supreme Court explained in United States Trust Co. v. New Jersey, state laws impairing such contracts must be “reasonable and necessary to serve an important public purpose.”
The bill does contain some language requiring the emergency manager and the state treasurer to determine that they are not violating this constitutional limit before a collective bargaining agreement can be blown up, but Snyder’s own budget gives the lie to any claim that an assault on working Americans is “necessary” to ensure that Michigan governments can pay their bills. Snyder proposed a massive $1.73 billion business tax cut even as he was arguing that his anti-union power grab was necessary to restore the state’s fiscal balance.
The consequences of Snyder’s actions could be stark. If a state is free to break contracts whenever they feel like it, than no one will agree to do business with the state. Investors will refuse to buy the state’s bonds, and state contractors will demand all payments upfront out of fear that the state will accept their work and then tear up the contract requiring the workers to be paid. Creditors will charge the state enormous interest rates to secure against the risk that the state will just waive its hand and make its obligation to repay go away.
In other words, Snyder is so determined to chip away at collective bargaining, he’s demanded a power that he cannot constitutionally use and that would drive his state into an even deeper financial hole if he ever tried.