MSU Extension Center for Local Government Finance & Policy

The City of Detroit is in the midst of a significant restructuring after years of declining financial stability. As a result, the budget adopted for FY 2013 reduces costs by $250 million, which equates to 16 percent of the prior year’s budget. Cost reductions were needed to bring spending levels in line with available revenues, address an accumulated general fund deficit of $265 million, and ensure that sufficient cash reserves are available to cover the most basic needs such as payroll.

Cities are essentially service organizations. Massive cuts to balance the budget inherently mean that both personnel and wage and benefit levels will be affected. Detroit’s FY 2013 budget is no exception. First, city staffing is budgeted to decrease by 2,500 or 20 percent. Second, on July 18, 2012, the city imposed changes collectively known as the City Employment Terms (CET) to further reduce personnel costs.

In addition to the unprecedented fiscal stress and the related range of actions that must be considered, the legal environment surrounding these decisions is in flux. This has broad implications for the city, its employees, the public and the effort to achieve financial stability in the City of Detroit. This FAQ document will outline the events leading to the CET, discuss the implications, and lay out further questions to consider as the city continues to address its financial crisis. Disclaimer: This document is provided as a public service and was prepared for educational, public interest and research