FRANKFORT — Observers of corporate bankruptcies say the ruling in the Patriot Coal case will open the door to other corporations that want to shed retiree obligations. In a controversial decision, a bankruptcy judge in Missouri ruled that the coal company could slash health and pension benefits as it restructures.
According to economist Teresa Ghilarducci, chair of the economics at the New School of Social Research, Patriot has been especially aggressive about using the bankruptcy process to break the retiree parts of employee contracts, and it’s not just Patriot going that route.
“In fact there are many bankruptcy situations in which it seems that the primary reason the troubled company is going all the way to bankruptcy is in order to shed those obligations,” she declared.
The decision could allow Patriot to eliminate health care benefits for more than 20,000 retired miners and family members. Patriot Coal claimed it has to slash costs to remain viable. The United Mine Workers union said the company planned to abandon the retirees from the day it was founded in 2007.
The Patriot retirees could end up in a public health care trust administered by the mineworkers’ union. The pensions of other bankrupt companies have been absorbed by the federal government’s Pension Benefits Guarantee Corporation. Both have been under-funded.
Budget analyst Sean O’Leary said retirees might end up having to depend on Social Security, Medicare and Medicaid, all part of a shift of costs from the company to taxpayers.
“A shift from what was a private business providing a pension to people on public services” is what’s happening, he charged. “And the end result of that creates a great deal of strain on our public services.”
O’Leary said the background to this story is a falling number of good-paying industrial jobs and a decline in union membership. He said that tilts contract negotiations, and legal fights, in favor of the corporations.
“Fewer and fewer employees (are) covered by unions, and not only are there fewer companies offering those benefits, but it’s possible for those that have those benefits to have those taken away,” he pointed out.
It’s a “scary thing,” said O’Leary, for states like Kentucky and West Virginia, where Patriot operated mines.