This summer, St. Petersburg, Florida, Mayor Rick Baker declared a fiscal emergency. He wanted to reopen a union contract and put the brakes on scheduled 2010 pay raises for city employees. The union was able to talk Baker into backing off, but the deal hinged on a promise that its leaders would sit down with the administration and discuss avenues for savings in 2010, the last year of the current contract. The workers had to make clear, says Rick Smith, who heads the Florida Public Services Union in St. Petersburg, that they would help the city get through the crisis.

Unions are facing the bleakest collective bargaining landscape in generations. "I call it bargaining in the age of no growth," Smith says. Especially relevant to him--and other union leaders in many parts of the country--is that, given the effect of the recession on state and local revenues, there will be no significant growth in employee salaries and benefit packages in the foreseeable future. Quite the opposite: 2009 has seen a wave of efforts by governors and mayors to try, as Baker did, to reopen existing contracts and coerce give-backs, a solid signal that contracts going forward are going to be stingy.

The headache for unions is compounded by the length of the recession. A public-sector recovery is not likely until mid- to late-2011 or 2012. "Every one of our big contracts will be up during that cycle," says Steve Kreisberg, who tracks collective-bargaining trends for the American Federation of State, County and Municipal Employees. "I think we're going to be looking at a lot of zeroes."

That's what they saw this summer in San Francisco, where the Bay Area Rapid Transit Authority (BART) settled an ugly fight over contract renewal with its unions. After threatening to strike, the unions finally agreed to a four-year contract that has no pay increases, reins in overtime costs and asks employees to pay more for health benefits.

How these pressures play out in other jurisdictions depends on local politics, labor-management history and the personalities involved. For instance, in Philadelphia, never known for the gentility of its labor-management relations, the two AFSCME affiliates--one that represents blue-collar workers and one that represents white-collar workers--have launched a classic frontal assault on Mayor Michael Nutter, with a big rally, anti-Nutter name-calling and threats to shut down the city.

Nutter lost his "friend of labor" status earlier this year when he crafted a budget that called for $25 million in labor cost-savings over five years, savings that will have to come out of future contracts. It was a fundamental decision that the unions charge Nutter made unilaterally. Nutter insists he was upfront with them.

But in late summer, with the state legislature and the governor still unable to agree on a budget, Nutter laid out an even more dire "Plan C" fiscal scenario, one that would have meant immediate layoffs for thousands of city workers. That disaster appeared to be averted in mid-September by an agreement worked out in Harrisburg, but several legislative hurdles remained before the city could be certain of avoiding the agonies of "Plan C."

Layoffs are the hammer that mayors and governors now use to get labor to acquiesce to new-era contracts. The layoff issue had been raised by San Francisco transit officials during the recent contract negotiations. It was part of a public campaign to convince unions of the gravity of the fiscal situation. BART officials highlighted what they saw as wasteful union work rules, such as one that distinguishes between janitors who clean the inside of stations and those who work outside.

While it's hardball in Philadelphia and San Francisco, other places are trying to settle things more amicably. In Springfield, Oregon, the union worked with city officials to craft a contract that calls for a wage freeze in year one with a "reopener" clause for years two and three--meaning the city and union will revisit possible raises depending on the fiscal situation. "We know the union is making sacrifices," says Assistant City Manager Jeffrey Towery. "The city is very appreciative."

Likewise, Rick Smith in St. Petersburg says he wants to maintain the wage rates his union won in its last contract, which will ensure that when fiscal conditions do improve, his members won't have traveled backward on pay scales. But his union is willing to negotiate some temporary measures that it and the city might take to reduce labor costs in the near term, and also consider other, less costly, sweeteners that could take the place of pay increases in the upcoming contract. As part of preliminary discussions with the city, Smith and the FPSU considered everything from cutting back to a 38-hour work week to tying future wage increases to the overall economic health of the city, as was done in Springfield.

The FPSU also is looking at even more unconventional possibilities, such as asking the city to set aside some of its affordable housing stock for city employees. "Given their wages, most of our members qualify for low-income housing credits," says Smith, "so why not have a percentage of city housing units that go to city workers." Smith says he's also discussing incentives for city employees to use public transportation as well as measures to allow them to till empty plots of city land to start community gardens. "We're trying to bargain for quality-of-life benefits," says Smith. "But we don't want to lose what we've got on wage rates in case there is an economic recovery--and there will be a recovery."

For now, though, the level of general fiscal pain is severe, and many unions are recognizing that fact of life. "When you take away 20 percent of revenues from a jurisdiction, there's just no way to fill that kind of hole," AFSCME's Steve Kreisberg says. "At the same time, you're seeing a greater demand for government services. You start thinking about the big picture, and you can give yourself a headache."