In 1975–76, New York City declared a fiscal crisis when the large financial institutions refused to extend their usual short-term loans to the city government unless the political establishment and the public unions agreed to severe budget reductions. The unions and the Democratic mayor, Abraham Beame, prepared for the worst, and they were not surprised when the city’s finances were taken over by a bank-controlled Emergency Financial Control Board (EFCB). District Council 37 agreed to the layoff of 50,000 non–civil service employees, many of whom were black and Latino, and other municipal unions accepted reductions as well. Education budgets were slashed; improvements in teachers’ working conditions were put on hold and pay increases were frozen and then reduced.

The United Federation of Teachers (UFT) accepted the financial board that Wall Street had forced on the city and also accepted the EFCB’s proposal to transfer some of the municipal government’s autonomous functions to the state. The union further endorsed the board’s layoff of thousands of paraprofessional school workers, many of whom assisted classroom teachers. City government imposed unpaid furloughs on those remaining on the payrolls. Local union leaders, most of them Shanker and Feldman loyalists, all but abandoned their earlier industrial-union militancy