This year’s contract talks with employees might be the most important in Butler’s history.

With the city facing the possibility of bankruptcy in two or three years, what the city is or is not able to achieve in this year’s bargaining will likely determine whether the city is under state control in a half-decade or less.

Twice in the past year, the city council has failed to move ahead with finance director Joseph Bratkovich’s recommendation that Butler’s eligibility for state fiscally distressed status be determined. The time might be near when city leaders will have to say yes.

Getting approved for distressed status would get the state involved in trying to resolve the city’s financial plight. However, distressed status wouldn’t guarantee a quick fix for the city’s money situation. Some Pennsylvania cities have been under the state’s wings for many years and still see no prospect for shedding that unflattering status.

Meanwhile, being fiscally distressed isn’t an asset when a community is trying to better itself by luring businesses and new residents` — as Butler is trying to do. Therefore, what Butler is able to achieve by way of its current contract talks carries utmost importance as to the city’s health — and what it might look like — a few years hence.

On the basis of Butler’s size, the city doesn’t have a bloated workforce. Just about 55 employees total are covered by the three union contracts — the pacts representing police, firefighters, streets and parks workers and several other employees.

But of the city’s 2011 spending plan, more than 60 percent is budgeted for employee-related costs. Included in that percentage is the 12 percent of the budget — about $877,000 — that is doled out for employee health care costs.

Meanwhile, the city’s contribution toward employee pensions jumped to $437,000 this year from $120,000 in 2010.

Mike Palombo, a Pittsburgh lawyer hired by the city to negotiate the contracts with the unions, said, “The challenges are significant, given the financial condition of the city. We believe that our employees understand the crisis and remain hopeful that, together, we can achieve contracts that are affordable and sustainable.”

Reading between the lines of his comments suggests the intent to seek concessions, wage freezes, givebacks and/or larger health care contributions.

In the past, there has been the belief that the unions were doubting the seriousness of the city’s financial problems, but now there can be no doubt about the city’s plight.

The upcoming contracts, which are to take effect on Jan. 1, must be built upon a foundation of faith and trust. The alternatives include a volunteer or hybrid fire department, fewer police officers and scaling back the number of other workers.

As unpalatable — and even dangerous — such prospects might be, they are possible without money to continue paying for the current level of staffing and services.

City expenses have exceeded revenues during the past several years, including this year. Through the use of reserve funds, the city has been able to remain financially afloat.

But that can’t continue much longer, and city employees hold the key for removing some of the financial pressures by what they are willing to agree to under their upcoming contracts.

This very likely will be a “D-Day” contract. Either the city negotiates a pact that will keep Butler out of bankruptcy, or the state might have to enter the picture to make the tough decisions that city leaders and employees decline to make.

It should be clear to everyone that these contract negotiations are critical to Butler’s future — if it is to have one.