Consider it a victory for taxpayers and for the rule of law. On Tuesday, the Wisconsin Supreme Court ruled 4–3 in favor of upholding the state’s new collective bargaining law, reversing a lower court decision that sought to stamp out the will of the people, the authority of the legislature, and a major movement toward fiscal reform. And at three this morning, following a nearly 13-hour floor debate, the Wisconsin Assembly approved a budget aimed at wiping out the state’s $3 billion structural deficit.

Like many states, Wisconsin this year found itself drowning in an ocean of overspending and suffering the fourth highest tax burden in the country. In this fiscal nightmare, public-sector unions fashioned for themselves a cushy, taxpayer-funded existence, disconnected from the realities of the state’s economic woes. Heritage’s James Sherk explains just how sweet that deal was:

Until now, government employees in Wisconsin paid just 6 percent of their health care premiums and next to nothing for generous pensions, and the average teacher in Milwaukee makes $101,000 a year. Government union contracts also require layoffs to occur on the basis of seniority. Long-time government employees can rest assured that they will never get laid off.

That was a path that just wasn’t sustainable, and early this year, first-term Governor Scott Walker (R) attempted to usher in a plan to change the way the state did business—a new law that would restrict collective bargaining in government, require government workers to contribute 5.8 percent of their salaries to their pensions and at least 12.6 percent of their health–care premiums, and allow workers to choose whether or not to pay union dues.

That was the spark that ignited a furious fire among Wisconsin’s big labor movement and captured the nation’s attention. Thousands of protesters swarmed the state’s capitol, and 14 Wisconsin senate Democrats fled to Illinois, where they hid out for more than three weeks in an attempt to block the law. Ultimately, though, an agreement was reached and the law was passed, leaving the law’s opponents to resort to the legal action in hopes of undermining the legislative process by way of an activist judge.

For a short time they were successful; a county judge blocked the law purely on a political basis. On Tuesday, the state’s supreme court overruled that decision, allowing the law to take effect. Heritage’s Hans von Spakovsky explains the legal import of the decision:

It is a victory not only for the soundness of the underlying legislative process but also for the rule of law against activist judges who ignore the separation of powers between the legislative and judicial branches and make up their own law from the bench.

There are more battles to come in Wisconsin: A pro-union group is using robocalls to deliver more protests to the statehouse; state unions on Wednesday filed a lawsuit challenging parts of the law in U.S. District Court; and a movement is afoot to recall six Republican state senators who voted for the law.

The continued opposition isn’t surprising given what’s at stake for public sector unions. To date, they have enjoyed tremendous power—a veritable monopoly on labor services provided to government, allowing them to secure unmatched benefits. And, without competition, costs go up while quality goes down. That’s not something they will give up easily, and they won’t go down without a fight.

But it’s a fight America can’t afford to lose. All across the country, states are beset with budgets that are running out of control. According to a Pew report, “the gap between the promises states have made for public employees’ retirement benefits and the money set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009—a 26 percent increase in one year.” States must make significant changes to address this trillion-dollar shortfall or face total budgetary collapse.

The victory in Wisconsin is a significant one, but it’s just one state and one law. Just as public-sector unions will continue their struggle for survival, Americans must continue their fight to restore fiscal sanity to their cities, states and nation.

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