California’s Public Sector Unions Spend Over $750 Million Per Year

Earlier this week the California Public Policy Center (CPPC) released a study entitled “Understanding the Financial Disclosure Requirements of Public Sector Unions.” The study found that the financial reporting requirements of state and local public sector unions are far less extensive than federal worker unions or private sector unions, and not remotely on par with the reporting requirements of publicly traded corporations. For example, publicly traded corporations must report their quarterly financial statements within 45 days of each calendar quarter. Anyone wishing to view the financial activities of a publicly traded corporation can find detailed current and historical data within minutes using the internet. Even private sector unions and federal worker unions are required to file annual financial reports with the Dept. of Labor, where they are posted online and searchable with relative ease.

In the case of state and local public sector unions, however, the only reports they file are federal 990 forms with the IRS. They are virtually exempt from public oversight. While watchdog sites exist that obtain and post these annual 990 reports, they are in PDF format where the data cannot be efficiently consolidated, the line items in these standard reports provide very few details into their operations, and there are literally thousands of independent local and state union chapters that all file separate reports. Compiling detailed information on the financial activity of state and local government worker unions is virtually impossible.

It wouldn’t really matter if the thousands of state and local government union chapters active in California were not, in sum, among the most powerful political players in the state, if not the most powerful. But this CPPC study compiled 990 data on just 16 of these unions, including most of the biggest ones, but ignoring thousands of others. These 990 reports showed that at the end of 2010, these 16 unions, including the state chapters of the CTA, CCPOA, PORAC, CSEA (State), CSEA (Schools), and CPF, had over $100 million in cash and cash equivalents, and during 2010 had spent well over $400 million. Included among these 16 was SEIU Local 1000, but not the other 20 public employee SEIU locals in California. Included among these 16 were three AFSCME chapters, representing Sacramento, Oakland and San Diego, but not the other 39 AFSME locals in California. And while the financials for the CTA’s main chapter were included in the analysis, the other 1,300 of California’s CTA locals were not; nor were the hundreds of CPF (Firefighter) locals, or the 45 AFT locals, or the several hundred CSEA (School Employees) locals.

The CPPC study estimated that at the end of 2010, the cash available to all the state and local public sector union chapters in California combined would probably have been over $200 million, and their combined expenditures would have been at least $750 million. This is consistent with our UnionWatch post of Sept. 2010 “Public Sector Unions & Political Spending,” where, using available data on membership and average annual membership dues, we estimated California’s state and local government unions would spend $750 million per year. It is easy for the other side to debunk these claims, since they have made the actual data nearly impossible to compile, but a top-down UnionWatch analysis from 2010 combine with a more recent CPPC analysis of select core data from 2010 to get the same number. Using conservative assumptions, California’s state and local public sector unions deploy at least $750 million per year to pursue their agenda. The real number is probably over $1.0 billion per year.

It is important to put this information in context. Everything a government worker union does is intrinsically political. If they aren’t spending this billion per year in California on collective bargaining over how to run our government – i.e., how much to pay workers, how to define worker’s jobs, how to discipline, promote, hire and fire workers, how to organize departments, how to manage worker benefits – government workers – then they are managing educational campaigns designed to influence their members (including teachers), influence the public, and influence policymakers. Or they are paying for voter registration and get-out-the vote drives, officially considered “non-political” expenditures, but carefully targeted efforts designed to benefit their political agenda. Or they are actually spending money on reportable political activities. But that explicitly political spending – overwhelming in its impact – is built on a foundation of total spending that is entirely calculated to advance the political agenda of public sector unions.

It is also important to understand that the political spending of public sector unions, and the agenda of public sector unions, is a monolithic, single issue program, with no source of organized opposition remotely comparable in terms of financial power or political focus. Public sector unions claim that they are necessary to protect the middle class from corporations, but the facts speak otherwise. Corporations pursue diverse political agendas specific to their particular industries, and often compete with each other. Their political giving is balanced among political parties. Corporations have no interest in opposing the political agenda of public sector unions, and with rare exceptions, they don’t.

Finally, public sector unions claim they are protecting the middle class, but the “middle class” they are protecting is government workers. The average total compensation for California’s state and local government workers, even if you don’t add to the average the true costs to fund their retirement health and pension benefits at realistic rates of investment returns, is well over $100,000 per year. The average total compensation for a private sector worker in California is half that. No educational disparity or risk premium can justify government workers making twice what private sector workers make. No amount of taxing the rich can pay for this. It is completely unsustainable, and the privileged status of government workers constitutes not protection, but oppression of the genuine private sector middle class.

The reason there has not been government reform in California is because of the financial power of public sector unions. Returning to the CPPC study, if California’s public sector unions were sitting on over $200 million in cash at the end of 2010, immediately after completing the bruising 2010 election cycle, one can only imagine how much cash they were sitting on at the end of 2011 (they almost all file for extensions, so we won’t see their 2011 990 forms until later this year). It would not be implausible that, entering 2012, California’s state and local public sector unions already had a war chest of around a half-billion dollars. And Californians should remember that the billion per year in public sector union revenue comes straight from their taxes, and is used by government worker unions to pay for the best lawyers, PR firms, spin doctors, academic studies – and politicians – that money can buy.

If truth were a commodity as readily purchased as perception, there would be no hope.

3 replies
  1. Avatar
    John Bosch says:

    One of the best articles I’ve read to date about the enormous weath and power government unions have. We often read blogs from state, county and municiple bloggers who remind us a “deal is a deal” and turn a blind eye to government union thuggery and financial strongarm tactics used to get them those deals. Who among them has the guts to admit what their unions do in their name is wrong?

  2. Avatar
    Tough Love says:

    Public Sector Unions are a CANCER on Society.

    Collective Bargaining should be outlawed.

  3. Avatar
    Constitutionalist says:

    Mt.Olive Chronicle

    The writer, Michael Poquat, is a police officer in Mount Olive Township.

    As a police officer in the state of New Jersey, I find myself unable to sit by while the current climate of public employee bashing continues under the misinformation fed to the public by the media and our current governor.

    While I can not comment on the teacher’s retirement system, I can speak about the Police and Fire Retirement Fund (PFRS), and more specifically, how it has been mishandled by some of our elected officials. The truth should come out, and the public has a right to know how we got to where we are today.

    Long before I became a police officer, the state of New Jersey enacted a law which required police officers and firemen to contribute a certain percentage of their salary into the state’s “secure” pension fund. Throughout my 22 year career, I have paid 8.5 percent of my salary, as mandated by law, into this fund every pay period.

    I was not given the option to place my 8.5 percent in an IRA or other investment fund. Every pay check since I was 25 years old had the 8.5 percent taken out of my pay and placed into the PFRS with the promise that the money would be there when I retired. By law, towns and municipalities were required to match that 8.5 percent.

    By the time Gov. Christine Todd Whitman took office, there was over $100 billion in the fund. This meant that at the current rate of retirements, pension costs for police officers and firemen were funded at 104 percent, well into the future. This was a prudent and financially responsible plan that worked, and it provided security for the families of these men and woman who risked their lives every day serving and protecting the citizens of New Jersey.

    In no way was it heavily over funded or excessive. It covered the costs of promised retirements with a small cushion left over. It was at this time that Whitman stepped in. Gov. Whitman recognized the billions of dollars in our “secure” and “separate” pension fund, and she proceeded to raid that fund. Unknown and unannounced to the public, monies were indiscriminately withdrawn from the PFRS and used to pay for Whitman’s tax cuts and to balance the state budget.

    Billions of dollars were taken, and to make matters worse, the Whitman administration passed a law allowing towns and municipalities to no longer contribute to the fund. Over $3 billion in contributions were skipped over the next eight years, while the individual police officers and firefighters continued to have their 8.5 percent contribution taken from them and placed into the PFRS.

    The state gambled for years, relying heavily on the returns from the stock market to cover the missing funds. Politicians misspoke on the campaign trail, touting the virtues of how their financial genius was able to balance their state and local budgets, and the public was lulled into a sense of false financial security.

    But the small print in Whitman’s bill was ignored. The funds they failed to contribute would have to be made up at a later date. The pension reprieve was temporary and their contributions would have to be paid back, just like any other loan. It was quietly suggested by the Whitman administration that towns set these contributions aside for when the state called to make good on them. It appears most towns and municipalities failed to heed this advice.

    Governors (Donald) DiFrancesco, (James) McGreevy, and (Richard) Codey continued this trend, and all failed to call the towns and municipalities on their “loan” while the PFRS fund continued to dwindle down close to $66 billion. They remained silent. To bring this to light at this point would certainly mean political suicide, knowing that towns and municipalities would have to raise taxes to make up for their error in financial judgment and planning.

    It wasn’t until Gov. Jon Corzine took office that this trend was stopped, but unfortunately, the damage was done. Gov. Corzine made the call the governors before him were afraid to make. He advised the towns and municipalities that it was time to pay back the monies the towns had been given a temporary reprieve on. And the media jumped on this, printing bold headlines “Towns going broke over police and fire pensions.”

    This attention grabbing and misleading headline made it appear that your police and firemen were bilking the taxpayers dry, when the truth is totally the opposite. The politicians bilked your police officers and firemen dry and in the long run, the tax payers of New Jersey.

    Towns and municipalities knew they were going to have to pay this money back and for them to insinuate otherwise is simply not true. Realizing the gravity of the situation, a new bill was introduced and passed into law. This allowed the towns to pay back the loan given to them by their public employees in increments; starting at 20 percent, 40 percent, 60 percent, 80 percent, and finally 100 percent each proceeding year.

    Towns and municipalities continue to act as if they have been caught unaware and shocked by this entire process. The public is being told that payments for police and fire pensions are doubling, tripling and quadrupling and that the public employee system is out of control. What the public needs to know is that they are the victims of a mounting debt that was created by the Whitman administration and compounded by those following her tenure.

    To blame your public employees for the abuses of the pension system is ludicrous at best, especially when our elected officials are the ones responsible for raiding the fund and then enacting the legislation on how and when to pay it back.

    Gov. Jim Florio recognized the financial hardship facing the state of New Jersey and proceeded to raise the state sales tax to 7 percent. This helped spell political suicide for him, and Gov. Whitman was not going to make the same mistake. She repealed the 7 percent, dropping it back down to the 6 percent, knowing full well this money would have to come from somewhere.

    Her solution was to raid the Police and Fire Pension System, allowing her to balance the state budget and give the false appearance that all was fiscally sound under her watch.

    Our current governor, facing the same financial crisis of those going before him, has chosen a similar route, but one with a more vilifying tone. He has again found the same victim: Your public employees. When asked about the pension situation in the state of New Jersey, Gov. Chris Christie replied “I wasn’t going to put $3 billion into a failing pension system. We need pension reform. I passed some already for new hirees, and this fall we are going after the current employees and pension reform and benefits because we are broke.”

    Nowhere does he mention how the public employees had already bailed out this state years before, and now he is focused on “going after” the current employees to fix a mess created and compounded by politicians. To say otherwise for him would be political suicide should he aspire to higher political office, and as most of those before him, he is not about to risk his future. Rather, he would gamble on the future of those men and woman and their families who have served this state with honor and integrity.

    The principals of the pension system are not broken Mr. Governor. What is broken is the manner in which the politicians have treated and abused it. Yes, the system is failing now, but not because of your police officers and firemen. As of 2009, the pension fund should have assets of $112 billion to meet its obligations, yet it is currently sitting at $66 billion.

    It is the largest unfunded liability in the country. New Jersey is the first state ever to be charged with fraud by the Securities and Exchange Commission, and Gov. Christie, strangely, has no comment on this. Yet he continues his rhetoric on the evils done to us by our police officers and firemen, ignoring the truth and lambasting and vilifying us at every turn.

    As the saying goes, “Politics has no shame when it comes to preserving your place in office. Why let the truth get in between a good, attention grabbing headline?”

    The system is on the brink of collapse and continued arrogance and mudslinging will not fix it. The truth is what it is Mr. Governor, and there is no getting around that. Politicians put us in this mess for their own political gain, not our public employees, as you would like the public to believe. You know this and need to stop ignoring the facts. How we deal with it from here is the measure of each of our character and integrity. I know the public is smart enough to recognize this and I hope that you are too. Long after you are gone, we will still be here, protecting and serving as we always have. In the end, all we have left is our name. Let’s hope yours is remembered for you’re integrity and not for what you have slung so far in your race for political aspiration. I challenge you to do the right thing, as so many police officers and firemen strive to do every day for their families and the citizens of New Jersey.

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