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The Friedrichs Free Rider Fraud

The Supreme Court’s decision to hear the Friedrichs case has the unions in a tizzy.

On June 30th, the Supreme Court decided to hear Friedrichs v. California Teachers Association et al, a case that could seriously change the way the public employee unions (PEUs) do business. If the plaintiffs are victorious, teachers, nurses, sanitation workers, etc. would be able to work without the financial burden of paying union dues. The responses to the Court’s decision from the teachers unions and their friends have ranged from silly to contradictory to blatantly dishonest.

In a rare event, leaders of the NEA, AFT, CTA, AFSCME and SEIU released a joint statement explaining that worker freedom would be a catastrophe for the Republic. Clutching their hankies, they told us that, “big corporations and the wealthy few are rewriting the rules in their favor, knocking American families and our entire economy off-balance.” And then, with an obvious attempt at eliciting a gasp, “…the Supreme Court has chosen to take a case that threatens the fundamental promise of America.” (Perhaps the labor bosses misunderstood the wording of the preamble to the Constitution, “In order to form a more perfect union….” No, this was not an attempt to organize workers.) While the U.S. is not without its problems, removing forced unionism will hardly dent the “fundamental promise of America.”

The California Federation of Teachers, which typically is at the forefront of any class warfare sorties, didn’t disappoint. The union claims on its website that the activity of union foes “has resulted in a sharp decline in median wages for working people and the decline of the middle class alongside the increasing concentration of income and wealth in the hands of the one per cent.” But wait a minute – the unions are the most potent political force in the country today and have been for a while. According to Open Secrets, between 1989-2014, the much maligned one-percenter Koch Brothers ranked 59th in political donations behind 18 different unions. The National Education Association was #4 at $53,594,488 and the American Federation of Teachers was 12th at $36,713,325, while the Kochs spent a measly $18,083,948 during that time period. Also, as Mike Antonucci reports, the two national teachers unions, NEA and AFT, spend more on politics than AT&T, Goldman Sachs, Wal-Mart, Microsoft, General Electric, Chevron, Pfizer, Morgan Stanley, Lockheed Martin, FedEx, Boeing, Merrill Lynch, Exxon Mobil, Lehman Brothers, and the Walt Disney Corporation, combined.”

So the question to the unions becomes, “With your extraordinary political clout and assertion that working people’s wages and membership in the middle class are declining, just what good have you done?”

Apparently very little. In fact, the National Institute for Labor Relations Research reports that when disposable personal income – personal income minus taxes – is adjusted for differences in living costs, the seven states with the lowest incomes per capita (Alaska, California, Hawaii, Maine, Oregon, Vermont, and West Virginia) are forced-union states. “Of the nine states with the highest cost of living-adjusted disposable incomes in 2011, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Texas, Virginia and Wyoming all have Right to Work laws.” Overall, the cost of living-adjusted disposable income per capita for Right to Work states in 2011 “was more than $36,800, or roughly $2200 higher than the average for forced-unionism states.”

But the most galling and downright fraudulent union allegations about Friedrichs concern the “free rider” issue. If the case is successful, public employees will have a choice whether or not they have to pay dues to a union as a condition of employment. (There are 25 states where workers now have this choice, but in the other 25 they are forced to pay to play.) The unions claim that since they are forced to represent all workers, that those who don’t pay their “fair share” are “freeloaders” or “free riders.” The unions would have a point if someone was sticking a gun to their collective heads and said, “Like it or not, you must represent all workers.” But as I wrote recently, the forced representation claim is a big fat lie. Heritage Foundation senior policy analyst James Sherk explains,

The National Labor Relations Act (NLRA) allows unions that demonstrate majority support to negotiate as exclusive representatives. If they do so they must negotiate fairly on behalf of all employees, including those who do not pay dues. However unions may disavow (or not obtain) exclusive representative status and negotiate only for their members. Nothing in the National Labor Relations Act forces exclusive representation on unwilling unions. (Emphasis added.)

Mike Antonucci adds,

The very first thing any new union wants is exclusivity. No other unions are allowed to negotiate on behalf of people in the bargaining unit. Unit members cannot hire their own agent, nor can they represent themselves. Making people pay for services they neither asked for nor want is a ‘privilege’ we reserve for government, not for private organizations. Unions are freeloading on those additional dues.

If there are still any doubters, George Meany, the first president of the AFL-CIO, whose rein began in 1955 and continued for 24 years, told Congress,

When a union has exclusive recognition with a federal activity or agency, that union is required to represent all workers in that unit, whether or not those workers are members of the union. We do not contest this requirement. We support it for federal service, just as we support it in private industry labor-management relations.

While the NLRA applies only to private employee unions, the same types of rules invariably govern PEUs. Passed in 1976, California’s Rodda Act allows for exclusive representation and it’s up to each school district and its local union whether or not they want to roll that way. However, it is clearly in the best interest of the union to be the only representative for teachers because it then gets to collect dues from every teacher in the district. It’s also easier on school boards as they only have to deal with one bargaining entity. So it is really a corrupt bargain; there is no law foisting exclusivity on any teachers union in the state.

So exclusive representation is good for the unions and simplifies life for the school boards, but very bad for teachers who want nothing to do with organized labor. It is also important to keep in mind that the Friedrichs case is not an attempt to “bust unions.” This silly mantra is a diversionary tactic; the case in no way suggests a desire to do away with unions. So when organized labor besieges us with histrionics about “the promise of America,” the dying middle class, free riders etc., please remind them (with a nod to President Obama), “If you like your union, you can keep your union.” In this case, it’s the truth.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Harris v. Quinn: A Mother Petitions the Supreme Court in Fight Against Unions

I have tried to steer clear of inflaming names like “parasite” when speaking about public unions. In this case, no other word comes close to describing the setup.

Making Millions Off the Disabled 

One brave mother, Pam Harris, has resisted forced unionization of herself (as a sole home-caretaker, in her own home, for her disabled son Josh). She resisted all the way to the Supreme Court.

An email from Diana Rickert at Illinois Policy Institute describes the setup. You can also find her article on the Chicago Tribune.

With immense disgust, I present Making Millions Off the Disabled

 Josh, the youngest child in the Harris family, was born with a rare genetic disorder. He lives with severe physical, cognitive and emotional struggles. This means the day-to-day tasks most of us take for granted — waking up, splashing water on his face, eating — require a lot of help.

But Josh is blessed to have a family that loves him. They always have been there for him.

In fact, his mother, Pam, has stayed home full time to take care of Josh for the past 25 years. Josh is her primary focus. Not her career. Not vacations. Not social outings with other moms. The truth is, Pam is doing what any mom would do: fighting to give her son the very best care she can.

Josh’s care is expensive. The Harris family is fortunate enough to receive a modest Medicaid benefit administered by Illinois state government. Josh is eligible to receive up to $2,130 per month, or roughly $25,000 a year.

But here is where the Harris family’s story takes a disgusting turn.

Henry Bayer wants some of Josh’s money. In fact, he feels entitled to it.

Who is Henry Bayer?

Bayer is the executive director of the American Federation of State, County and Municipal Employees Council 31, one of the state’s largest government unions.

Bayer’s salary — approximately $145,000 in 2012, according to public records — is paid for by union dues from government workers. Compulsory union dues, from government workers who must pay money to Bayer and his union whether they want to or not.

Illinois politicians have a dangerously cozy relationship with government unions. In 2009, these close ties paid off: Gov. Pat Quinn issued an executive order to unionize the people in Josh’s program.

Imagine having to pay union dues to collect food stamps or unemployment. That’s what the executive order meant for Josh. For him to continue receiving his Medicaid support and his mother to be his primary caretaker, the Harris family would be forced to give part of their benefit check to either the AFSCME or another union, the Service Employees International Union.

The Harris family wouldn’t stand for it. They alerted other families in the program, and when it came time to vote on which union would represent them, the vote was clear: 220 votes for AFSCME, 293 votes for SEIU, and 1,018 votes with an emphatic “no union!”

Pam Harris and others took their fight all the way to the U.S. Supreme Court.

Oral arguments in Josh’s case were heard Jan. 21, and a decision is expected this summer. Josh’s story has garnered national attention.

In the aftermath of the Supreme Court hearing, here is what AFSCME’s Bayer had to say in response to a Chicago Tribune editorial in favor of Pam Harris: If you don’t want to pay union dues, you shouldn’t be eligible for state aid.

A few years before the executive order to unionize the program that the Harris family participates in, Quinn’s predecessor, former Gov. Rod Blagojevich, unionized another, similar program for the disabled. The unions didn’t even bother taking a vote that time; they conducted a questionable card-check operation to claim a slim majority of people in this program wanted to pay dues to SEIU.

According to documents obtained through the Freedom of Information Act, since 2009 the SEIU has siphoned more than $52 million in union dues from the families in this program.

Pam Harris Video

Here is an interesting video by Pam Harris.

Forced Association

The Illinois Policy Institute was overly polite.

Pam Harris and others are forced against their will to join unions. Those unions do absolutely nothing for Harris except suck like giant parasites, money that should go to the disabled.

It would be fitting if the Supreme Court ruled the SEIU and AFSCME parasites not only have to stop the practice, but also have to pay back the $52 million they stole, plus interest.

These disgusting, parasitic practices occur in many other states as well.

Freedom of Association

I am all in favor of freedom of association. People who want to join the Boy Scouts can. People who want to join the NRA can. People who want to form any kind of work union can. I am happy to let those unions exist.

However, the reverse should be true as well. No one should be forced into an association (or forced into dealing with associations) if they don’t want to.

Imagine the outrage if liberals were forced to join the NRA to get jobs as teachers!

Yet, somehow it’s OK if conservatives have to join the SEIU to take certain jobs. In the case of Harris and other caretakers, the jobs don’t even exist, except for the parasitic collection of union dues!

Forced membership into organizations is nothing more than a form of slavery. And “collective bargaining” is a euphemism for the slavery of forced membership.

Yes, it is indeed that simple, no matter how nice the union slave-masters try to make it sound.

I propose, and hope, that the Supreme Court issues a broad ruling on the matter, ending the slavery of forced collective bargaining once and for all.

About the Author:  Mike Shedlock is the editor of the top-rated global economics blog Mish’s Global Economic Trend Analysis, offering insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education.

Public Union Foes and Defenders

The basic premise behind public employee financed campaigns is that the election is now while the bills may be deferred for years, particularly if they take the form of pension promises. Eventually, however, the bills do come due. This is why Governor Mitch Daniels (R-Indiana) said he decided on his first day of office in 2005 322 to end public employee collective bargaining rights and to stop collecting union dues. Without the state collecting dues, only 10% of union members chose to stay enrolled by paying their own dues.

Governor Chris Christie (R-New Jersey) stood before 200 of his state’s mayors in 2010 and declared that the era of “Alice-in-Wonderland” budgeting is over: “Money does not grow on trees. . . . For New Jersey and any number of other states and municipalities, it’s useless to pretend. . . . We have no room left to borrow. We have no room left to tax.” Chris Christie went on to say that his treasurer had presented him with  possible budget deletions or freezes to balance the budget and that he had adopted . Almost all observers thought that this was the end of the Governor’s career. Instead it made him a national figure and even won approval from New Jersey voters.

Governor Scott Walker (R-Wisconsin) was elected in 2010 and immediately moved to restrict collective bargaining for benefits (excluding police and fire) and also to stop collecting union dues. This led to a firestorm of protest and a recall election, which the Governor won. Governor John Kasich (R-Ohio), also elected in 2010, restricted public employee collective bargaining, including police and fire, but his actions were overturned by voters in a 2011 referendum.

In retrospect, Kasich’s chief error was in not moving to end automatic state collection of all union dues. Scott Walker’s experience in Wisconsin in this regard is highly instructive. Walker’s position was that the state would continue collecting all dues until the end of the contract. After that, dues would only be collected with the consent of the public worker. What actually happened was that two-thirds of workers enrolled in AFSCME, the state’s largest public union apart from the teachers’ NEA, refused to give their consent. As in Indiana, the political power of the union took a major hit. As Jim Geraghty commented in the National Review: “Apply this across the country . . . and you’re talking about . . . a game-changer in so many states.”

Ironically, a federal court ruled in 1966 that a union did not have the right to use member dues for political purposes if a member objects. But few union members know about the right to opt out or, if they do, may feel intimidated in pursuing what are called their “Beck rights.” Moreover the unions make it very difficult by stalling on Beck rights requests, smothering them in endless red tape, and refusing to calculate what portion of the dues apply. If, however, the public employer refuses to collect full dues for the union automatically and instead asks the member whether dues should be used for political purposes, it is much easier for the worker to express a preference.

As we have noted, the rules governing state and local public unions differ from those governing federal workers. The former can usually engage in collective bargaining and go on strike; the latter seem to serve little purpose other than to collect dues and put a share of it at the disposal of the Democratic Party. Despite these differences, federal wages and benefits have also risen, so that taken together they now exceed what can be earned in the private sector for the same job. This is a remarkable reversal: fifty years ago, it was generally understood that federal workers would earn less in exchange for more days off, slightly better benefits, and almost total job security.

Studies purporting to compare federal with private work levels do not agree with one another, but the Congressional Budget Office has found that, comparing employees of comparable educational level, federal wages are higher at lower pay scales, similar at middle, and somewhat lower at the high end, with benefits much higher across the board. Taken together, the federal employee advantage is 16%. In addition, federal employees work three hours less per week on average and one month less per year. An earlier Labor Department study found that state and local workers make 46% more, so federal workers were not doing as well. Other studies, however, suggest all categories of government pay are more like twice as high as private, when the net present value of soaring retirement awards, often equal to final year pay, is taken into account.

The number of very highly paid federal employees has also increased, even during the years following the Crash of 2008. For example, in early 2008, the Labor Department had only one employee earning $170,000 or more. Eighteen months later, there were 1,690 such employees. Over the same period, all federal employees making more than $100,000 rose from 14% to 19%. One federal employee, working in a government green energy lab in Colorado, was reported in 2012 to be making just under $1 million, with two deputies making over $500,000 each, and nine others making over $350,000. The number of all jobs during the economic recession of 2008–2009 also rose in the federal government, unlike in the private sector, where over eight million disappeared. It is not at all surprising that by the end of 2010, seven of the ten richest counties in the US surrounded Washington, DC.

Having come into office on a wave of union support and money, the Obama administration literally opened its doors to union leaders. Andy Stern, the head of the powerful SEIU, visited the White House more often than any other political figure during the first six months. What he seemed to want most was “Card Check” legislation that would end the secret ballot in union organizing. President Obama and Democratic leaders strongly endorsed the bill, but it must have lacked some Democratic votes in the Senate, because it was never put forward for a vote, despite overwhelming Democratic majorities in Congress.

President Obama found other ways to reward labor. During his first weeks in office, he signed executive order 13502, which made union membership a requirement of anyone working on federal construction projects. He also opposed Senator Jim DeMint’s (R-South Carolina) National Right to Work bill, which would have ended compulsory union membership as a job condition in all states (23 states have their own versions of this law).

The President backed a decision by the Democrat controlled National Labor Relations Board (NLRB) intended to block Boeing’s plan to move 787 Dreamliner plane construction from unionized Washington to union-free South Carolina. He backed another highly controversial decision to force companies to turn over their employees’ private email addresses and telephone numbers without employee consent to union organizers. He also tried unsuccessfully to force companies doing business with the government to reveal all political activity or donations, a rule that would not have applied to unions. By early 2012, he had granted waivers from his Obamacare legislation to unions representing 543,812 employees (also to administration friendly companies with 69,813 employees).

Meanwhile the president kept subsidies flowing to the Post Office which, despite massive losses, reliably collects union dues from workers, which are then made available to Democratic campaigns ($3.6 million in the 2010 election cycle). Other countries have successfully privatized their mail delivery. The obstacle to doing this in the US is that postal workers, like other government employees, are deemed to be, for the most part, reliable Democratic voters, and their union is regarded as an indispensable political cash cow.

Crony-Capitalism-in-America

About the Author: Hunter Lewis is co-founder of AgainstCronyCapitalism.org. He is co-founder and former CEO of global investment firm Cambridge Associates, LLC and author of 8 books on moral philosophy, psychology, and economics, including the widely acclaimed Are the Rich Necessary? (“Highly provocative and highly pleasurable.”—New York Times) He has contributed to the New York Times, the Times of London, the Washing­ton Post, and the Atlantic Monthly, as well as numerous websites such as Forbes.com and RealClearMarkets.com. This post is an excerpt from Chapter 20 of his most recent book, Crony Capitalism in America: 2008–2012.

Unions and Obamacare, Part 2: How Unions Got Obamacare Passed

Unions were at the forefront in the desperate campaign for Obamacare.

The organization “Health Care for America Now!” included some 1,030 organizations and was the principal coalition working to pass the program. HCAN’s 20-member steering committee included the AFL-CIO, the Communication Workers of America, the teachers’ unions (both the National Education Association and the American Federation of Teachers), the American Federation of State, County and Municipal Employees (AFSCME), the United Food and Commercial Workers (UFCW), the United Auto Workers (UAW), and the Service Employees International Union (SEIU), along with Working America, an AFL-CIO front group.

Taking the lead in organizing unions and their allies for Obamacare was Dennis Rivera. Rivera was the longtime head of the nation’s largest union local—Local 1199 (SEIU Healthcare Workers East)—until he left that job in 2007 to run SEIU’s national effort to organize healthcare workers. In his new position, he was working for Andy Stern, the SEIU president who would later be the most frequent visitor to the White House in the early days of the Obama administration. Back then, in 2007, Stern said Rivera was perfect as chair of SEIU Healthcare because “He’s tough, smart, and compassionate, just what’s needed to transform healthcare in this country. At this moment in history, as the winds of change are blowing toward fundamental healthcare reform, and as SEIU redoubles its efforts to fix our broken healthcare system, Dennis’ decision to shift his focus to the national effort couldn’t come at a better time.”

Stern was eerily prophetic. Rivera was the perfect person to lead the change. Rivera’s specialty at Local 1199 was forming alliances with businesses and hospitals, as well as spending heavily on campaigns that supported his political friends and punished his political enemies. He was close to the leading Democrats in New York (and served on the transition team for Gov. Elliot Spitzer in 2006-2007), but he also took advantage of splits within GOP ranks, partnering with Gov. George Pataki and other Republicans who had big business ties. His skill at building anti-taxpayer coalitions would prove invaluable to the Obamacare effort.

In June 2009, shortly after President Obama took office, the pro-Obamacare “Kaiser Health News” reported that “Unions have created a formidable political machine for the battle on health care, one that they’re already begun to deploy to support their positions and undercut those they oppose. They say they’re ready to spend $80 million.”

The unions’ greatest worry was that they would spark a backlash among voters, such as the backlash against Hillary Clinton’s healthcare plan that, in 1994, gave Republicans control of Congress for the first time in 40 years. Said Len Nichols of the left-wing New America Foundation: The unions understand “that if Democrats fail, last time we got [House Speaker Newt] Gingrich, this time we could get [conservative radio host Rush] Limbaugh.”

(The worriers were right: The backlash against Obamacare gave Republicans, in 2010, their best election in 60-80 years, but by then the program had already become law.)

Forewarned and forearmed, prepared for perhaps the key political battle of their lifetimes, the pro-Obamacare unions and their allies set up their “Health Care for America Now!” campaign on Washington’s K Street, the infamous home for special-interest lobbyists. The operation was funded by MoveOn.org and other organizations funded by billionaire George Soros, and by Soros-connected donors such as the Atlantic Philanthropies, Peter Lewis of Progressive Insurance, and Herb and Marion Sandler. The tax disclaimer for HCAN stated: “HCAN is related to Health Care for America Education Fund, a project of the Tides Center, a section 501(c)(3) public charity.” On the board of the Tides Center was ACORN founder Wade Rathke [see Part 3, to be posted Monday, November 11].

During the campaign for Obamacare, SEIU’s Dennis Rivera took the lead in forming alliances with industries that hoped to profit from the new system directly (health insurance, non-doctor-owned hospitals, the pharmaceutical industry) and indirectly (companies like Walmart that hoped to dump their employees’ healthcare costs onto the taxpayer). Rivera also took advantage of the can’t-we-all-just-get-along weariness of opponents of nationalized healthcare. Many of them had been persuaded by the major news media that President Obama and the Democrats and their healthcare-rationing ideas represented the wave of the future; others wanted a place at the negotiating table as the nation’s healthcare resources were divvied up. In 2009, Crain’s New York Business reported:

Dennis Rivera, the indomitable labor leader, was on Capitol Hill in late June to persuade members of a powerful House committee to include a public insurance option in its massive overhaul of the nation’s health care system. Karen Ignagni [representative of the health insurance industry], perhaps the most feared lobbyist on the Hill, was there to sway the lawmakers in the opposite direction. Yet during a break in the hearing, Ms. Ignagni—whose group of insurers served up the “Harry and Louise” ads that helped kill the Clinton health care reform effort—walked over to Mr. Rivera, greeted him with a warm embrace and asked to meet the following week. . . .

[After his success in New York forming coalitions with Republicans and businesses, Rivera] has exported his mastery of transactional politics to the Beltway, appealing equally to would-be adversaries’ self-interest and their fears to lure them to the table. . . . As chairman of the Service Employees International Union’s health care division, he’s brought together groups including insurers, drugmakers and doctors—all of whom defeated previous attempts at reform. In a nation grown weary of confrontational politics, Mr. Rivera’s brand of bridge-building has injected civility into a complex process, forging a path to health care reform that has eluded Washington for decades.

Rivera, as the healthcare chief of the union most closely connected to President Obama, blurred the lines between his union and the Obama Administration. “To some degree, Dennis is an independent actor, and to some degree, he’s working for the White House,” said a senior vice president of a medical technology group. “That played into making the process a success and people wanting to get involved. It’s not too great to be on the wrong side.”

During the Obamacare campaign, Rivera convened strategy sessions at 9 a.m. in a “war room” at SEIU headquarters. According to Crain’s, the campaign deployed “an army of 400 SEIU staff and members who are fanned out across 16 priority states. Union leaders have identified 20 senators and nine representatives they believe need some swaying to the cause of reform, and researchers have produced 100-page dossiers on each of them. The reports contained detailed information ranging from lists of associates who might influence these legislators to notes about how they typically respond to TV ads that protest their positions. The union has drawn up specific plans to target each elected official, ranging from writing letters and making phone calls to bird-dogging and holding sit-ins. If an official typically doesn’t respond to union pressure, it’s duly noted, and sympathetic leaders from religious or women’s groups have been primed to work them over.”

Particularly valuable in Rivera’s effort were left-wing groups that are not perceived by the general public as left-wing, such as the AARP and the American Cancer Society, which are thought by most people to be a senior citizens’ group and a traditional charity.

One of the key politicians with whom Rivera formed an alliance was Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee. A relative moderate from a conservative state, Baucus had little history with SEIU before 2008. Rivera targeted Baucus, gradually building a relationship, then using the endorsement of so-called “reform” by Walmart as leverage to get Baucus on board. Without the help of Baucus, it’s unlikely Democrats would have held together in support of Obamacare—and without the unanimous support of the Senate’s 60 Democrats, the legislation could not have passed.

The irony: It was Baucus who, this year, labeled the rollout of Obamacare a “train wreck.”

Rivera’s efforts bore fruit when Obamacare passed Congress. In the course of the campaign, the legislation’s supporters had labeled opponents as racists who only fought against the President’s program because it was proposed by a black man. In a 2010 speech, AFL-CIO President Richard Trumka recalled personally witnessing the racism of Obamacare opponents on the day of the key vote: “I watched them spit at people. I watched them call [civil rights hero and U.S. Rep.] John Lewis the N-word.” Recordings of the incident proved that no such display of racism ever occurred, but it hardly mattered. Claims by opponents that Obamacare would be a disaster, claims that were backed up by the most thoughtful analysis available, hardly mattered. To the unions, what counted was victory. Any problems could be fixed later—right?

Dr. Steven J. Allen (JD, PhD) is editor of Labor Watch. This post is the second of a three-part series originally published by Labor Watch, a project of the Capitol Research Center, and is published here with permission.

Saving Pensions Will Require Unions To Face Reality

“Not surprisingly, within moments of news of Detroit’s bankruptcy, pension scare mongers took to their pedestals to place all the blame on pensions. California, Los Angeles, and other governments would surely follow Detroit’s footsteps in short order, they cried. It’s simply not true, like most of the claims made by the anti-pension soldiers who have been trying for years to take away the retirement security of firefighters, teachers, police officers and other public servants.”

Ralph Miller, President, LA County Probation Officers’ Union, AFSCME, Fox & Hounds, August 20th, 2013

Miller has a point. California is not Detroit. California’s population has not imploded, nor will it. Detroit’s economy was reliant on one industry, California’s huge economy is diverse and relatively healthy. Turning California around, while daunting, is going to be a lot easier than turning around Detroit. And, yes, it was a collapsing industrial base and an imploding population that did as much or more than unsustainable pay and pensions to destroy the city of Detroit’s finances. Fair enough.

Where Miller goes off the rails is when he then infers that equally bogus are “most of the claims made by the anti-pension soldiers who have been trying for years to take away the retirement security of firefighters, teachers, police officers and other public servants.”

Few, if any pension reformers want to take away anyone’s retirement security. But as a nation, we are currently on track to pay more money each year in pensions to retired government workers than we pay in Social Security to everyone else. The average pension for a recently retired government worker in California who logged at least 30 years of full-time service is about $65,000 per year. The average Social Security benefit for a private sector retiree who logged 40 years or more of full-time work is $15,000 per year.

This is not a valid social contract. Government workers, through these pensions, are no longer required to endure the economic challenges facing the taxpayers they serve. And despite rhetoric and reporting that confuses these issues, Social Security is a relatively healthy system that can remain solvent with minor adjustments to withholding and benefit formulas, whereas public sector pensions are going to catastrophically collapse the very next time there’s a bear market.

There are really two primary issues that ought to be the focus of debate: (1) What is a realistic rate of return, after adjusting for inflation, for pension funds over the next 30 years? (2) If you don’t believe that pension funds are going to continue to deliver 7% returns, 4% real returns after inflation, year after year for the next three decades, do you fix the system by converting participants to an adjustable defined benefit, or by converting participants to a 401K?

To the first question, if you truly believe real rates of return are going to hover somewhere north of 4% per year, forever, then you should have no trouble agreeing to an adjustable defined benefit. This would simply be a modification of pension formulas, whereby pension benefits would be reduced by a uniform percentage, applied to everyone – new hires, active employees, and retirees – by as much as necessary to maintain an adequate funding ratio. By applying this formula to everyone equally, the amount of sacrifice for any given participant is minimized.

The alternative, should markets turn downwards, is to intensify attempts to protect veteran employees and retirees at the expense of new entrants to the public workforce. The fatal problem with this method is that new entrants have lower rates of pay and a very long wait until they retire, both factors that minimize any benefit to the fund’s solvency by reducing their pension formulas.

The other alternative, which many pension reformers have determined is inevitable given the intransigence of public sector unions to even consider options such as an across-the-board adjustable defined benefit, is to go to a 401K defined contribution plan. That would force every individual to hope they successfully pick the best investments, subjecting them to the caprice of a highly volatile, highly manipulated global market. It would also force every individual to hope they die before they run out of money. It is not a preferable option. It is as brutal as it is whimsical.

What government union leaders and their members must realize is they have set themselves apart from the rest of the American people during a unique period in our nation’s history. Between 1980 and 2030 the percentage of Americans over age 65 is projected to double, from 11% to 22%. At the same time, the costs of healthcare march relentlessly upwards – partly because medicine can do so much more to improve the length and quality of life. Moreover, we are entering the terminal phase of a global debt bubble that has been inflating at least since 1980. It’s about to pop. Passive investment funds are not going to be coining money like they used to.

Government unions can continue to demonize wealthy people, hoping enough voters will be duped by this scapegoating, but they must understand that “wealthy people” is becoming synonymous with “old people.” Their rhetoric, therefore, will foment discord between generations. Yet the reality is quite different. If things continue the way they are today, the discord, and the wealth disparity, will not be between old and young, but between old government workers (and the super rich, of course), and everyone else – young and old private sector workers, as well as newly hired government workers.

Ensuring that every American can enjoy sufficient retirement security to allow them to live their final years with some measure of dignity is not going to be easy. The solution is to lower defined benefits for all government workers to financially sustainable levels, as needed, and more generally, to move towards applying the same set of taxpayer funded benefit formulas and incentives to all American workers equally, for them to earn regardless of whether or not they work for the government.

*   *   *

Ed Ring is the executive director of the California Public Policy Center and the editor of UnionWatch.org.

The Unions’ Own “1%”: Extravagant Pay, Nepotism, Government Indifference

Summary: Union leaders are increasingly distant from the everyday workers they claim to represent, with faster-growing pay and an entrenched ruling class, data show. Nepotism is in full force, union members complain, and the closest some second- or third-generation officials have been to a day on a job site is a class on labor relations at Harvard. With a small handful of persons controlling a multitude of related trusts, sometimes for decades, it should be no surprise the Department of Labor has found at least 89 cases where union members had funds embezzled by their own officials in the first half of 2013.

The Laborers’ International Union of North America says it fights for equality, for lowering the gap between the highest- and lowest-paid, and against the corrupt practices of corporate fat-cats who have politicians in their pockets and avoid paying their fair share in taxes. That’s the image the union wants to project.

The reality is different. The LIUNA presents a case study in the hypocrisy, self-dealing, and good-old-boy networking that now characterizes many if not most unions. Entrenchment is common, with the same people holding office for year after year. Nepotism is rampant; privilege afforded by birth is the norm in much of the labor movement.

At marble palaces throughout Washington, union leaders who are often the sons and grandsons of organizers and who have just as often had virtually no experience toiling on job sites, have come to view themselves as untouchable. Indeed, that sense of invulnerability is rooted in reality, given the record of Obama administration officials in charge of enforcing labor laws. The Department of Labor’s enforcement office since the 2008 election has been stacked with former union officials who have ceased audits of international unions, even those that had long lists of unresolved problems in previous audits.

Privilege at “the Laborers”

At LIUNA, pay for a tight network of top union officials has risen faster than for the rank and file, even as membership has declined, according to a computer analysis of federal disclosure documents. Eight of the Laborers executive board’s 13 members have been in their posts more than a decade.

At the Laborers, a combination of political influence and brazenness is on full display. On top of the $1 million the international union spends yearly on K Street lobbyists and $1 million in campaign contributions and political ads in the last election, its legislative affairs office includes a well-connected lobbyist, Leo J. Gannon.

Gannon is a former Rhode Island state legislator who made $217,000 in 2012 as head of legislative affairs for the union-affiliated Laborers-Employers Cooperation and Education Trust. In 2003, he pled guilty to making false statements to federal investigators in connection with a $750,000 Labor Department grant involving partnerships for matching unemployed workers with jobs; prosecutors alleged no such partnerships were executed. After politicians urged leniency, Gannon got off with probation and a fine. Yet he continues to hold a position with the union despite the fact that the law bans people convicted of certain crimes, including lying to or stealing from the federal government, from holding positions of power within unions and related organizations. It is a criminal offense for the prohibited individual to take such a job or for a union to hire him. Neither Gannon nor the Laborers responded to requests for comment.

Gannon is not the first Laborers hire to have had a run-in with the government. Gordon Green, director of the Laborers’ Service Contract Education and Training Trust Fund, was sentenced to prison after being charged in 2007 with bribery relating to an employee benefit fund and with the theft of employee benefit plan property.

Green sold union information to a contractor managing government buildings’ maintenance for a suitcase containing $150,000 in cash; the government contractor alerted authorities.

“Gordon Green’s criminal actions demonstrate both an astonishing breach of the trust placed in him by the Laborers’ International Union of North America and an intolerable example of corruption and greed,” prosecutors said.

Green received six months in prison after getting credit for “substantial assistance in the investigation or prosecution of other persons who have committed criminal offenses.”

Little scrutiny

Critics say that the Laborers and other unions are less likely to face scrutiny because President Obama has stacked the Office of Labor-Management Standards with former union officials. (OLMS is the federal office charged with rooting out misconduct among unions.) Notably, OLMS has stopped auditing the international unions that control the majority of union money and slashed the number of local union audits in half.

In 2008, the OLMS audited 791 unions, but in 2011, under new director John Lund, it looked at only 461. The change is largely because officials no longer conduct the most complex audits, those of international headquarters.

“They control something like 90 percent of the funds. They’ve got their hands in everything, so they’re the ones you should be looking at the most,” said Don Loos, Lund’s predecessor, who served in the George W. Bush administration. Loos, who is now an advisor at the National Right to Work Committee, has complained that the OLMS is toothless, with no ability under the law to levy fines or other sanctions. “They say ‘look, you’re doing this wrong, but we can’t fine you.’ Which is unlike any business reporting. The problem is there’s no penalty for being dishonest,” he said.

Critics say the organization has been lenient in requiring unions to report on their financials, including overlooking teachers’ unions that represent private charter-school teachers. Unions solely representing local government employees are exempt from most disclosure.

“It is time that the U.S. Department of Labor requires all state teacher unions and government employee unions that have failed for decades to comply with the [Labor-Management Reporting and Disclosure Act] be forced to comply with the Act or be criminally prosecuted for willful failure to file these reports,” Concerned Educators Against Forced Unionism wrote to the Labor Department this year.

All in the family

If connections and privilege afforded by birth are responsible for the positions of some of the “one percent” of Wall Street that unions have decried, they are at least as common in their own leadership posts.

For the Laborers Local 1015 in Canton, Ohio, 14 staffers and officers oversee $1.7 million in assets for 685 members, but five of them, including the treasurer, auditor, and business manager, belong to the Mayle clan.

At Kentucky’s Laborers 1445, five of 17 officials are named Oney. They are business manager Johnny W., who makes $80,000; Johnny N., who makes $61,000; auditor Roger, treasurer Mitchell, and secretary Rhonda.

“Johnny N. is the field rep, he’s my son. When it comes to hiring him, I make my recommendations and the executive board does what they want to do,” the business manager said. His brother Roger is auditor, and Mitchell, until two years ago, sat on the executive board as treasurer. Rhonda, who “sleeps with my brother,” Johnny W. joked, answers phones.

These cozy relationships are even worse among elites in the union’s monumental national headquarters—and they have actively separated unions from their most basic historical missions, one of the Laborers’ own officials said. “It’s becoming impossible to find anyone at the Laborers’ International Union who has ever actually worked the trade beyond a summer or two while they attended the Harvard Labor College,” said a longtime national official of the Laborers’ International Union of North America who spoke on the condition of anonymity because he feared retaliation.

“How can you represent working men and women when you’ve never had to really work a day in your life as a construction laborer? These sons and grandsons of laborers have never suffered through a long layoff, or seared in the heat of the day, or frozen in the cold of a winter outside on a job site.”

At the Laborers’ international headquarters, the double-speak and misplaced financial priorities are perhaps nowhere more evident than in the fact that even as the Laborers’ payroll has swelled, it has failed to pay taxes on its flagship office space for the last eight years, according to a half-million-dollar lien filed by the District of Columbia this year—the third such lien filed against it since the 1990s. “Prevent seizure action by sending full payment today!” the letter says.

The union’s headquarters previously had federal tax liens issued against it in 1991 and 1992 for $70,000 and in 1993 for $25,000, records show. They were settled in 1995 and 1996.

Of course, even as it neglected its own obligations, the union was quick to criticize others for not paying taxes, telling members last year that Republican presidential nominee Mitt Romney “opposes legislation that would ensure corporations pay their fair share of taxes.”

Tangled web

Armand E. Sabitoni is treasurer of the Laborers national union, making $436,000 a year, with at least two relatives on staff. Five members of the Sabitoni family are officers at Laborers locals. A tangled web of pension and other funds weaves the family’s tentacles through every branch of the union and provides ample opportunity to boost salaries far beyond what is evident in the payrolls of the union’s main offices.

Michael A. Sabitoni Jr., for example, is president of the Rhode Island Building and Construction Trades Council and is also chairman of the Rhode Island Laborers’ Pension Fund, the Rhode Island Laborers’ Health and Welfare Fund, and the Rhode Island Laborers’ Annuity Fund.

He is also trustee of the New England Laborers’ Training Trust Fund, the New England Laborers’ Labor-Management Cooperation Trust and the New England Laborers’ Health and Safety Fund.

“There’s a whole host of trusts,” said Nathan Mehrens, a top Department of Labor attorney under President George W. Bush. “Interconnected entities that are technically distinct from the union itself, but provide ample compensation.” So even if no one salary may be egregiously high, all those posts add up.

At the 57,000-member International Brotherhood of Boilermakers national headquarters, four members of the Creeden family received a combined $836,000 a year, with Secretary-Treasurer William making $300,000 and directors Kyle and Ryan making more than $143,000 each.

At the 250-member United Industrial & Service Employees Union, four of the seven officials in 2011, including the president, vice president, and trustee, were named Romero. At the International Union of Painters and Allied Trades Local 1970, the president, treasurer and secretary were all named Lipscomb.

About 1 in 5 unions had multiple officials with the same last name in 2011, according to an analysis of federal union disclosures. Unions had a median roster of eight officials, making it easy for one family to have significant control.

While the Laborers represent a high-profile case study, self-dealing is commonplace at the full spectrum of unions. Teamsters 710 of Mokena, Ill., pays its treasurer, Patrick W. Flynn, $435,000 a year, but apparently that wasn’t enough; both his son and daughter took jobs at the union. President Michael Sweeney brought on his sister Maureen at a $60,000 salary, while trustee James Dawes, who received a $215,000 bonus, brought on his daughter for $45,000, tax records show.

The average union member has no idea how much the leaders make, said Stanley Oubre, a retired Boilermaker in Louisiana. Few union members can relate to people making such huge salaries.

“It sounds like we’re getting robbed,” Oubre said of the money earned by International Brotherhood of Boilermakers President Newton B. Jones. “I was a boilermaker for 35 years, and oh my goodness, what we made was pennies” compared with that.

Job security

When officers aren’t already related, they often become a sort of family, re-elected time after time, or shuffling top positions among themselves each election. Three-quarters of unions that had elections in 2010 re-elected most of their officers, an analysis of DOL data shows. Ten percent of unions re-elected 9 of 10 officers.

“When an outgoing boss leaves, they make an interim appointment of their own successors. After that, they have a re-election rate that would make an incumbent congressman blush. Nobody is ever stupid enough to run against them,” the Laborers official said. A recent American Postal Workers Union national president, for example, was elected seven times to three-year terms.

Across the U.S., 27 percent of officers in 2003 were still in office in 2011. In 1 in 5 unions, at least half of elected officers remained the same over the course of those eight years. But imperial tenure is more common, and has a greater impact, at the national headquarters that control the bulk of union finances.

Two-thirds of national headquarters retained at least half of their officers in the most recent election, a Washington Times analysis shows. For example, the United Union of Roofers, Waterproofers and Allied Workers returned 11 of 12 officers in 2008, and the American Federation of Teachers re-elected 35 of its 45 officers in 2010.

At the Laborers’ International Union of North America national headquarters, 11 of 16 current officers have been running the union since at least 2003. At the United Brotherhood of Carpenters, it’s six of eight, with only two district vice presidents departing. At the Bakery, Confectionery, Tobacco Workers and Grain Millers Union, only six board members and one vice president among the union’s 24 officials left over the eight years.

Union posts increasingly have become long-term gigs over the years, with the average union re-electing 56 percent of its officers in elections held in 2010, up from 49 percent in elections in 2001. And the longer they stay on the job, the more they make.

High pay

Over the past decade, top union officials’ compensation has risen even though membership has fallen, and the unions have added significantly more employees to their offices. Joseph V. Senese was paid a salary of $698,406 last year for his role in running the National Production Workers Union, based in the golf course-lined Chicago suburbs, which reported 600 members in 2006 and none in 2007, according to union disclosures.

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Tax records confirm a pattern of high salaries, with base compensation of $583,000 in 2008, and show that Senese, in turn, issued hundreds of thousands of dollars in cash loans back to the union. For decades, the union spent “large sums of money” to provide Senese with around-the-clock security after his brother and father, also union honchos, survived assassination attempts and federal authorities barred his father from union activity for life, alleging mob ties, according to a 1993 Chicago Tribune article. “We don’t talk to newspaper reporters. Don’t call back here,” a staffer at the union’s full-time office said this year before hanging up the phone.

John M. Lazzaretto, business manager of LIUNA Local 152 in Highland Park, Ill., was paid $419,543 in 2011. The 1,000-member union local counted Lazzaretto’s son, Michael, as an organizer, and his cousin, Vallie, as secretary, and a Brennan Lazzaretto as janitor.

“A big portion of that final salary was a retirement package. My salary probably averaged about $250,000, which for a business manager, I was probably top three or four. There’s probably three or four people in the Chicago area making more than $300,000. Of course, times have changed; people get rid of the heavy earners,” Lazzaretto said.

“I was the only trustee left after the feds came in, when the government put a consent decree over the whole international union alleging there was ties to organized crime,” he said. “I came out with a clean bill of health.”

Despite unions’ focus on income equality, the inequality between the highest-paid and lowest-paid union employees has grown over time, and the rank-and-file workers toiling in factories and construction sites that the union officers represent especially pale in comparison with the top officials who represent them. In 2000, the bottom quarter of full-time employees at union offices, such as administrative assistants at headquarters, had salaries of less than $33,900, while the top quarter had salaries of more than $65,400. In 2012, the bottom quarter salary was $43,000 compared with $94,800 for the top quarter.

Unions argue that even huge salaries for officers, such as the $1 million that Gerald McEntee made last year as president of the American Federation of State, County and Municipal Employees (AFSCME), are far below the pay of business CEOs. But critics point out that as representatives of the working man—and increasingly, the working man whose paycheck comes from the taxpayer—labor leaders should be held to a different standard.

Loos, the former Department of Labor official, said labor leaders with compensation that is worlds apart from those they represent make it difficult for them to empathize with life in the trenches. “Look at SEIU [the Service Employees International Union]. That’s a union of janitors, and you’ve got people at the top making $500,000 a year, plus a lot of them have their hands in more than one till—they’re making additional money from the pension funds.

“A lot of these groups were a part of the Occupy Wall Street movement, and they really pushed the notion of ‘fat cats.’ But,” he said, “union bosses have always been fat cats.”

Luke Rosiak is a journalist specializing in data analysis who has written for the Washington Post and the Center for Responsive Politics. Some reporting in this article originally appeared in the Washington Times. This article originally appeared in Labor Watch and is republished here with permission.