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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.

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

Governor Brown Fighting Obama Administration to Defend Pension Reform

Remember AB 340, the pension reform successfully pushed by Democratic Governor Brown, that even Governor Brown acknowledges is only a first step towards making public employee pensions financially sustainable?

Well even AB 340 goes too far according to Obama’s new Secretary of Labor, Thomas Perez. As Dan Borenstein of the Contra Costa Times reports on August 16th, “unless California lawmakers exempt transit workers from the pension changes, the feds could cut off up to $4.3 billion of transportation funding, according to an estimate by the California Transit Association. That includes $174 million for BART, $225 million for Santa Clara Valley Transportation Authority and $12 million for AC Transit.”

The immediate negative economic impact of this is huge: Bill McMorris, reporting for the Washington Free Beacon on August 16th, writes “The federal government has withheld more than $500 million in funding to local California transportation agencies since January and could withhold $1.6 billion for the year as the result of a complaint filed by transit union members, losses that could cost the state tens of thousands of jobs.”

As we reported in our editorial of July 9th, BART workers aren’t exactly being exploited: Their average total cost of employment – pay plus employer paid benefits – averages $116,306 per year. They get 13 paid holidays and veteran workers get six weeks vacation per year. Their sick time, holidays and vacation accrue without limit and can be cashed out when they retire. They can even apply the unused time to stretch their years of service, increasing their pensions. And BART employees personally contribute nothing to their pensions.

Here’s a comment that appeared below the July 9th editorial that exemplifies how corrupt much of BART’s unionized workplace culture has become:

“I have a friend who just started working for BART as a train-car maintenance person. He was telling me that everyone in his shop gets 1 paid sick day per month, so they have a scam going where they use this sick day to get thousands of dollars in overtime each year. Once a month, they decide which day to start and everyone knows what is going to happen in advance. As an example, there might be 5 mechanics scheduled for the morning shift, so they have one person call in sick. This forces one of the people who just finished the previous night shift to stay on another 8 hour shift and make double time pay. Then another worker who is scheduled for the evening shift calls in sick and one of the 5 day workers stays on into the evening and gets double time. Then one of the night shift guys calls in sick and whoever hasn’t worked double time yet stays on… this goes on through the week and everyone uses their sick day (paid sick day) and these guys end up making 30 to 40% over their base pay in overtime!”

Similar games to turn sick time into overtime occur throughout California’s unionized public sector, but that’s another story.

BART workers, few of whom are paying off six-figure loans for higher education, are currently making twice what the average worker in California earns in pay and benefits, and they’re getting paid time off benefits that exceed virtually anything offered, anywhere in the private sector. The pension reforms introduced by Gov. Brown via AB 340 are tepid, timid steps forward that can barely be seen to even inconvenience current workers. Yet AB 340 is what is being aggressively opposed by the federal government.

The power of public sector unions pits Democrats against each other, because the impact of public sector unions is bankrupting our state and local government agencies, including BART. Whenever there is a surplus, the unions take everything off the table. No new investment. No new services. No new infrastructure. Just more pay and benefits for government workers. Democrats are waking up, and a schism is developing between the ideologues and the pragmatists.

What Republicans and Democrats might recognize together is the fact that unions – especially public sector unions – are monopolies, just like corporations and banks. They are anti-competitive, exclusionary special interests whose agenda is often not aligned with the public interest. And by breaking up monopolies – all of them – and reintroducing competition, you lower the cost of living. This should be the policy priorities of a bipartisan coalition, because lowering the cost of living benefits everyone, whereas preserving excessive and financially unsustainable pay and benefit packages for unionized public sector workers hurts far more people than it helps.

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UnionWatch is edited by Ed Ring, who can be reached at editor@unionwatch.org.

Maine Legislator Speaks Out Against Public Sector Union Power

For years, an unhealthy alliance between Democratic politicians and labor unions has taken its toll on our state’s budget and economy. When Republicans held the majority in the Legislature for the first time in decades, we enacted some important reforms, but there is still much to do.

Unfortunately, Democrats, now back in the majority, proved in this year’s legislative session that they’re more determined than ever to maintain the status quo that has weakened the integrity of our government and the strength of our economy for future generations.

Former Assistant House Minority Leader Terry Hayes, D-Buckfield, gave us a rare insight when she referred to unions as a “stinky infestation” of the Maine Democratic Party that require “absolute obedience” from the liberal politicians they get elected.

In Maine, government employee unions spent more than $430,000 to get Democrats elected to the Legislature in 2012. Private unions spent almost another $200,000.

The ramifications of this unhealthy alliance between Democrats and their union friends can be seen in public policy time and again.

Accounting for inflation, state government has grown almost 30 percent in the past 20 years, and every time a spending reduction is proposed, state employee labor unions are the loudest opponents.

Democrats staunchly opposed a reform that cut the state pension’s $4.1 billion long-term deficit almost in half, lifting a major burden from our children’s shoulders.

The public unions’ “first in, last out” policy cripples the efficiency and customer service of government offices, even resulting in the layoff of a Maine Teacher of the Year.

Almost every education reform proposal goes down in flames because of union influence. The public unions even rejected Gov. LePage’s offer to match funds for advanced teacher training, opting to keep the money for political campaigns instead of our children’s education.

Democrats and unions fought efforts to reduce fraud in our workers’ compensation and unemployment insurance systems — efforts that would preserve more benefits for those using them honestly and reduce out-of-pocket costs for hardworking Mainers.

They even opposed a measure that would simply make it easier for young people to get training as electricians. Unions didn’t want the extra competition, so they told Democrats to deny this opportunity for Maine’s young people.

I see it every day in the Legislature’s labor and commerce committee, where union bosses fill the room and give my Democratic colleagues their marching orders.

However, I wouldn’t voice a complaint about a problem without offering a solution, and fortunately there is a clear one.

Right-to-work legislation, also known as “workplace freedom,” would provide employees with the choice of whether to pay union dues and in turn would relieve unions from having to represent those who don’t pay. This is common sense; the choice should be up to the individual worker. When the unions don’t have a government-granted monopoly in the workplace, we see fewer destructive work rules like “first in, last out” that weaken state government’s effectiveness and scare off private employers.

Even Michigan enacted right-to-work because unions had bled its economy dry and it was losing jobs to its newly right-to-work neighbor, Indiana. Detroit was recently forced into bankruptcy by an unsustainable system of public unions.

According to the Bureau of Labor Statistics, over the past 10 years, private-sector job growth increased 6.4 percent in states with workplace freedom and only 0.4 percent in forced unionism states. Maine’s job growth was minus 1.4 percent during the same period.

Wages in right-to-work states are 4 percent higher than those of their unionized counterparts when adjusted for cost of living, and their wage growth is three times greater over the past decade.

A national survey of business site location consultants found that half of companies considering relocation or expansion automatically rule out states without workplace freedom. Our own governor experienced this recently when he met with a major company that wanted to know only two things: the cost of energy and whether Maine is a right-to-work state.

Workplace freedom is that important when it comes to economic growth.

It’s time that government began working for us. Maine needs a major economic shake-up if we are to emerge from decades of economic stagnation induced by extreme liberal policies. The unhealthy alliance between big government and big labor unions must come to an end if we want better government, lower taxes, more private-sector jobs and less debt for our children.

Rep. Amy Volk, R-Scarborough, is serving her second term in the Maine House of Representatives. She serves on the Labor, Commerce, Research & Economic Development Committee. Her commentary originally appeared in the Portland Press-Herald and is published here with permission.

Exponential Technological Advances and the Role of Unions

“Robots will steal your job, but that’s ok.”
Federico Pistono

Anyone who has recently driven through Mountain View, in the heart of Silicon Valley, is likely to have had the memorable experience of sharing the road with a car that has nobody inside. Google’s “autonomous cars” are being tested there, and apparently they drive better than people do – they are smart, safe, sober, and tireless. They have the potential to eliminate 3.6 million full-time jobs in the United States.

Anyone purchasing materials at a Home Depot store, or their local grocery chain store, without interacting with a human cashier, has seen the future of retail employment. According to the Bureau of Labor Statistics, there are 3.4 million people working as retail cashiers in the United States. Most of those jobs are also at risk.

What about agriculture? New robots are coming that can do anything a farm worker can do. As noted in this report, “Robot harvests on the horizon; farm owners predict machines will revolutionize costs,” a machine is now being tested that can thin lettuce shoots, a job that requires extraordinary precision and finesse. If machines can thin lettuce, they can do anything on the farm.

Manufacturing? Old news. Robots are on track to completely take over manufacturing. What about journalism? Can robots displace reporters? Read your local newspaper’s high school sports reports – but don’t be too sure a human composed the story, because many newspaper chains have already automated routine reporting. They crowd-source the data gathering with mobile phone applications, and let software applications produce more consistent, more comprehensive written coverage. By the way, how much would you like to bet on whether or not a robot can cook a better Big Mac?

Enough already. If you don’t think technology and automation in this era represents a fundamentally new phenomenon compared to the pace and impact of technological advances in previous centuries, I’ve got a bridge to sell you. Jobs are being relentlessly eliminated via automation. This is throwing highly skilled workers alongside semi-skilled and unskilled workers into a labor market where most of them will not find a new job that comes anywhere close to paying them what they used to earn in the job they lost.

And this is why public sector unions should be illegal.

The mega-trends of automation, globalization, plummeting birthrates and an aging population are not immoral or happening by design, they are simply parts of an inevitable phase of human evolution at which we find ourselves today. The stratification of wealth that attends these trends is the effect of them, not the cause.

How governments, America’s in particular, midwife today’s epochal transformations of human civilization must not be distorted by a government class who exempt themselves from the challenges facing everybody else. If government workers, through their unions, are permitted to make a separate bargain with the shrinking pool of wealthy global elites who benefit from automation and globalization, it will be mutually corrupting. Whatever political economy must emerge to enfranchise those billions who will otherwise become dispossessed by automation and globalization, it is not feudalism, nor fascism. The growing alliance between government employee unions and the ultra-rich is a recipe for both. We’ve learned from history the consequences of such choices.

Despite preaching the opposite, public sector unions, by definition, undermine the empathy that government workers feel for private sector workers. Because empathy between the government and the governed can only exist if every taxpayer funded entitlement, whether it is retirement security, or health security, or protection of civil liberties, is implemented and earned according to formulas and incentives that apply to every citizen equally – regardless of who they work for. To cite just one pertinent example, currently in the United States there are more total liabilities in the public employee pension funds – representing 17% of the workforce – then there is in the entire Social Security fund, representing everyone else. This is not a formula for empathy. This is not a valid social contract. And it is the result of collusion between powerful financial interests and public sector unions.

The technological advances that eliminate jobs at the same time as they empower the government and the super-rich raise profound questions:  How will government evolve to enable or encourage improved economic security for all citizens? How will government evolve to craft and enforce environmental edicts? How will government evolve to combat crime and terrorism? What policies are adopted and how citizens accept them will depend in great part on whether or not government employees are making the same sacrifices and following the same rules.

To paraphrase Federico Pistono, robots will not only steal your job, they will watch you. The capacity of government to employ robots for police and military applications is without practical limits. Do Americans want a unionized government that protects itself, or a government staffed by people who are personally experiencing the same conditions as the rest of us? Which government might be more likely to equitably navigate the seismic, perilous, wondrous currents of this age?

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UnionWatch is edited by Ed Ring, who can be reached at editor@unionwatch.org.

 

BART Strike Highlights More Than Just Compensation Issues

The four day BART strike that ended on July 5th provided ample evidence of how public sector union power can inflate wages – and expectations – far beyond what the rest of us may consider normal or fair. In a July 1st editorial entitled “Striking BART workers out of touch with financial reality,” the Contra Costa Times wrote:

“They’re already the top-paid transit system employees in the region and among the best in the nation. They also have free pensions, health care coverage for their entire family for just $92 a month and the same sweet medical insurance deal when they retire after just five years on the job. They work only 37½ hours a week. They can call in sick during the workweek and then volunteer for overtime shifts on their days off. The rules exacerbate out-of-control overtime that added in 2012 an average 19 percent to base pay for station agents and 33 percent for train operators.”

According to the San Jose Mercury, who has published BART payroll and benefits per employee as part of their Public Employees Salary Database, the average total compensation – what they refer to as TCOE or “total cost of employment” for a BART worker in 2011 was $116,309. This is for a 37.5 hour week before overtime – but there’s more:

From the San Jose Mercury’s editorial of June 13th, BART pay plan is the most outrageous yet,” in addition to working 37.5 hour weeks, BART employees “earn three weeks’ vacation each year, gradually increasing to six weeks after 19 years on the job. They also have 13 holidays. Naturally they don’t use it all, so they’re allowed to save unused vacation and holidays without limits. Many can even add some unused sick leave. In San Jose, top management and some unions can accrue time like this for a huge payoff when they retire. BART’s system is even more outrageous. When managers leave, they can use that accrued time to actually stay on the payroll — to continue receiving full salary, incentive pay and health benefits, and to accrue work credit that boosts their subsequent pensions. They even — get this — receive holiday pay and accrue more vacation time that they can use to further extend their time on the payroll.”

Journalists are getting much better at recognizing that total compensation – total cost of employment including the cost of employer paid benefits – is the only valid way to evaluate how much someone earns. Equally significant however is the value of paid time off. If a person works 37.5 hours a week, they are only working 93% as much as someone who works a 40 hour week. To get a valid comparison, inflate the pay of the person who works 37.5 hours per week by (40/37.5)-1, or 6.7%. If someone is getting six weeks paid vacation per year, and the average worker only gets two weeks off with pay, then consider a 50 week year vs. a 46 week year, and inflate the pay of the person with six weeks vacation by (50/46)-1, or 8.7%. It adds up. Ask anyone in a salaried job that requires 50 hour weeks, or a self-employed person who isn’t paid on days they don’t work. And how many of them ride BART?

One may argue whether or not unions have a legitimate role in private industry – but BART is a public institution, holding monopoly power over mass transit options in much of the San Francisco Bay Area. There are few journalists or commentators left, even in the Bay Area, who won’t consider that excessive union power is the reason for excessive compensation packages for BART employees.

But compensation is only one aspect of how unions in the public sector damage the solvency and effectiveness of public institutions.

In a July 5th commentary on Townhall entitled “Labor Unions Against the Public Interest,” author Chris Edwards examines the additional challenges mass-transit management encounter thanks to a unionized workforce. Referring to the Washington DC Metro, he writes:

“‘If I had my druthers,’ [The DC Metro’s System Manager] said, he would hire station managers based on ‘the ability to operate in a customer-friendly way.’ But, Sarles said, Metro’s collective bargaining agreement requires him to promote bus drivers to train operators and station managers. In fact, his spokesman said, mediocre bus drivers may get promoted more quickly because ‘we need to get you from behind the wheel.’ And if someone does a great job as station manager, ‘I can’t recognize that financially,’ he said. So here’s the “manager” of a government agency who doesn’t even have the authority to manage his own workforce. It is ironic that Metro and BART are called “public services,” but managers of private businesses are better able to actually serve the public.”

This is just one example of work rules that greatly impede the ability of unionized public agencies to operate efficiently. These work rules undermine the authority of public officials – most of whom are elected by these same unions they supposedly manage – to promote based on merit, to demote or fire for incompetence or negligence, to streamline operations, to change job descriptions, or otherwise manage their agencies. And this affects every unionized transit agency, public utility, municipal bureaucracy, public safety organization, school district or public works department in the United States.

The BART strike cast a bright light on excessive compensation for unionized public workers. But the issues run far deeper than just money. If government workers were not exempt from the challenges of globalization because of their unions, they would use their influence within government and as private citizens to help break up monopolies and enable competition. This in-turn would lower the overall cost-of-living and benefit everyone. Instead, public sector unions are monopolies themselves, first among equals, in an increasingly monopolized society.

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UnionWatch is edited by Ed Ring, who can be reached at editor@unionwatch.org

How Public Sector Unions Skew America’s Public Safety and National Security Agenda

It would be redundant to summarize recent revelations concerning just how big America’s national security state has become. Two reports, both written in the last two days, do a really good job: “The Making of a Global Security State,” by Tom Engelhardt, published by The Nation Institute, and “5 Alarming Things We Should Have Already Known About the NSA, Surveillance, and Privacy Before Ed Snowden,” by Brian Doherty, published by the Reason Foundation.

It is encouraging that both of these articles address the same topic and summon the same moral concerns, despite being published by top-tier think tanks – the Reason Foundation and the Nation Institute – that occupy opposite positions on the right/left continuum. What is discouraging is neither of these articles explore the connection between unionized government and the alarming police state trends they describe so thoroughly.

The centrality of patriotism and law-and-order priorities blinds many on the right to the role of unions in skewing America’s public safety and national security agenda. Reverence for the labor movement blinds those on the left from seeing government unions as complicit in the erosion of civil liberties. These sentiments work against what ought to be a growing bi-partisan consensus: public sector unions do not operate in the economic or political best interests of the general public.

It isn’t hard to find examples from history of how elites co-opted the personnel of government in order to secure a commitment to preserving their power and privilege. From the tenuous relationship between the Roman nobility and their legions of centurions, to the party members of the cold war era communist nations and their security services – authoritarian regimes have always relied on their versions of the Nomenklatura. And the defining characteristic of the Nomenklatura, in all of its historical iterations, was privilege. They were economically exempted from the hardships that faced ordinary citizens.

The power of public employee unions in government is the primary reason that government workers now make approximately twice as much in total compensation as private sector workers. This headline from an a USA Today article explains how federal compensation has outraced the private sector “Federal workers earning double their private counterparts.” California Public Policy Center studies provide recent and ample evidence of the same phenomenon at the state and local level (ref. “Calculating Public Employee Total Compensation,” “California’s Public Safety Compensation Trends, 2000-2010,” “Self-Employed Workers vs. Government Workers – A Financial Comparison,” as well as compensation analyses for the cities of San Jose, Irvine, Costa Mesa, and Anaheim).

Nowhere is the disparity between the fortunes of unionized public sector workers and the private citizens they serve more glaring than in their respective formulas to earn retirement security. Social security pays, on average, about $15,000 per year, starting at age 68. California’s public servants, on the other hand, at the end of a 30 year career can expect to collect on average a pension in excess of $60,000, easily attainable by age 60 or sooner. Tell a self-employed person who must contribute 12.5% of their gross pay to Social Security why they should get 25% as much as a public servant, ten years later in life?

The failure of politicians – abetted by unions – to give all Americans the same deal as government workers alienates Americans from their government and impugns the motives of government policymakers. Frighteningly, it also alienates government workers from Americans.

As we enter an era of ubiquitous surveillance, for good or ill, it is vital that civil libertarians on both sides of the political spectrum recognize that government unions have a vested interest in expanding the size and the powers of government. The inordinate power of public sector unions in California is beyond debate among anyone who closely participates in the political process. Less obvious but equally real is the closely aligned interests of big government unions with the agenda of banks who profit by financing deficits and investing pension assets, large corporations who benefit from over-regulation because it kills emerging competitors, and the high-tech industry that invents and sells tools of surveillance and cyber-war.

A major step towards ensuring that America’s public safety and national security agenda is not divorced from the general interests of private American citizens would be a bipartisan call for all taxpayer funded, government administered retirement benefits to be earned by every citizen – public or private – according to the same set of incentives and formulas. The vehemence with which public sector unions would fight this necessary reform might finally provide sufficient evidence to liberals of how selective their concern is for “working families.” This one dramatic policy shift would go far towards realigning the interests of government workers with that of the citizens they serve.

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UnionWatch is edited by Ed Ring, who can be reached at editor@unionwatch.org

Related Editorials

Why Public Sector Unions are “Special” Special Interests

The Special Privileges And Exemptions of Public Sector Unions

Should Police and Firefighters be Exempted from Union Reforms?

Understanding the Financial Disclosure Requirements of Public Sector Unions

The Preexisting Political Advantage of Government Workers

California’s Government Unions Fight Reformers

The Ideology of Public Sector Unions vs. Private Sector Unions

Wall Street & Public Sector Unions

Why Public Sector Unions are “Special” Special Interests

California’s November 2012 statewide ballot included Prop. 32, the “Stop Special Interest Money Now” initiative. Among the provisions included in this campaign finance reform measure was the requirement that public sector unions obtain permission from each member prior to using a portion of their dues to support political campaigns.

It’s hard to precisely determine just how much public sector unions spent to immolate Prop. 32, since their campaign material often combined “Yes on 30” (new taxes), with “No on 32,” meaning resources were being directed at both initiative campaigns. Also, hard dollar campaign spending was only part of the effort; an army of union operatives were activated to defeat Prop. 32 – from public school teachers influencing students and parents to precinct walkers to labor friendly slate mailings. Overall, the unions probably spent about $100 million to defeat Prop. 32.

And their message was consistent: Prop. 32 targets “working families,” it attempts to “silence our voices,” it is “deceptive,” it provides “special exemptions” to the real special interests, “corporations and billionaires.”

Let’s review the veracity of these claims one at a time:

–  The average unionized government worker in California earns total compensation that averages well over $100,000 per year, about twice what the average private sector taxpayer earns per year. These are not typical “working families.”

–  Prop. 32 merely attempted to require public sector unions to do what every other political participant must do; use money that donors contribute voluntarily. Yet the public sector unions alleged that merely requiring political contributions to be made on an opt-in basis would “silence our voices.”

–  Prop. 32’s opponents tagged it the “special exemptions act,” because they felt it was unbalanced – they claimed it targeted public sector unions but didn’t include sufficient campaign finance restrictions on billionaires and corporations. Notwithstanding the fact that Prop. 32 did pretty much everything constitutionally allowable to restrict the campaign spending of all special interests, there is a rank hypocrisy in this statement that deserves further exploration. Because public sector unions are an integral part of America’s special interest elite.

Characteristics of the Special Interest Elite:

(1)  Their political agenda differs from – and is often in conflict with – the public interest.

(2)  Their top priorities are not informed by ideology, but rather by whatever means achieves their ends.

(3)  They will work to influence whatever political party and politicians are amenable to their agenda.

(4)  They hold inordinate influence over elections and policymaking.

(5)  They have an identity of interest with other elite special interests.

If you review these five characteristics it is certainly arguable that public sector unions belong among the special interest elite. One can suggest that public sector unions are overwhelmingly democratic, and informed by leftist ideology (item 2), but to do so is confusing cause for effect. The priority of government worker unions is money and power, and the ideology of the left supports these ends.

What is often still overlooked by critics of public sector unions, and dismissed by their supporters, is item five: There is an identity of interests between public sector unions and other elite special interests. In fact, public sector unions are the critical, primary broker among elite special interests. Without them, the power and influence of America’s overbuilt financial sector and anti-competitive corporations would be diminished, not enhanced. This is counter-intuitive, but is an utterly crucial point that reformers need to impress upon idealistic, left-leaning voters.

Why Public Sector Unions Are the Most Elite of All Special Interests:

(1)  All other powerful special interests have narrowly focused agendas that pertain to their specific industries. This means their participation in politics is generally sporadic; they emerge when there is a threat or opportunity affecting their business, then they withdraw. Often their agendas are in conflict with each other, which tends to attenuate if not cancel out their power.

(2)  Public sector unions have one broad agenda – more pay and benefits for public sector workers, and more public sector workers. This agenda supersedes whatever other redeeming programs and rhetoric they may adopt. Ultimately, this agenda is corrupting, because it is utterly apolitical and intrinsically disconnected from any qualitative analysis of what programs and policies are in the public interest.

(3)  Unlike all other special interests, public sector unions are inside the government. As term-limited elected officials come and go, the ranking employees of public sector unions know that the union leadership delivers the true continuity. And if other special interests want favorable legislation, or special treatment by the bureaucracy, they know where to go first – not to the politicians, but to the unions.

(4)  There is no source of money pouring into politics at nearly the scale and consistency of public sector union dues – in California these dues total well over $1.0 billion per year. Public sector unions deploy these massive sums in order to be actively involved in every political contest, no matter how big or small.

This reality, that public sector unions operate at the heart of the corporate and financial elite, that they broker, enable and corrupt corporate and financial power, is the tragic irony that is lost on California’s electorate. Public sector unions are the foot soldiers of corporatism, because without their blessing and support, crony capitalists would not as successfully lobby for anti-competitive laws, pension bankers would not have a taxpayer-guaranteed virtually unlimited source of funds to invest, and bond underwriters would not be collecting commissions on hundreds of billions in bond issues necessitated by spending deficits. Public sector unions are also the facilitators of authoritarianism, because every new law and every new intrusion on civil liberties is accompanied by a need for more unionized government workers.

The bargain public sector unions have made with the relentlessly consolidating corporate and financial elite is completely at odds with their supposedly egalitarian, supposed ideology. Using their virtually unrestricted, awesomely potent ability to control our politicians, they have carved out for themselves the biggest special exemption of all – they have negotiated an immunity to the economic challenges facing every private sector taxpayer who must compete in the global economy.

Put that into a 30 second television commercial.

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UnionWatch is edited by Ed Ring, who can be reached at editor@unionwatch.org.

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Would ANY Public Sector Union Reform Appeal to California’s Democrats?

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The Special Privileges And Exemptions of Public Sector Unions

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The Ideology of Public Sector Unions vs. Private Sector Unions

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Reforming Public Sector Unions and Public Sector Pensions is NOT “Anti-Worker”

An incoming email responding to last week’s UnionWatch editorial “Los Angeles Police Union Attacks CPPC Study” included the following statement:

“While you profess not to dislike public employees, it is clear that you disliking public employee unions.  Interesting—so you might like a public employee or two individually, you just dislike when those individuals organize to work for better working conditions or pay.  Which goes hat in hand with your desire to make public employee pension plans seem so expensive that they are terminated.” 

This invites a response.

Our concerns about public employee unions are primarily based on the fundamental differences between unions in the public sector vs. unions in the private sector. There’s nothing wrong – in principle – when “individuals organize to work for better working conditions or pay.” But if those individuals work for the government, there are plenty of problems. We are seeing the result of this throughout California and the rest of the United States.

Public employees work for an entity that funds its operations not by selling competitively priced products to willing buyers, but by assessing taxes that must be paid under threat of imprisonment. And public employees are managed by elected officials, not business owners, elected officials whose campaigns – especially at the state and local level – are funded by public employee unions.

Unionized government workers demand wage and benefit increases from bosses they elected, paid for by government entities that don’t have to earn a profit but can simply take money from other citizens. It is difficult to imagine how a system set up this way can possibly avoid getting dangerously out of control.

As we explore in-depth in our post “The Preexisting Political Advantage of Government Workers,” even if public employees were prohibited from engaging in collective bargaining, they would still have tremendous influence over the political process. After all, it is difficult to find citizens who have a greater stake in how our state and local government is managed than government employees – they have far higher rates of voter turnout, they are far more likely to run for office, and they are far more organized. If government workers were not unionized, they would still be able to effectively lobby for better working conditions or pay.

As it is, with rare exceptions, public employee unions have taken over our state and local governments. A timely example of their power is AB 822, reported on by CalWatchDog’s Katy Grimes in her recent report “Assembly bill would stall local pension reform efforts.” Along with bills already passed to impede the state initiative process, and bills already passed to impede the municipal bankruptcy process, now we have a bill proposed in the California legislature that will impede the ability of voters to modify pension benefits. This is legislation by and for the unions.

AB 822 is offered in direct response to local pension reform initiatives passed by supermajorities in San Jose and San Diego. Which brings us back to our incoming email.

“Which goes hat in hand with your desire to make public employee pension plans seem so expensive that they are terminated.”

The biggest irony here is that if pensions aren’t reformed, i.e., if benefits aren’t reduced in equitable and sustainable ways, they will be terminated by default. In an ideal scenario, pension benefits would all be simply reduced to the formulas that applied prior to 1999 when the California state legislature passed SB 400 to retroactively increase California Highway Patrol pensions by 50%. In the cascade of copycat legislation and contract revisions that followed over the next several years, California’s state and local governments planted the seeds of financial disaster.

Pension reformers are not trying to make pensions “seem” expensive. As they are currently structured, even if 7.0% average annual rates of return for the next 30 years can be achieved, they are expensive. And for every 1.0% that rate of return drops, annual pension contributions have to increase by 10% of payroll.

The problem with trying to have an honest discussion about pensions is compounded because public sector unions aren’t the only defenders of the status-quo. The pension bankers themselves are making billions in fees every year, and they aren’t about to advocate changes. In general, the financial sector is hugely empowered precisely because of unionized government overspending – they invest the government pension money, and they issue bonds to cover government deficits. Remember this, the next time a spokesperson for the California Teacher’s Association urges you to “blame Wall Street.”

To advocate reform – an equitably reduced, financially sustainable defined benefit for public employees, and a set of reasonable regulations to curb the currently unchecked power of public sector unions – is in no way an attack on public sector employees, or retirement security, or even unions themselves.

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UnionWatch is edited by Ed Ring, who can be reached at editor@unionwatch.org.