******************** THIS BLOG HAS MOVED TO WWW.LEGALINSURRECTION.COM ********************

This blog is moving to www.legalinsurrection.com. If you have not been automatically redirected please click on the link.

NEW COMMENTS will NOT be put through and will NOT be transferred to the new website.

Tuesday, March 8, 2011

Public Sector Employee Benefit Conglomerates Protected By Collective Bargaining Agreements

The battle taking place in Wisconsin is just one of many battles in which elected officials are attempting to take back control over state and local government from public employee unions.

The stakes for the public are high. Increasingly large percentages of state and local budgets are devoted to servicing public employee salaries and benefits, particularly retirement benefits. 

Across the country governments are in tough shape, as decades of public employee collective bargaining has created an impossible situation; homeowners cannot stand higher property taxes, but businesses will move out of state if business and income taxes are raised, creating a downward spiral in which bigger government feeds off of smaller fiscal pies.

If, as Ezra Klein argues, the federal government has become an insurance conglomerate protected by a large, standing army, state and local governments have become public sector employee benefit conglomerates protected by collective bargaining agreements.

The solution will vary from location to location, but continuing the status quo is not an option anywhere. 

As Veronique de Rugy (h/t Instapundit) points out, part of the problem is past underfunding of pensions, putting numerous states in the position of running ouf of pension monies within a decade.  But that underfunding did not take place for the fun of it much less to provide greater services to the public; rather, underfunding was a function of resources being allocated to wages and already high benefits payments. 

In my home State of Rhode Island, the streets were not paved with gold as a result of underfunding.  The result is that we lack services and we lack funding.

The new -- and Democratic -- Mayor of Providence has been forced to issue termination notices to every teacher in the school district so as to escape byzantine collective bargaining provisions which otherwise would limit Providence's ability to cope with a pending fiscal disaster, in which almost one-quarter of the budget goes to funding public employee benefits:
The city’s annual required contribution — pegged at $59.4 million this year — is projected to increase dramatically over the next 28 years, rising to more than $210 million in 2039.

Those numbers, the report says, are unsustainable, sucking resources away from other needs. Last year, the city spent $109 million on retirement-related expenses. That was 18 percent of the city’s overall budget — money that could not be spent on schools, other city services or property tax relief — and more than a third of the money the city collected in property taxes.

Had the city contributed what it should have last year to the pension fund and retiree health care — $150 million — it would have equaled about one-fourth of the city’s annual budget and just over half of its yearly property-tax revenue.
In New York State, Democratic Governor Andrew Cuomo has proposed significant cuts, and a battle between Cuomo and various public sector unions is just heating up.

In Indiana, Republican Governmor Mitch Daniels dealt with the issue by removing public sector union collective bargaining by executive order at the start of his term, as part of an overall fiscal plan which has resulted in Indiana being insulated to a significant degree from the ecnomic woes facing its neighbors.

In Wisconsin, Gov. Walker picked a half-measure.  He combined the benefit reconfiguration being pursued in places like New York, with a partial revocation of collective bargaining power as to the problem area, benefits (collective bargaining would continue as to wages).

Gov. Walker's approach is not out of the mainstream with what other states are doing, the difference is that labor unions have chosen Wisconsin as their test case in part because of the traditionally liberal inclination of Wisconsin voters (November 2010 being an exception).

To focus too narrowly on current polls would be a mistake.  If Walker manages to turn the state's budget problems around and to increase private sector job growth, there is every reason to believe all will be forgiven, or at least sufficiently forgiven so as to limit electoral damage.

The former Mayor of Washington, D.C., who lost in November in part because he took on the public sector unions, made the point:

This analysis by Spencer Abraham in The Weekly Standard points to Michigan in the 1990s as an example of how short-term negative polling can be overcome by economic success:
What the Michigan experience proves and what will be demonstrated again in Wisconsin is that in the short run, fighting the kind of fight Scott Walker is waging will not produce high levels of popular support for the proponents of change. For now, the headlines and mainstream media attention will make the “victims” of change appear sympathetic figures. Moreover, the allegations being made about the impact of the new policies will sound frightening to voters. Everyone fears the unknown, and scaring voters is something at which organized labor and its allies have proven themselves adept.

But, if Walker and company stick to their guns and make the changes needed to put their state on the right path, they will find their actions increasingly popular as Wisconsin gets back on track. When voters realize that the “sky didn’t fall” and that their schools and public services do not suffer any diminution in quality, their concern will turn to respect for politicians who stood their ground and made the tough decisions, as opposed to those who ran away from their duties. As Wisconsin’s economy rebounds and businesses from high-tax Illinois relocate to low-tax Wisconsin, the wisdom of Walker’s approach will become increasingly clear. Ultimately, Walker and those who stand with him will enjoy the same popular success as [former Michigan Gov. John] Engler and his Michigan cohorts. And Wisconsin will be the ultimate winner as its economy and future become strong and dynamic.
At this point, Walker has no real choice but to continue on the path of taking back control of state government, both in the current fiscal year and moving forward through reform of the collective bargaining process. 

Losing economically is not a winning proposition.

Follow me on Twitter, Facebook, and YouTube
Visit the Legal Insurrection Shop on CafePress!
Bookmark and Share


  1. Wisconsin was a disaster for the Unions, an epic failure. It was quite fun to watch as these libs displayed their true colors for the nation.

    This entire fight is going far different than 1994, when Republicans won the house. They made some bold and brave moves, and then the national media took over and not only the Republicans, but everyone who voted for them and for some fiscal sanity was savaged nightly. The Republicans themselves appeared to evaporate under the assult, and many began running to microphones to try to prove that they were not evil "Grinches".

    There was no Fox News at this time and there was no 'alternative media' beyond Rush Limbaugh. Thank God for him at this time, without his presence, conservatives would've had absolutely no national voice at all.

    This time things are far different. While the media is yet again trashing conservatives in their efforts to reign in the federal leviathan, people now see these efforts for what they are. People also understand and know that the budget *must* be controlled. Unlike in the 90s, people now want control back over a runaway government.

  2. Well, unions were designed to protect their members through collective bargaining. I am all for fiscal restraint but if too much was given away at the bargaining table, then one must return to the bargaining table to restore one's fiscal house.

    What the Wisconsin governor is doing is union busting without calling it that. If his proposal (more likely when) becomes law, then only salary can be negotiated. So if it is perceived that too much in salary increases where given in bargaining sessions, then off to the legislature to offset the impact of the wage increase.

    Makes bargaining pointless. So if one wants to bust the public employee unions, be honest and state that is the case instead of pretending the whole charade is just for fiscal restraint.

    Link to an op-ed piece I wrote in the local Penn State University newspaper on the subject matter: http://www.centredaily.com/2011/03/08/2567291/negotiate-with-unions-rather-than.html

  3. Walker "half-measured" for two reasons:

    1) The changes had to be prescribed in law because the current law requires CB. IOW, he could not safely EO the change; there would be a lawsuit.

    2) Time matters. Changing the law in a timely fashion allows other public bargaining units to implement benefits-changes to prevent calamity when Walker's actual 2-year budget slices State spending by $1Bn--the preponderance of that going to subordinate units of government.