With Unions, Follow the Money

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WASHINGTON--Missing in action, walking off the job. That's the new style for Democratic state legislators, first in Wisconsin, then in Indiana. They have fled to Illinois, rather than provide the quorum necessary for votes on legislation sponsored by Republican majorities to curtail public-employee benefits and union activity.

In Wisconsin, typically Democratic in recent years, Republicans captured the legislature and the governorship last November. Democrats, now the minority, seek to frustrate the budget-balancing proposals of Governor Scott Walker by immobilizing the legislature, a desperation tactic.

States are facing substantial budget deficits. The recession has caused lower tax revenues and higher payments for Medicaid and unemployment insurance.

Meanwhile, their public sector pension obligations are rising. No one knows the extent of public sector pension underfunding, because it depends on numbers of state workers and their salaries at retirement, but some analysts place the total underfunding at $2 trillion to $3 trillion.

Illinois plans to sell $3.7 billion of bonds this week to pay public employee pensions.

American Enterprise Institute resident scholar and pension expert Andrew Biggs told me, "While the generosity of government pay varies from state to state, on average, the total combination of public sector wages, benefits and job security outweighs pay for similar private sector workers."

In other words, public employees are, overall, compensated more generously than private sector workers. Republican governors and legislatures see reducing state health and pension benefits (by raising employee contributions) as a step towards balanced budgets.

Politically, that may play well with voters who are unemployed, or work at lower wages than before they lost jobs, or who face higher property, income and sales taxes to pay the inflated pensions of public sector workers. That's practically everyone.

In Ohio, newly-elected Governor John Kasich, a Republican and former 18-year member of Congress, faces an $8 billion budget deficit. He favors an end to collective bargaining rights for state workers and restricting those rights for such local-government employees as teachers, police officers, firefighters and others.

In Florida, with a predicted deficit of $2.5 billion deficit this year, a new Republican Governor, Rick Scott, is demanding that public workers pay 5 percent of their salaries toward their pensions.

The Republican-controlled Indiana legislature is considering legislation that would let employees choose to quit unions, turning Indiana into a "right-to-work" state.

Indiana Democratic legislators fled to Urbana, Illinois, rather than provide the two-thirds quorum required to pass legislation.

Speaking in Indianapolis on Wednesday, Governor Mitch Daniels declared, "The House Democrats have shown a complete contempt for the democratic process....You don't walk off the job, take your public paycheck with you, and attempt to bring the whole process to a screeching halt."

President Franklin D. Roosevelt believed that public sector employees should not engage in collective bargaining. In 1937, in a letter to Luther Steward, president of the National Federation of Federal Employees, he wrote,

"All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service."

Two years earlier, Mr. Roosevelt had signed the National Labor Relations Act, giving workers far-reaching rights to organize and strike. But he distinguished the rights of public-sector employees from those in the private sector. Despite FDR's qualification, many states gave their employees the right to collective bargaining, with the resulting budget problems.

Wisconsin faces a $137 million deficit this fiscal year and a $3.6 billion deficit over the next two years. Wisconsin Senate Democrats holed up in Rockford, Illinois, to prevent a quorum that would let Republicans pass a bill that would cut the cost of the public sector workforce and enable the sale of state-owned power plants-saving $300 million and preventing 11,000 layoffs of public-sector workers.

The bill would require public sector employees to pay 5.8% of their salary towards pension contributions and 12.6% towards health insurance premiums, modest obligations compared with contributions made by some private sector workers.

Although Republicans have majorities in both chambers, a quorum of three-fifths of members is necessary for budget bills. Only one Democrat is needed to achieve a quorum in the Senate, but none has shown up.

Public-sector union representatives say they don't mind paying the extra contributions. But they do object to provisions in the bill that would limit collective bargaining rights for state workers, with the exception of police, firefighters, and state troopers, whose rights would not be curtailed.

In addition, the Wisconsin bill would end salary deductions for union dues for state employees, forcing the unions to collect dues from individual members as do other organizations.

In a further blow to union security, the bill would allow government workers to stop paying dues altogether and remain members of collective bargaining units. This means that many union members would be inclined to drop their membership.

This would choke the flow of dues that are used to pay union officials and their staffs, and are even used for political contributions.

In last year's elections, the biggest campaign spender was the American Federation of State, County and Municipal Employees, which bragged about spending $87 million on the election. Political contributions usually go to Democratic politicians, who promise to raise salaries of public employees and hire more of them.

That can lead to higher taxes, and budget deficits. It is a circle: taxes go from the electorate to the government paychecks, to union dues-then to more union campaign contributions.

The legislation under consideration in Wisconsin would stop this cycle, saving workers money because dues would not be required or collected by the government. Small wonder that Democratic politicians are taking flight.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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