The Wisconsin Turning Point
This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published May 23, 2012 on The American Spectator website.
The recall election for Wisconsin Governor Scott Walker is scheduled for June 5. That election is now a crucial battleground for the future of America, and even a critical bellwether for how this fall’s elections will turn out. Walker is staring down the national political machine of government workers unions, and the entire Obama campaign. This is a Paul Revere moment for all conservatives across America. The future of your country is at stake. Walker needs your support now.
Walker’s Reforms Are Working, Spectacularly
Walker came into office facing another state budget deficit of $3.6 billion. Historically, Wisconsin like many other states would raise state taxes to counter these recurring deficits, on top of annual stiff property tax increases to fund skyrocketing school and other local government costs. But those continual tax increases were imposing greater and greater costs on state economies in terms of lost economic growth, jobs and wages.
Walker, based on his experience serving as County Executive for Milwaukee County for 8 years, and in the state legislature for 8 years before that, focused on cutting the growth in state and local government spending instead. That spending restraint included requiring state and local government workers to contribute to their own benefits more like private sector workers. After all the yelling and screaming in Wisconsin, in the end these government workers were only required to contribute 5.8% of their salaries towards their pensions, which is matched by their government employers (taxpayers), and 12.6% of the costs of their health insurance, with the other 87% paid by taxpayers. This compares to private sector workers paying on average 21% of the cost of their company health insurance, with most private sector workers having no pension at all.
The state budget reforms also made payment of union dues voluntary for government workers, empowering these workers to each decide for themselves if they want to be full dues paying members of the public employee unions. That is a potential savings for families of $1,000 a year for each government worker in the family. This forces the public unions to focus on serving their members and convincing each one that their services are worth the dues, just like every other private sector institution in American society.
The budget reforms also limited collective bargaining to negotiations over salary but not over benefits or working conditions and rules. This gave counties, cities, and school boards the flexibility to make management changes to increase efficiency in serving the public and to reduce costs, without laying off workers and reducing services to the public.
A chief example of how this flexibility has been used is for these local governments to open their employee health insurance to competitive bidding. Previously, the unions demanded that public employers use the unions’ own sponsored insurance entity as their insurer, without market bidding. But since Walker’s reforms removed benefits from collective bargaining, government employers were freed to turn to competitive bidding on the open market, where many have found their coverage at substantially reduced costs. For school districts so far, the savings from this competitive bidding alone have amounted to $211.47 per student. Statewide that would add up to nearly $200 million in savings.
The state has also used this flexibility to halt fraudulent sick leave abuses that unions used to inflate overtime expenses. Workers had called in sick for their own shifts, and then worked the next shift on overtime pay. School districts have also been freed to pay teachers based on performance and not just seniority, and to keep better performing teachers rather than longer term time servers who have long given up caring about their job performance.
Walker’s collective bargaining reforms have added up to over $1 billion in documented savings for state and local governments in Wisconsin in the first year alone. That enabled the entire state deficit to be eliminated without yet another tax increase, and without layoffs of teachers and other government workers, except in three school districts that have continued to resist implementing the reforms.
Moreover, because of the reforms the budget was balanced while property taxes declined on average statewide for the first time in 15 years. The Wall Street Journal reported on April 17, “The [Wisconsin] state budget office estimates that the typical homeowner’s bill would be some $700 higher without Mr. Walker’s collective bargaining overhaul and budget cuts.” Soaring property taxes had previously increased every year since 1998, up 43% during that time. The Journal added, “A year ago amid their sit-ins and other protests, the unions said such policies would lead to the decline and fall of civilization, but the only things that are falling are tax collections.”
In short, Walker’s reforms are working, spectacularly.
Getting Collective Bargaining Right
The right of collective bargaining for private sector workers is not at issue in Wisconsin, though President Obama and the Democrats want to confuse the public on precisely that question. Under current law, there are plenty of market and legal checks on private sector unions to keep them from abusing the public. The ultimate limit if they push too far is that their company will be driven out of business. Though that does happen sometimes, that is only when management fails to do its job in resisting excessive union demands. Otherwise, within current market and legal checks, private sector unions actually perform a helpful market function in ensuring that employers keep up with market wages and working conditions as expeditiously as possible.
Not so for government unions, which are two words that together spell oppression. Federal, state or even local governments cannot be driven out of business. They gain their revenue forcibly through taxes. As a result, there is no market limit to how much such unions can pirate from the public.
Indeed, public sector unions choose their own employers, by voting for the governing policymakers for each political entity — county boards, school boards, legislators, Governors, etc. This creates an inherent conflict of interest, as a politician can be negotiating regarding the pay and benefits for his own political supporters at public expense. That can lead to oppressive political corruption, where there is no political limit as well as no market limit to the plunder of the public by government unions.
As a result, nationwide public employee unions plunder taxpayers for pay for state and local government workers that is on average 45% more than the taxpayers paying those salaries make in the private sector. The bill to taxpayers for each of these workers includes an average hourly wage of $26.25, plus another $13.56 in hourly costs for benefits, for total hourly costs of $39.81, or $80,000 per year on average. This is true in Wisconsin as well. Indeed, the Manhattan Institute’s E.J. McMahon reports that for public school teachers in Milwaukee, the annual cost of family health coverage is $26,844, for which the teachers were paying nothing.
State and local government workers today are not exploited in sweatshop conditions for poverty wages as the workers in union lore of old. Today it is taxpayers who are the ones being exploited. Indeed, in the great Wisconsin public employee union debate over the past two years, not one example has been brought forth of a state and local government worker who has been mistreated by his democratically elected employer. Government employees are also protected today by civil service laws, which reflects the special protections government employees already enjoy with their employers subject to the democratic process.
Moreover, local governments in Wisconsin couldn’t resist union demands because intransigent unions could just force them into arbitration, which was rigged to favor union demands. School districts, towns, cities and counties could find themselves on track for bankruptcy because of an arbitrator’s ruling, which just followed arbitration precedents, even though it left the district or local government with no economic means to recover.
Government employees work for democratically elected officials representing the will of the people, not greedy miscreants exploiting them for personal profit. This is another reason why there is no legitimate role for government unions, and there should be no collective bargaining rights for government bureaucrats. The democratically elected Congress or state legislature cannot sit down and bargain with government employee unions as equals, because government employee unions are not the equals of the representatives that were elected by the people to govern. Government employees are subject to the democratically expressed will of the people like everyone else. They are not and should not be treated like aristocrats with special legal privileges, exempt from democratic governance. If government workers feel their pay and working conditions are inadequate or oppressive, they can join the democratic process to elect new representatives like everyone else. The public will respond to their plight and join in voting out abusive elected officials. Private sector workers, by contrast, cannot elect new employers.
Such fundamental, unworkable problems with government unions used to be commonly understood, which is why even an ultimate liberal like Franklin Roosevelt would not recognize such unions. And that is why strikes by government workers have been commonly prohibited in American history as well. These public servants are providing essential public services, and they should not be allowed to deprive the public of those services. But today this common understanding of the past has been lost in too many jurisdictions. As a result, we find exactly oppression of the public in some local or even state jurisdictions.
These are the reasons that federal employees have no legally recognized collective bargaining rights at all. Governor Walker’s reforms would still provide for more collective bargaining for Wisconsin government workers than allowed those so badly oppressed federal workers, whose wages are set by an act of Congress rather than by collective bargaining.
And these are the reasons that Governor Walker’s reforms are just, as well as practically effective in keeping state spending, taxes and deficits under control. Supporters of Governor Walker’s reforms are not looking to deny middle class prosperity to working people, as government employee union apologists contend. Rather, they want the broadest possible prosperity among working people, and rapid economic growth to maximize the highest possible standard of living for all.
The June 5 Walker recall vote in Wisconsin represents a critical turning point for the entire nation. If the public employee unions prevail in recalling Walker because he dared to challenge their legal privileges and political power, these unions will be entrenched nationwide as the new American aristocracy, which the common serfs are doomed to serve and pay. In Wisconsin, the immediate result will be another tax increase while any economic recovery remains weak and fragile, as the savings of Walker’s reforms will be reversed. The result will be more such tax increases nationally.
But it is not just Walker’s highly successful, pro-taxpayer, pro-growth reforms that are put to the test in this election. Now that the government public employee unions have put Walker and effectively those reforms on the ballot, the clout of those unions with the public is at stake as well.
If Walker wins, the result means not just that he and his reforms have been vindicated. It means that the government public employee unions do not have the knee-jerk support of the public that they and the union controlled media have claimed. Now that the issue is being put to the test, if Walker wins the unions just don’t go back to where they were before the recall election. It is the government worker unions that will be discredited. As the Wall Street Journal also explained on April 17, “The Wisconsin recall donnybrook in June will test whether voters value their own bottom lines more than the political power of unions.”