Shadowbosses: Government Unions Control America and Rob Taxpayers Blind

by Mallory Factor

  High rates of unionization kill private sector jobs. In New Jersey, for example, where two-thirds of all public sector employees are unionized, the state’s private sector employment rate is down for the last decade.13 But the politicians kept spending as if there were robust growth in the state’s economy.14

  Now take a look at Texas. Texas is a right-to-work state with far less powerful government employee unions—less than one in five public employees is a union member.15 Job growth in Texas was nearly double the national average in recent years.16

  So, would you rather start a business in New Jersey or Texas? Unless you’re Tony Soprano, the answer’s clearly Texas.

  The chart above illustrates this point exactly. Its message? The states experiencing the most personal income growth are right-to-work states. The largest right-to-work states experienced almost three times as much growth as the largest forced-unionism states. For vibrant private sector growth, head to the right-to-work states, which also are the states with low levels of government employee unionism.

  REAL PERSONAL INCOME GROWTH

  In Most Populous States, 2000–2010

  Right-to-Work States Forced-Dues States

  Texas 26.0% California 10.6%

  Florida 21.2% New York 12.8%

  Georgia 13.7% Illinois 5.1%

  North Carolina 17.1% Pennsylvania 10.2%

  Virginia 24.7% Ohio 1.1%

  Arizona 29.0% Michigan −7.5%

  Tennessee 15.3% New Jersey 9.1%

  Average 24.9% Average 7.8%

  Sources: Bureau of Economic Analysis, U.S. Commerce Department, Bureau of Labor Statistics, U.S. Labor Department

  Courtesy: National Right to Work Committee

  Budget Busters

  In 1980, Frank Sinatra covered the song “New York, New York.” Today, we hear it every time the Yankees win a ball game. “Start spreadin’ the news,” Frankie Blue Eyes warbles. “I’m leaving today. I want to be a part of it: New York, New York!”

  Unfortunately, in the ’70s and early ’80s, nobody really wanted to be a part of New York City. New York was a disaster zone. From 1965 to 1975, the city lost half of its million manufacturing jobs, rendering its increasingly bloated public sector payrolls unaffordable.17 In 1966, the transit workers went on strike. In 1968, the sanitation workers went on strike, and huge piles of garbage bags were piled high in the streets. In the 1970s, in the state of New York, there were twenty teachers’ strikes per year.18

  Eventually, New York recovered. But overly generous union contracts and terrible pension obligations are driving the Big Apple down the road back to the mid-1970s. Unless Gotham’s elected officials change course soon and begin aggressively reining in government employee compensation costs, the dark days of three and a half decades ago are bound to be returning soon.

  It isn’t just New York. It is the same in many states with a heavily unionized government workforce.

  “But,” you ask, “how can you be sure that it’s the unions that create this problem?”

  Well, let’s take a look at two counties that border each other: Montgomery County in Maryland and Fairfax County in Virginia. Both are home to many federal contractors and federal employees. Both are dominated by Democrats.

  One of these counties is not like the other, though.

  In May 2010, the Washington Post declared, “Montgomery County has just completed a nightmarish budget year.”19 Montgomery County in Maryland was forced to jack up taxes because its deficit amounted to one-quarter of its budget. Meanwhile, Fairfax County in Virginia was “all sweetness and light by comparison.” Fairfax erased its far-smaller deficit much more easily.

  These counties not only border each other, but also have similar populations with similar demographics. So, what was the difference between Montgomery and Fairfax Counties? In Montgomery County, government employee unions wield great influence and hold collective bargaining power over teachers, police, firefighters, and other government employees.20 In Montgomery County, the teachers unions in particular are so powerful that “politicians who received the teachers’ endorsement in the most recent elections reached into their pockets and wrote checks to the union,” instead of the other way around. And elected officials in Montgomery County can’t make budgetary policy unless their union masters agree to it. Even the far-left Washington Post was forced to admit that Montgomery County’s collapse was due to “irresponsible governance, unsustainable commitments and political spinelessness—particularly in the face of politically powerful public employee unions.”

  In Fairfax County, Virginia, in contrast, there is no collective bargaining for government employees. And that has made all the difference. As the Post confirms, “Fairfax, though facing tough choices and further cuts in an economy clouded by recession, has a brighter future.”21

  Union States vs. Free States

  Not every place has to end up like Montgomery County, Maryland.

  America is still a country that believes in letting states decide their own policies, at least on the issue of government employee unions. Unfortunately, the trends show that our future looks more like Montgomery County than Fairfax County.

  In 2011, in eighteen states, more than half of public servants were covered by a union contract.22 If you’re in one of these heavily unionized states which we call “Union” states, you’re in serious trouble: Alaska, California, Connecticut, Hawaii, Illinois, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and Wisconsin.

  That same year, fewer than 30 percent of government employees were under a union contract in twenty-two states. If you’re in one of the lightly unionized states, which we call “Free” states, you still have hope: Alabama, Arizona, Arkansas, Colorado, Georgia, Idaho, Kansas, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming.

  Ten states fell in the middle, with a public sector union density of between 30 and 50 percent. If you live in these states, which we call “Halfway” states, you can expect your state to do better than the Union states and worse than the Free states. These Halfway states are Delaware, Florida, Indiana, Iowa, Maryland, Montana, Nebraska, Nevada, Ohio, and West Virginia.23

  In each of the Union states, public servants can be fired for refusing to pay dues or fees to an unwanted union—except Wisconsin, which has banned the practice recently for almost all government workers except public safety workers. And just one of the twenty-two Free states, New Mexico, authorizes such firings.24

  So, what’s the effect?

  Quite simply, the Union states are worse off than the Free states, and the Halfway states fall in the middle.25 On a 2010 list of the nine states “most likely to default” determined by the Business Insider,26 all are Union or Halfway states. And the average unionization rate for government employees for the most-likely-to-default states was 20 percent higher than the average for all other states.27 And it almost goes without saying, but let’s say it anyway: not one of the twenty-two Free states was on the “most likely to default” list.28

  Correlation doesn’t always equal causation. But in this case, we think it does. The Union states have experienced slow private sector job growth, while government job growth has been brisk.29 The Union states have higher amounts of state debt per person than less unionized states. Among states with more than 60 percent of the government workers unionized, the median debt per person was a whopping $6,380. This is double the level of debt per person of the middling-unionized states, and triple the level in less-unionized states.30

  Okay, you say, that’s still not proof. Doesn’t the higher cost of living in the Union states account for the higher debt per person? California is expensive territory. So’s New York. So it should cost more for government services there, right?

  It certainly does cost more, but let’s look at why it’s more expensive to live in these state
s. One of the main drivers for the high cost of living in California or New York seems to be all the superfluous regulations on housing construction, energy generation, and land use, usually passed by pro-union politicians.31 And the more regulated a state is, the more government employees it needs to ensure regulatory compliance, which drives up cost. And as we know by now, more government employees means more union members and more union dues. Cause or correlation?

  Your Taxes Are Too High

  For years, tax burdens in the United States have been substantially greater in the Union states than in the Free states. The average tax burden on individuals in New York is 12.1 percent, New Jersey is 12.2 percent, and California is 10.6 percent.32 The average tax burden in the Free states is only an average of 8.8 percent.

  Let’s take the supposed leader of the Free states, Texas. While the average American paid 9.8 percent of their income in state and local taxes, the average Texan pays almost 20 percent less than that—7.9 percent. And Texas has also experienced brisk long-term growth, which has significantly increased its tax revenues. From 1990 to 2010, Texas state government revenues nearly tripled, even though Texans have a lower tax burden than other states.33 But tax burdens are still too high everywhere, driven up largely by growth of government payrolls.

  Spreading the Wealth

  So you’re paying high taxes nearly everywhere thanks to the increased numbers of government workers and their high salary and benefits. Most disturbing, your tax dollars are probably supporting someone who makes more money than you do. A recent analysis of government worker compensation confirms that state and local government employees are raking it in compared to their private sector counterparts.34

  In America’s Pacific region, where close to two-thirds of state and local government employees are unionized, government employees’ hourly compensation is more than twice as high as private employees’ hourly compensation. Even in lightly unionized regions, government employees’ compensation is still 25 percent higher than private sector compensation.35 Similarly, economist Larry Kudlow reports: “Nationwide, state and local government unions have a 45 percent total-compensation advantage over their private-sector counterparts… The politically arrogant unions are bankrupting America.”36

  So can’t taxpayers in Union states just organize ourselves into “good government” groups, cut back excesses, and work to lower taxes in these states? It’s not going to work, says Steven Malanga of the Manhattan Institute. “The next lesson we are likely to learn,” he writes, “is that voter revolts against new taxes are no longer effective because of the might that these public-sector groups now wield.”37 Basically, the unions are so powerful in the heavily unionized states that taxpayers can’t even organize effectively against the union machine there. It’s like you’re sitting in the ejector seat of a fiscal helicopter, and you’re buckled in tight.

  Featherbedding

  “What have unions done to cripple the Union states financially?” you ask.

  “How much time do you have?” we might reply. Government unions don’t just negotiate for contracts that increase pay and benefits for the workers. They also negotiate for union work rules in employment contracts that allowing “featherbedding,” which is requiring that more workers be hired than are really needed for the job, or paying workers for more time than is actually worked or is necessary. These are hidden costs that unions negotiate for in employment contracts for their government employee members.

  For example, police in the northern New Jersey town of Englewood can earn roughly $3,000 extra a year in so-called “muster pay” by showing up for work just fifteen minutes prior to their shift and changing into their uniforms. Is it really necessary to pay them for this time? When was the last time you got paid extra for showing up a bit early to work to get ready for your day?

  Union Work Rules

  Many officers in Englewood, New Jersey, and other jurisdictions rake in $25,000 or more annually in “extra-duty” pay at construction and utility-repair sites. Ever wonder why construction sites seem to have so many police standing around them? It is not because the police are lazy; it’s because union work rules require it. New Jersey law mandates police presence at construction sites and during utility repair, even on quiet residential streets. That means a 6–11 percent price markup on every construction project, paid for by the taxpayer.38 And this is great for the police, who can earn up to $65 an hour for these shifts. We love police officers, but they could be doing more good work walking the beat in high-crime areas rather than standing around on neighborhood blocks, watching road workers tar over speed bumps.

  It isn’t just the police that have featherbedding rules. An audit of the New Jersey Turnpike Authority found $30 million in featherbedding. Abusive practices included extensive non-merit bonus payments to employees and management, extra bonuses for workers who worked on their birthdays, and a practice of cashing out sick days every year to get around a $15,000 limit on sick-day cash out at retirement.39 All this excessive pay was for tollbooth workers who have been kept on government payrolls under union contracts—even as automated tollbooths have made many of these jobs obsolete.

  Pension Padding

  Unions also negotiate terms that allow manipulation of overtime pay and pensions. For the rest of us, working overtime is a normal part of the job. And for small business owners, staying late is part and parcel of keeping their businesses alive. That used to be part of government service, too—government workers made an effort to go the extra mile just to do a good job. Now, however, overtime is a union-negotiated perk of being a government employee.

  The government employee union representing New York City’s Metropolitan Transit Authority (MTA) appears to be driving the bus over the city’s taxpayers. In 2010, a New York Times reporter explained how union contracts jacked up taxpayers’ cost of compensating an employee to double his base salary. For example, one recently retired MTA conductor allegedly made nearly a quarter million dollars, more than the authority’s chief financial officer. The conductor’s base salary was a bit less than $68,000, not extraordinary in a very high-cost city. All the other money came from overtime and money from unused sick days and vacation time he got upon retirement. All in all, nearly eight thousand MTA employees raked in more than $100,000 in salary in 2010.40

  Thanks to the unions, staying late often means juicing your retirement income. This was the conclusion then New York attorney general Andrew Cuomo came to in 2010 when he launched a probe into public-sector “union contracts that allow abuses to happen.”41 When a union-supported Democrat like Cuomo (now governor) gets up in arms about government union-boss skullduggery, you know there must be a worm in the Big Apple.

  Cuomo gave an example of one police officer who had a $74,000 annual salary. He received another $125,277 in overtime pay. How did he log so much overtime? This officer, like many unionized public employees who monopolize overtime shifts in any given year, was nearing retirement. His taxpayer-funded lifetime pension benefits would be based on the average of his last three working years’ income. So he purposefully arranged for extra overtime shifts so that he could bulk up that three-year average prior to stepping down. Such “pension-padding practices” cause a “one-two punch to the taxpayer,” charged Cuomo.42 Actually, they cause a one-two-three punch to the taxpayer. First, we have to pay the officer’s inflated salary. Next, we have to pay his inflated overtime. Finally, we have to pay his inflated pension based on his inflated salary and inflated overtime.43

  In nearly any business, large or small, a supervisor who allowed even one employee to get away with more than doubling his annual base salary by racking up overtime would get canned in short order. But let’s remember—it’s the government employee unions pulling the strings, electing their own bosses. And under current rules, neither the government nor the government workers would have an easy time firing the unions.

  No wonder New York State is in serious trouble, as Herbert London, president emeritus of the Hud
son Institute, reminds us: “There is no doubt New York State has extraordinary assets: an educated workforce, potable water, cheap hydro-electric power, magnificent scenery. But these assets have been surpassed by manipulative leadership, profligate spending, and the appeasement of municipal union demands.”44 Despite all its assets, New York State and other heavily unionized states are headed in the wrong direction.

  And if New York is bad, the crony union city of Chicago is even worse. In Chicago, a 1991 law allowed union officials who once worked for the city to have their city pensions determined by their higher union salaries. The Chicago Tribune reported that this law allows union officials to “land public pensions that far exceeded their pay as city employees—even as they continued to earn lucrative salaries from their unions.”45 But union officials took this abuse one step further in a double-dipping pension scheme. Eight of Chicago’s highest ranking union officials reportedly received pension credit twice for their union working years—once for determining their city pensions and once for determining their union pensions. “Some of those labor leaders were participating in up to three pension funds at the same time, accruing retirement benefits that reached as high as $500,000 a year.”46 One union official receives a “$158,000 municipal employees pension after being rehired at the Department of Streets and Sanitation for one day in 1994,” working on union matters ever since. While officially retired from his city job, the union official continues to make $260,000 a year from his union job, from which he reportedly will receive an additional pension.47

  These double-dipping pension schemes are considered abusive even by Chicago standards, but in a different pension-padding scandal, two union lobbyists there netted hefty city pensions perfectly legally with only a single day’s work.48 Legislation passed by the pro-union legislature allowed a brief window during which union officials could qualify for a teacher’s pension by teaching in the school system for just one day. Two union officials who each substitute-taught school for a single day during the window are now legally entitled to a full teacher’s pension—based on their union salaries and years of service to the union. Because their salaries are higher than the average teacher, their teacher’s pensions are estimated to be double what a teacher would normally receive. The Tribune reported, “Over the course of their lifetimes, both men stand to receive more than a million dollars each from a state pension fund that has less than half of the assets it needs to cover promises made to tens of thousands of public school teachers.”49 Is it any wonder that the heavily unionized states are heading for an abyss?