Public-Sector Unions, Public Employees: May You Live in Interesting Times

Joseph E. Slater, Public Sector Labor Law in the Age of Obama, 87 Ind. L. J. 189 (2012)

In 1959, Wisconsin became the first state to grant collective-bargaining rights to its public workers. The next half-century witnessed the rise of public-sector unions. As union density declined in the private sector, it increased in the public sector such that, by 2010, 7.6 million public-sector employees belonged to a union as compared with 7.1 million private-sector union workers. Many celebrated the public-sector union as the big success story. The fortune of public-sector unions and their members seemed, however, to turn on a dime with the 2010 mid-term elections. The past two years have witnessed some of the most pernicious attacks on public employees and their unions in the past half-century. Too contrived to be ironic, among the first and most virulent of these attacks began in Wisconsin.

Here’s where Professor Joseph Slater’s latest article, Public Sector Labor Law in the Age of Obama, begins. Professor Slater tackles four big issues: (1) recent political attacks resulting in legislative changes in the context of the current economic crisis and debate over public employee pensions; (2) bargaining and legal issues created by the current economic crisis; (3) the debate over whether and to what extent certain categories of employees (specifically Transportation Security Administration employees, police, and firefighters) should have collective-bargaining rights; and (4) the Missouri state constitutional requirement that employees have a right to bargain collectively.

In Part I, Professor Slater surveys the main reasons for recent political attacks on public-sector unions, carefully separating myth from fact. Myth: Greedy public-sector unions heavily contributed to state budget shortfalls by insisting on fat pension plans for their members. Fact: Most states set their employees pension plans by statute or regulation, not by collective bargaining. Fact: Public employee pension funds only account for 3.8% of state and local spending. Fact: Many state pension plans are underfunded. Fact: Most of the contributing causes to state pension underfunding—including state politicians’ having diverted state monies away from pension plans toward other projects, questionable actuarial practices, and stock market declines—were outside the control of public-sectors unions. Fact: Collective-bargaining rights are not correlated with state budget deficits.

Professor Slater also debunks the myth of the overly paid public servant, including the belief that public-sector pension plans are always too generous. According to Slater, the data reveal that most such pensions are modest and that states are increasingly cutting back on their contributions. These data must be judged in light of the fact that over one-third of all public employees are not eligible for social security. Along these lines, Slater recounts studies that have cogently contradicted the myth that public servants are over-paid. These studies, Slater explains, are more reliable because they break out categories of workers, comparing apples to apples rather than comparing private-sector janitors to public-sector lawyers. Accounting for education, experience, and other significant factors, these studies show that public servants remain undercompensated by several percentage points. This is true even when factoring in benefits, including pension plans.

Part I ends with a survey of states, most notably Wisconsin and Ohio, that have eliminated or attempted to eliminate collective-bargaining rights for public employees. In this section, Slater argues that, because such laws have no effect on budget deficits, they must be intended to harm unions as an institution.

These arguments naturally segue into Part II’s review of how the current economic crisis has shaped legal and bargaining issues. Slater details interest-arbitration cases and furlough disputes based on contract clauses to highlight the observation that public employers have been shifting the burden of budget management onto public employees.

To be sure, someone has to pay for budget deficits, which can be cut by reducing spending or increasing revenue, most notably through tax increases. Increasing revenue is difficult in a recessional era of unprecedented unemployment rates and a shrinking tax base. Blaming public employees for state budget deficits and reducing spending by cutting payroll—either by slashing public employee benefits or furloughing employees—is much more politically expedient than either tax increases or cutting popular public programs. This problem for public workers is exacerbated by the reality that most public employees cannot strike and many arbitrators have been persuaded, at least to some extent, that state governments need to cut expenses. But public officials who furlough without dialogue are taking the easy way out. Wouldn’t it be better for society to have an honest dialogue that revealed that public-sector unions have no control over the budget and that to the extent that unions gained benefits for public workers they did so through bargained-for exchanges. That means that public employees gave up something, perhaps wages, in exchange for delayed compensation in the form of benefits. Parts I & II of Slater’s article provide ample evidence to support such a dialogue.

Parts III and IV present several instances of the right to bargain among transportation safety employees, firefighters, police officers, and in general under one state’s constitution.  As Slater points out, after the 9/11 terrorist attacks, the Bush administration’s newly minted Department of Homeland Security (DHS) created the Transportation Security Administration (TSA).  Shortly thereafter, TSA Administrator James Loy issued an order forbidding TSA employees from engaging in collective bargaining. The stated rationale for this order was the employees’ “critical national security responsibilities.” This order, together with other moves by the Bush administration to decollectivize federal employees, has renewed debate over the question whether public servants in certain critical positions should be permitted to engage in collective bargaining—as a matter of public policy and of law. As of now, TSA employees are represented by the American Federation of Government Employees (AFGE) with limited collective-bargaining rights.  But this, of course, could change with a change in administration.

By contrast, as Slater points out, the proposed the Public Safety Employer-Employee Cooperation Act of 2009 would have granted collective-bargaining rights to public safety officers employed by state or local governments. The proposed bill is “a substantial departure from traditional public-sector labor law. The federal government has never attempted to grant collective bargaining rights to large groups of state and local government employees.” Perhaps for this reason, if passed, this bill is likely to come under constitutional challenge. Slater acknowledges that the bill is unlikely to pass, but if it did pass (and survived constitutional challenge), “this Act could be seen as a bold assertion of the importance of collective bargaining rights.”

Slater lastly explores the meaning of collective bargaining by focusing on the right to bargain collectively under Missouri’s constitution, which provides that “employees shall have the right to organize and to bargain collectively through representatives of their own choosing.” Although originally construed as not applying to public employees, the Missouri Supreme Court recently reversed its 60-year old decision, holding that the constitutional provision does, in fact, apply to public workers. Lower courts are now exploring what it means for public workers to have such a right.  Does the principle of exclusive representation apply? Apparently not. Does a system devised by the employer requiring employees in each school to select representatives and permitting the largest union to select a representative, a process the court called “collaborative bargaining,” meet the requirements of collective bargaining? The court held that it did not. These cases, Slater explains, allows us to re-explore the concept of collective bargaining. Is this concept some sort of platonic ideal or is it ever-evolving to meet the challenges and circumstances of the times?

In such interesting times, perhaps the answer to that question is  . . .  interesting.

 
 
Discussion

5 comments
  1. 1
    On November 20, 2012 at 1:40 pm, Jack Tachspeyr said:

    “Professor Slater also debunks the myth of the overly paid public servant, including the belief that public-sector pension plans are always too generous.”

    Who do you think you’re kidding? This sort of dishonest BS is the reason every local and state government (in those parts of the country dominated by public sector unions) are going broke. Are you just a hack, or are you financially illiterate? Because it’s one or the other. Do the math:

    A typical non public safety worker in California’s state or local governments will get a pension based on the following formula: 2.5%, times years worked, times final annual salary. That equates to a pension of nearly $70,000 per year for the typical participant in CalPERS or CalSTRS who retired in recent years and worked 30 years or more. And it isn’t just public safety employees, with average pensions that are now nearly $100,000 per year, who skew the average upwards. The average California teacher now gets a pension that averages about $68,000 per year. Let’s keep this in perspective, by the way, the MAXIMUM social security benefit is $31,000 per year. And self-employed people contribute 10.5% of their gross earnings to pay for that benefit, which is a higher percentage contribution than virtually ALL public sector workers have to make to their pensions.

    The averages you see coming from the unions and from the pension funds are deliberately understated because they include people who didn’t work a full career, as well as people who retired 10+ years ago and weren’t eligible under the elevated qualifying salaries and elevated pension formulas that were passed during the internet bubble and the real estate bubble.

    Maybe you can comprehend this: If every Californian over the age of 55 (that’s about 10 million people) got a pension of $70,000 per year, it would cost $700 billion per year, which is about 40% of California’s entire GDP. Do you really think “taxing the rich” can pay for this?

    To throw a slightly more arcane, but absolutely necessary concept at you, one you have to grasp in order to realize how wrong you are, is the fact that if the pension funds rate of return, which they project at 7.5% per year, were to be lowered by one percent, it would cost a TEN percent increase to the required annual contribution as a percent of pension eligible salary. At the least! This is easily proven by anyone with a basic understanding of pension finance, and the pension fund managers know it.

    When you factor in the value of benefits, public sector workers in California make well over $100,000 per year on average. There is no excuse for this based on higher educational attainment or risks taken on the job. It is destroying our economy and it is destroying the credibility of government.

    If you care about ALL workers, and not just government workers, you need to rethink whether or not public workers should have any collective bargaining rights.

     
  2. 2
    On November 20, 2012 at 2:50 pm, Jane Tachspeyer said:

    Jack–who are you talking about (Dr. Slater or Dr. Lofaso) when you say:

    “Who do you think you’re kidding? This sort of dishonest BS is the reason every local and state government (in those parts of the country dominated by public sector unions) are going broke. Are you just a hack, or are you financially illiterate? Because it’s one or the other. Do the math:”

    Dr. Slater’s article sites to reports that debunk the myth that public servants are overpaid. If you don’t like those studies, one of which was written by an MIT professor (who probably knows how to do math), then you should write a response to those studies rather than engaging in ad hominem attacks of academics who earn $0 to give their opinions.

    Dr. Lofaso’s article review is merely a report of what Dr. Slater wrote. If you have a problem with that review because it inaccurately describes Dr. Slater’s article, then say so. However, her review is not inaccurate. Rather, you simply don’t like the substance of her review, which is essentially saying that you don’t like the substance of Dr. Slater’s article.

    It is true that there are financial issues with many states. But the thrust of the article is that unions, in almost every case, have NO POWER to affect pensions. In general, public pensions are set by state officials for all public employees. Your real beef then is with state and local officials who made poor choices, not with the public employees.

    Moreover, when state/local politicians entered into pension plans on behalf of their union and nonunion workers, those politicians believed that defined benefit plans were a good thing. This is because they, like most of us, had great faith in capital markets. Few people foresaw the market crash of the late 2000s or the Great Recession. It is this market failure–this failure of capitalism and the greed of those who precipitated the crash–that helped precipitate the pension debt. If states had merely entered into defined-contribution plans back in the 1970s, we wouldn’t be in this financial quagmire. It that’s true, then public sector compensation is not to blame.

    Finally, you claim, without proof, that California’s public workers earn more than $100,000 per year. Even if true, you do not tell us what type of jobs those workers hold. The market salary for experienced lawyers in California is likely well-over $100,000 per year. Without more information, we cannot assess the value of that argument.

    Next time you wish to call someone a hack or financially illiterate you might want to check your facts. Name calling by adults is just a continuation of schoolyard bullying that paralyzes our country.

     
  3. 3
    On November 22, 2012 at 11:25 am, Clive Staples said:

    Jack should listen to Jane.

    For our democracy to survive, we need to have civil discourse.

    Jack’s ad hominem attacks and name calling are not only unpersuasive but also are part of the reason why so many Americans are turned off by policy discussions. Jack, why do you have to be so rude and obnoxious? If you didn’t have the cowardly comfort of internet anonymity, would you talk to someone with whom you disagree in such a ridiculous manner.

    Let’s have a discussion, sure, but without the unfair and unbecoming name calling. I think you ironically exemplify Professor Lofaso’s point that this issue attracts “pernicious attacks.” Also, all Professor Lofaso is doing is summarizing Professor Slater’s article.

    Given your overreaction, the article (and summary) has served its purpose. It is making you rethink the manipulative sound bites and mantras we unthinkingly accept without finding out for ourselves. Methinks you doth protest too much. You provided some ostensibly contrary evidence. That’s a start. But how about reading the article and examining the evidence in there before you start calling anyone a hack or financially illiterate.

    Instead of yelling, how about engaging the substance of the article? The issue of public sector unions and state government budget deficits is a complex one. It needs careful consideration, not name calling and yelling. The issue most certainly isn’t as simple or obvious as you claim.

    The only way out of the financial mess we’ve gotten ourselves into is to listen to all perspectives and dispassionately assess our meager alternatives with facts and reason. Banging the table only demonstrates your own insecurity.