Pennsylvania’s Big Government Union Payback

Gov. Josh Shapiro signs off on huge pay raises for his top campaign contributors

WSJ editorial. 

"Unions have been collecting big raises from Democratic Governors, and the latest score is in Pennsylvania. On Monday the American Federation of State, County and Municipal Employees (Afscme) signed a new contract that includes a 20.25% wage increase over the four years.

The union notes that the new contract “includes a 0.5 percent increase in employee healthcare contributions,” but “the employer will contribute 28 percent more.” Try getting that from your boss. The contract also includes “increased meal allowances, expanded vacation buyback, improved overtime policy, improved health and safety measures, and more.”

That’s a tidy return on Afscme’s $1.26 million investment in Gov. Josh Shapiro’s 2022 campaign. In 2023-2024, the increase over the prior union contract will cost Pennsylvania taxpayers $83.7 million. After four years of raises, the state budget will have to account for an additional $724 million in costs. That doesn’t include the long-term cost of larger pension payments that are based on salaries.

This is how it works when public employee unions sit on both sides of the negotiating table. Other bills will also come due: The Service Employees International Union contributed $1.5 million to Mr. Shapiro’s campaign. The Pennsylvania State Education Association and the National Education Association chipped in $1.2 million, according to the Pennsylvania Department of State. What will they get?

Since 2007, Pennsylvania government unions have spent $190 million on politics through their political action committees and the 2021-2022 cycle broke records, according to numbers tracked by the Commonwealth Foundation. In the 2021–2022 cycle, 99.6% of public union’s PAC contributions to candidates for statewide office went to Democrats.

Pennsylvania’s unions have been losing members by the thousands since the Supreme Court’s 2018 Janus decision required workers to opt in for membership. But as long as their cash helps get Democrats elected, they will keep writing the terms of their own collective-bargaining agreements."

Virginia Is for Public-Sector Union Lovers

Richmond Democrats are about to give public employees the ability to hold government hostage.

By Ken Girardin. He is an analyst at the Albany-based Empire Center for Public Policy. Excerpts:

"The Old Dominion, one of a handful of states where public-sector bargaining is forbidden, benefited during the 2007-09 recession from the ability of state and local officials to control costs as tax revenue dipped. Democratic Gov. Tim Kaine saved $198 million in fiscal 2010 alone by postponing scheduled pay raises for state employees. Meanwhile in New York, officials had no choice but to pay 3% raises to the state’s largest public union in spring 2009, even as income-tax receipts dipped almost 6%. The contract forced the state to shell out 4% raises to the same union only a year later.

Virginia’s experience during the financial crisis also compares favorably with that of neighboring Maryland, where local officials struggled to address fiscal realities because of union opposition. The Washington Post editorial page noted Virginia’s advantage and floated the possibility of abolishing public-sector collective bargaining in Maryland as a solution: “Fairfax County [Va.] has managed well without it.”

There’s more at stake than employee pay. Labor contracts in New York’s heavily unionized schools and local governments dictate nearly every facet of public-service delivery. These managerial glue traps block the people’s representatives from making meaningful changes without first getting labor’s blessing. New York’s transit officials, for instance, had to get union permission before they could have subway stations cleaned properly by a private contractor. Captive to New York’s bargaining law, efforts to lengthen school days, trim overtime costs and even thwart crimes against disabled people under state care have all been stymied. Mayors and other officials are routinely saddled with deals negotiated in secret by their predecessors. Nothing in the Virginia legislation would spare its local governments from an identical plight once the ink dried on the first agreements.

While even the worst labor deals eventually expire, New York has a “contract continuity” statute that keeps terms in place until a new agreement has been negotiated—giving unions a much stronger hand at the bargaining table. Employers must keep paying experience-based raises while they negotiate. Other state governments—even the most union-friendly ones—have painstakingly avoided this mistake. Rhode Island Gov. Gina Raimondo vetoed similar legislation in 2017 and said New York “provides an important lesson” for other states. But Richmond isn’t hearing it: Virginia’s proposed legislation has contract-continuity language mirroring New York’s.

The damage done by the Taylor Law is arguably most pronounced in New York’s public schools. Census data recently revealed that annual per pupil spending on K-12 education in the Empire State is $23,091—the highest in the country. The biggest cost is “instructional salaries and benefits,” which are controlled primarily by teachers union contracts. New York, all told, spends almost 43% more on each student than does Massachusetts, where teachers are also unionized but under terms less hostile to school management—and taxpayers.

Virginia students meanwhile either matched or outperformed their New York peers by every major metric on recent National Assessment of Educational Progress tests, even as the Old Dominion’s per pupil spending was less than $12,000."

Pension Mess Can't Go On; That's No Reason to Ignore It

You can deal with it now or deal with it later, but eventually you will have to deal with it.

By Steven Greenhut, writing for Reason.

"President Richard Nixon's economic adviser, the late Herbert Stein, still is knon for his dictum: "If something cannot go on forever, it won't." It should be the rallying cry for California's pension reformers. The numbers don't lie, they say. Services are being cut to pay for oversized pensions, they note. Something must be done because the debt cannot keep growing forever.

They're right. And it won't go on forever. It can't go on forever. At some point, even the most dogged public-pension defenders will realize the gravy train—six-figure guaranteed lifetime pensions inflated by myriad spiking gimmicks—will end because the math must catch up with the wishful thinking.

New York and Chicago already pay for more retired cops than for officers patrolling the streets. Some cities have gone belly up, with Stockton and Vallejo the most visible California examples of what happens without adult supervision. Even healthy cities are slashing services and raising taxes to meet escalating pension bills, to pay for those who often receive far more in retirement than most residents earn during their working years.

Even the rest of the media have come to the party, however late. At the Orange County Register, writers have been pointing to the disastrous fiscal effects of Senate Bill 400 for years. That's the 1999 legislation that started a wave of unsustainable, retroactive pension increases, not just in state government, but in cities and counties across California.

As reported in the Los Angeles Times last week, "With the stroke of a pen, California Gov. Gray Davis signed legislation that gave prison guards, park rangers, Cal State professors and other state employees the kind of retirement security normally reserved for the wealthy... California Highway Patrol officers could retire at 50 and receive as much as 90 percent of their peak pay for as long as they lived." The deal was promised to pay for itself, but instead has plunged California into an unsustainable fiscal mess. Surprise.

Indeed, Stein was right that unsustainable things ultimately will be, err, unsustainable. But there's no underestimating the ability of officials to delay the day of reckoning—at least until they are comfortably retired at their beachfront condos. One website covers the coming "pension tsunami." It's great imagery, but the problem is less "tsunami" and more "steadily rising floodwaters." The result is the same, but timing is everything.

Sometimes it takes decades for problems to wreak havoc. Those who make predictions sometimes have to wait until the audience becomes receptive to their message. Those pension reformers have been warning about the flood for years. They've attempted legislative fixes. They've taken local reform measures to the ballot. They've tried to qualify measures statewide. They've gone to court. Usually they are stymied by the more politically powerful public-employee unions.

In a fit of despair, I wrote that reformers ought to abandon ship. That's not because they are wrong actuarially, but because they are politically outmatched in our union-dominated state. But once again, pension reform is resurfacing.

Last month, a state appeals court rebuked a Marin County public-employee union that was challenging the state's modest effort to rein in some pension "enhancements," or spiking. In doing so, the court ruled that the so-called "California Rule" (forbidding the state from reducing pension benefits for current hires, even going forward) could be jettisoned.

As Judge James Richman ruled, "(W)hile a public employee does have a 'vested right' to a pension, that right is only to a 'reasonable' pension—not an immutable entitlement to the most optimal formula of calculating that pension." That's big news because the pension mess cannot be fixed merely by lowering benefits for new hires, most of whom won't retire for decades.

More impetus for reform came from The New York Times, which reported recently that the California Public Employees' Retirement System has two sets of books to evaluate the size of the state's pension debt. It has its "official," rosier estimates, which say the system can count on a rate of return on its investments of 7.5 percent annually (higher returns make the taxpayer-backed unfunded liabilities seem smaller).

Then there are the "market" estimates—the much lower (2.64 percent) expected rates of return CalPERS uses to calculate how much agencies must pay it if they want to leave the system. Most reformers say these numbers are closer to reality. The Times article said such "market" estimates result in a cost projection that is "alarmingly large."

This is nothing new. In a 2011 column, I argued the situation was unsustainable. It can't go on forever, but it would be nice if the state's leaders would muster some courage and fix it, rather than just waiting to see if Stein had a point.

Steven Greenhut was the Union-Tribune's California columnist. He is western region director for the R Street Institute. He is based in Sacramento."

Collective Bargaining Weakens Cities: Public unions on the local level have too much power—even deep blue Massachusetts is starting to rein them in

Click here to read the article. By ROBERT M. COSTRELL. WSJ, 11-23-11. Mr. Costrell, a professor of education reform and economics at the University of Arkansas, served as chief economist for the Commonwealth of Massachusetts from 2003-2006 and education adviser to Gov. Mitt Romney from 2005-2006. Excerpts:

"After a seven-year effort dating to the Romney administration, the Democratic-controlled legislature finally passed a law aimed at bringing local costs in line with state costs—and it was signed by Gov. Deval Patrick. Previously, localities could not change the copayment, deductible or any details of any bargaining unit's health plan without the approval of every local union. As a result localities were paying, on average, 37% more for health insurance than state and private employers."

"In Cleveland, for example, the collectively bargained contribution by teachers is $75 per month for family health coverage, a fraction of a state employee's $205 monthly contribution. Ohio state employees face an out-of-pocket maximum of $3,000 per family for in-network coverage, including a deductible of $400 and a co-insurance rate of 20%. For Cleveland teachers, the out-of-pocket maximum is zero—there's no deductible and no co-insurance. These provisions are written into Cleveland's union contract. They will be very difficult to remove."

Weaknesses In Left Wing Studies Supporting Public Unions

See The Left and the Public Pay Debate at the AEI blog by Andrew Biggs. He criticizes "a study written for the Center on State and Local Government Excellence by University of Wisconsin professors Keith A. Bender and John Heywood." Excerpts:

"1. It effectively compares public-sector salaries only to pay for unionized private workers, not all private employees. Given that only 7 percent of the population is unionized and that allowing public-sector workers to unionize is a policy decision, this isn’t exactly an apples-to-apples comparison to the typical private-sector employee.

2. The study underestimates the value of defined-benefit pensions because it doesn’t account for the more aggressive funding rules of public pension plans. For a given level of guaranteed retirement income, state and local pensions put aside around one-third less money today than a private 401(k) plan would. Since the Bender-Heywood study measures what employers contribute today, not what employees eventually receive, it significantly understates public-sector pension benefits.

3. Their study omits the value of retiree health benefits. For someone like Professor Shaiken at the University of California, this is worth about an extra 10 percent of pay.

4. Their study ignores job security. Jason Richwine and I calculated that for California state employees, their additional job security is worth about an extra 15 percent of pay."

Maybe the state pension funding mess is bad

See How bad is the state pension funding mess? at Marginal Revolution. Tyler Cowen says, in response to some who say it is not bad:

"Beware of the 30-year comparison I say. A lot of sums look small compared to thirty years' worth of output. I worry when I read sentences such as this:

The major reason that shortfalls exist at all was the downturn in the stock market following the collapse of the housing bubble, not inadequate contributions to pension funds.

In my house, that's what inadequate means."

The rest of the post mentions how the unions use political clout to often increase benefits and reduce the retirment age and water down reforms.

Wisconsin Has Public Sector Unions, Virginia Doesn't-Look Who's Doing Better

From The Cato Institute. Here is that post by Chis Edwards:

"The struggle over collective bargaining and government worker benefits continues in Wisconsin. Residents of the Badger State may be interested in comparing their government’s fiscal and union policies with policies in the Old Dominion.

Wisconsin

•Collective bargaining (monopoly unionism) in place for government workers, with about 52 percent of state/local workers in unions (Source: Table 1 here)
•State debt as a share of income: 4.6% (Source: Moody’s)
•State unfunded pension obligations as a share of GDP: 32% (Source: Andrew Biggs)
•Score on quality of state government management: B- (Source: Pew Center)
•Score on Pew’s subcategory for “people” management: B-
Virginia

•Collective bargaining in state and local government banned by a 1993 statute signed into law by Democratic Governor Douglas Wilder
•State debt as a share of income: 2.1%
•State unfunded pension obligations as a share of GDP: 17%
•Score on quality of state government management: A-
•Score on Pew’s subcategory for “people” management: A

Public sector unionism is, of course, just one factor affecting a state’s fiscal and management results. But there is a statistical correlation across the 50 states on unionism and some public policy outcomes (see here and here).

Ending monopoly unionism in state government would not be the apocalyptic event that some Wisconsin protesters seem to think. Indeed, collective bargaining is not a “right” of government workers, but a special privilege that stands in the way of modern and flexible policy management. Hopefully, public sector unions will eventually go the way of private sector unions and the dinosaurs."