An incoming email responding to last week’s UnionWatch editorial “Los Angeles Police Union Attacks CPPC Study” included the following statement:
“While you profess not to dislike public employees, it is clear that you disliking public employee unions. Interesting—so you might like a public employee or two individually, you just dislike when those individuals organize to work for better working conditions or pay. Which goes hat in hand with your desire to make public employee pension plans seem so expensive that they are terminated.”
This invites a response.
Our concerns about public employee unions are primarily based on the fundamental differences between unions in the public sector vs. unions in the private sector. There’s nothing wrong – in principle – when “individuals organize to work for better working conditions or pay.” But if those individuals work for the government, there are plenty of problems. We are seeing the result of this throughout California and the rest of the United States.
Public employees work for an entity that funds its operations not by selling competitively priced products to willing buyers, but by assessing taxes that must be paid under threat of imprisonment. And public employees are managed by elected officials, not business owners, elected officials whose campaigns – especially at the state and local level – are funded by public employee unions.
Unionized government workers demand wage and benefit increases from bosses they elected, paid for by government entities that don’t have to earn a profit but can simply take money from other citizens. It is difficult to imagine how a system set up this way can possibly avoid getting dangerously out of control.
As we explore in-depth in our post “The Preexisting Political Advantage of Government Workers,” even if public employees were prohibited from engaging in collective bargaining, they would still have tremendous influence over the political process. After all, it is difficult to find citizens who have a greater stake in how our state and local government is managed than government employees – they have far higher rates of voter turnout, they are far more likely to run for office, and they are far more organized. If government workers were not unionized, they would still be able to effectively lobby for better working conditions or pay.
As it is, with rare exceptions, public employee unions have taken over our state and local governments. A timely example of their power is AB 822, reported on by CalWatchDog’s Katy Grimes in her recent report “Assembly bill would stall local pension reform efforts.” Along with bills already passed to impede the state initiative process, and bills already passed to impede the municipal bankruptcy process, now we have a bill proposed in the California legislature that will impede the ability of voters to modify pension benefits. This is legislation by and for the unions.
AB 822 is offered in direct response to local pension reform initiatives passed by supermajorities in San Jose and San Diego. Which brings us back to our incoming email.
“Which goes hat in hand with your desire to make public employee pension plans seem so expensive that they are terminated.”
The biggest irony here is that if pensions aren’t reformed, i.e., if benefits aren’t reduced in equitable and sustainable ways, they will be terminated by default. In an ideal scenario, pension benefits would all be simply reduced to the formulas that applied prior to 1999 when the California state legislature passed SB 400 to retroactively increase California Highway Patrol pensions by 50%. In the cascade of copycat legislation and contract revisions that followed over the next several years, California’s state and local governments planted the seeds of financial disaster.
Pension reformers are not trying to make pensions “seem” expensive. As they are currently structured, even if 7.0% average annual rates of return for the next 30 years can be achieved, they are expensive. And for every 1.0% that rate of return drops, annual pension contributions have to increase by 10% of payroll.
The problem with trying to have an honest discussion about pensions is compounded because public sector unions aren’t the only defenders of the status-quo. The pension bankers themselves are making billions in fees every year, and they aren’t about to advocate changes. In general, the financial sector is hugely empowered precisely because of unionized government overspending – they invest the government pension money, and they issue bonds to cover government deficits. Remember this, the next time a spokesperson for the California Teacher’s Association urges you to “blame Wall Street.”
To advocate reform – an equitably reduced, financially sustainable defined benefit for public employees, and a set of reasonable regulations to curb the currently unchecked power of public sector unions – is in no way an attack on public sector employees, or retirement security, or even unions themselves.
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UnionWatch is edited by Ed Ring, who can be reached at email@example.com.