Unions, mandates at root of states’ budget stress

by | Mar 13, 2011 | Blog, Capitol Review, Notes

The high-stakes battle to determine whether the people will serve government or government will serve the people is unfolding in state capitols.

Wisconsin is the tip of the iceberg.  Though not as fiscally imperiled as California or Illinois, Wisconsin is symbolic — the birthplace of government employee unions, once considered illegitimate even by liberal icons like FDR and the AFL-CIO.

“All government employees should realize that the process of collective bargaining . . . cannot be transplanted into public service,” Roosevelt said.

In the private sector, unions bargain for a share of profits.  If management agrees to conditions that are too expensive, the market punishes both sides with lost profits and lost jobs and rewards competitors.

Today, unions would be dinosaurs without government employees, who constitute more than half of all union membership.

“Unions are government organized as an interest group to lobby itself to do what (government) always wants to do anyway – grow,” writes George Will. “Governments, not disciplined by the need to make a profit, extract government employees’ salaries from taxpayers.”

With political contributions, unions reward politicians for making expensive promises at the expense of taxpayers – including future generations of taxpayers who cannot vote today but will be stuck with the bill tomorrow.

So, ask yourself, Mr. or Mrs. Taxpayer, do you think you have more clout with government than government employees’ unions?

Wisconsin Gov. Scott Walker grasps the stakes of the battle.  He wants union members to make reasonable contributions toward their pensions — they currently pay less than 1% of salary — and health care.  By limiting unions’ bargaining authority to wages, Walker would remove the temptation of unions and their legislator puppets to make pension promises that will be paid by future generations of taxpayers and government workers.

Walker is not alone.  Ohio is set to pass similar legislation, and Indiana and Missouri governors curtailed government unions’ bargaining power through executive orders about the same time former Colorado Gov. Bill Ritter did just the opposite.

Here in Colorado, taxpayers and government workers are already paying dearly to bail out the government pension plan, PERA, from an unfunded liability of $27 billion – equivalent to four full years of state income and sales taxes.

When the latest bailout is fully implemented, state and local governments, including school districts, will pay more than $700 million a year in perpetuity – taken from worker wages, school classrooms and other budget priorities – solely to pay down PERA’s deficit.  In addition, workers and employers contribute another $1.5 billion annually to support PERA’s existing benefit structure.

At a time when the state is pondering a $375 million reduction in K-12 education spending, PERA’s costly benefit structure can be ignored no longer. In fact, the New York Times recently called the state pension plan the most expensive in the nation.

Another inescapable problem is the relentless growth of entitlement spending and the cost of federal mandates – most recently ObamaCare, which locks in minimum levels of Medicare and Medicaid spending.

From 2000 to 2010, Colorado’s general fund budget increased by 47% or $2.4 billion.  Health care and welfare grew by 61% ($856 million); K-12 spending by 59% ($998 million); corrections, 75% ($436 million).  That left $90 million over 10 years for all other programs.

Although tax revenues haven’t grown in the past three years, “fees” increased by $756 million and 3,400 state workers were added to the payroll.

Now Colorado senate Democrats want to raise taxes by $500 million a year.  Senate Minority Leader Mike Kopp counters, “Colorado government has a revenue shortfall because Colorado’s families and businesses have a revenue shortfall.”

Winston Churchill reminded that governments that seek to tax themselves into prosperity are “like a man standing in a bucket trying to lift himself up by the handle.”

Government, after all, is supported by the private-sector economy – not vice versa.


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