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Tough Year for Unions
Jun 18, 2012
In 2010 Republican Scott Walker was elected governor of Wisconsin by a margin of about six percent. His party also won control of both houses of the state legislature, which allowed Governor Walker to reduce the power of public sector unions over state and municipal budgets. Most public union members saw their contributions to their pensions go from 1% to 5.8% of their salaries. Their share of their healthcare plans went from 6% to 12.6%. More radically, the Republicans restricted most public unions from collective bargaining over salaries and ended mandatory collection of union dues from public workers.
The result was a fire storm of protest that attracted the attention of the entire nation. It also resulted in a recall election. A million people signed a petition for the governor’s recall, about twice what was necessary. After a bruising Democratic primary and tens of millions spent by both sides, Walker defeated Milwaukee mayor Tom Barrett a second time, by about seven percent. It wasn’t a recall, it was a replay.
It has been a difficult year for public sector unions. If the bitter defeat in Wisconsin were not enough, the cities of San Diego and San Jose in union-friendly California both passed initiatives cutting the growth of public pensions. Meanwhile in New York, Democratic Governor Andrew Cuomo is also taking on the public unions.
There are two problems that have put public unions in a sudden disadvantage. The first is a national and indeed worldwide fiscal crisis. Wisconsin was facing a large deficit when he took office. His reforms helped to close that deficit without laying off workers or raising taxes. San Diego and San Jose have both steadily cut their public workforces over the last decade. San Jose has several brand new libraries and a police station sitting empty because they can’t afford to hire anyone to work there. What is happening is that the growth of retirement costs is squeezing out all other municipal spending.
The other problem is political. Public unions see it as their mission to win guaranteed benefits for their membership. As long as the national economy was enjoying healthy growth, it was easy for state and city governments to give their employees generous contracts and make lavish promises of future benefits. It was one easy way for mayors and city councils, governors and state legislatures, to build large, well-organized and well-funded constituencies.
When the economy pooped out in 2007 and didn’t just pop right back, it became rather clear to a lot of tax payers a large portion of their tax money was no longer under their control. Services and infrastructure decayed and jobs were cut as pension costs inexorably rose. Those costs were due to contracts that are legally binding and therefore not subject to ordinary legislative discretion.
It is a good thing to want to provide security and prosperity for our public and private workers. It is a very bad thing to create fiscal systems that cannot adjust to changing realities.