The Bloom Is Off The Rose

I wrote early last year about the gathering storm on the political horizon over public sector unions.  It was inevitable that the imbalance in power between the public unions and the taxpayers who pay their way would have to be rectified.  I admit that I did not see Scott Walker being the guy to take on the unions, in of all places Wisconsin, which in 1959 became the first state to allow collective bargaining by public employees.  He did, he took everything the progressive labor movement could throw at him over the last year and a half,  and he has come out on top.

This looks to me like a significant inflection point.  Public sector union power that has been increasing for the last half-century is going to see that power wane.  They no longer will be playing offense.  It looks like they will be forced to spend all of their time on defense going forward.

Private sector workers and taxpayers are not going to put up with the rich defined benefit pension plans, early retirement packages, extended sick leave programs, vacation days that get converted into deferred compensation packages at retirement and low cost medical plans that the public sector employee unions now enjoy.   Of course, this was all paid for by the private sector workers who, if they ever got any of these bennies, don't have them anymore.

The voters are not willing to pay more in taxes for these outsized benefit programs and they are also not willing to see essential public services cut to pay for rich retirement and other benefit programs.  You don't have to come to this conclusion by just looking at the Wisconsin vote this week.  Voters in San Diego and San Jose, California also resoundingly showed that the winds have shifted against the public sector unions.

I wrote about the bleak financial situation in San Jose last October in my blog post "Because We Can Becomes Because We Can't".  At one time, San Jose had 7,450 city workers.  It now has 5,400 even though it has added 250,000 residents in the last 15 years.  They are facing a reduction  to 1.600 workers in 2014 in order to meet the retiree and health costs that are currently being provided.  Arnold Ahlert fills in a few of the details from Frontpagemag.com.

Voters in San Diego and San Jose overwhelmingly approved cuts to retirement benefits for city workers. San Diego voters approved “Proposition B” by a 66-34 margin. It was even worse for government unions in San Jose, where Proposition B was approved 70-30 percent. “The voters get it, they understand what needs to be done,” said San Jose Mayor Chuck Reed, a Democrat who has called pension reform his highest priority. 

It ought to be. Both cities are being crushed by soaring pension costs. From 1999 to 2012, San Diego’s contributions to the city’s retirement fund skyrocketed from $43 million to $231.2 million, an amount equivalent to one-fifth of the city’s general fund budget that pays for its day-to-day operations. From 2001 to 2012, San Jose’s pension costs vaulted from $73 million to $245, equal to 27 percent of its general fund budget.

Such expenses resulted in onerous tradeoffs. In San Diego, libraries and recreation centers were forced to cut back their hours of operation. Roads were left to deteriorate, and some fire houses were temporarily forced to share engines and trucks. In San Jose, four new libraries and a police station have never opened because the city cannot afford to operate them–even though voters approved their financing with construction bonds at the beginning of the last decade.

It is also apparent from the Wisconsin experience that the public sector workers themselves question the value of union membership.   The Wisconsin law now allows public sector employees to opt out of union membership and dues.  Previously, they were required to join the union and forced to pay union dues as a condition of employment.   Since last year when this new right was established, the Wisconsin American Federation of State, County and Municipal Employees (AFCSME) has seen its membership fall from about 63,000 to 29,000.  In addition, 6,000 of 17,000 members of the American Federation of Teachers in Wisconsin have quit the union.  That is a lot of dues money.  More importantly, that is a lot of lost political contributions and power which is the real reason for public sector unions as I explained last year in "Who Is Really Being Attacked in Wisconsin".

The public sector union argument is about one thing-political power.   The unions like the required dues and the Democrats like the money that comes from the dues.  Of the top 8 donors to political campaigns in 2010, 4 were connected with public sector unions or teachers.  They spent approximately $25 million on political campaigns.  3 of the 4 (Service Employees International Union, American Federation of Teachers and American Federation of State/County/Municipal Employees) did not give one cent to Republicans. The National Education Association gave 2% of their take to Republicans. 

The workers and teachers are merely supporting actors in this play.  The public sector union bosses and Democrats are the leading actors.  Taxpayers will be nothing but bit players as long as that continues.

Taxpayers have shown in this week's votes that they do not intend to be bit players any more.  The union bosses and the Democrats who enjoy the union money are starting to lose their leading roles.  They may still retain important supporting roles if they begin to responsibly participate in the needed restructuring of government spending, jobs and public employee benefits.  However, if they think they continue their past methods of intransigence and intimidation they may find themselves in a similar situation to an over-the-hill former screen idol doing late night infomercials.  The bloom is simply no longer on the rose.