Waukesha’s city administrator and an urban planner say that public employee collective bargaining reforms — the controversial Act 10 of 2011 — need to go further:
In its Sept. 17 editorial about Gov. Scott Walker’s second term agenda, the Journal Sentinel Editorial Board said, “Act 10 was a mistake” (“Gov. Scott Walker’s second term? Same as the first,” Our View). Act 10 virtually ended collective bargaining for many, but not all, state and local public employees.
It was not a mistake and should be followed up with Act 10.2 and Act 10.3. One would address the expensive early retirement feature included in the Wisconsin pension plan for all state and local public employees, and the other would bring in police and fire personnel, left out in Act 10. Police and fire together amount to about 60% of most local budgets, leaving only 40% covered by Act 10.
Wisconsin was the first state in the Union to allow public employees to bargain collectively, and, by the 1970s, unionization was showing its worst feature. That feature was, and will always remain, that unions cannot resist the temptation to try to control both sides of the bargaining table. They do this by being politically active in electing union-sympathetic public officials and in de-electing taxpayer sympathizers. The state teachers union was the first to consistently apply this power both in local and state elections and was very effective at both levels.
Wisconsin, having first created public collective bargaining, rightfully should be the first state to remove it. Indiana was slightly earlier, but the Indiana public at referendum put it back in place. That action, and the current race for Wisconsin governor, shows just how much unions are fighting to regain this power.
Early public employee unions recognized that public employee strikes did not sit well with the public. In exchange for removing the right to strike, unions were given arbitration, a power that likely gained more for unions than striking. The problem with arbitration is it becomes an averaging of the surrounding lowest and highest wages.
As the wealthier tax bases raise their wages and benefits, over time the lower tax base communities rise to the previous average of the higher base. If they both can rise faster than inflation, which they have done by a ratio of 2.5-3 to 1, in only a few successive contract periods the lower tax base pay equals the former high base levels.
Where bargaining has been especially deleterious for taxpayers is unions began focusing on fringe benefits, which are hidden from public view and often hidden from employees themselves and under-appreciated by them. It is now common for public employees to receive benefits that cost 50% of their total pay, whereas the private-sector ratio is around 25%. This “fringes strategy” has paid excess dividends to public workers in two costly areas: health insurance and pensions.
In health insurance, public employees were shielded from the huge run-up in health premiums because they were able to bargain 100% employer pickup of the cost. Such premiums between 1978 and the 2008 economic slump rose 600%, or double the 300% rise in general inflation.
For teachers, they achieved an extra bonus from their employer-paid health insurance. The local unions bargained, and won in 60% of Wisconsin school districts, that the no-bid contract for health insurance go to the insurance company owned by the state teachers union.
That insurance can be called “cadillac coverage.” Not only did it have five-way coverage — doctor, hospital, drugs, vision and dental — each was top of the line. For example, in private-sector dental insurance, when it existed, $1,000 per year was the typical limit per patient in the family. A few companies offered $1,200, and a very few $1,500. Some teachers’ coverage: $2,000 per patient per year.
Similarly in patient-paid deductibles, zero was a common ratio for teachers. When private-sector family premiums were reaching $18,000 per family a year, the teachers’ company was $22,000 to $25,000. School districts are learning they can retain this high coverage, but by bidding can lower the cost greatly, in some cases so far by over 50%.
In pensions, most private-sector employers contribute up to 3% of wages into the company 401(k) plan, and under 401(k) rules, employees may add another 3%, a total of 6% between them. But because the early retirement feature of the Wisconsin plan is so costly, the plan specifies total contributions as high as 16% a year.
In bargaining, there have been efforts to have the school district pay the entire 16%. Under the “Rule of 85,” a Wisconsin public employee may retire as early as age 55, provided he or she has worked 30 years under the plan. Until age 65, when federal Medicare begins, collective bargaining has won employer-paid health insurance covering that gap for early retirees. Often, it even continues after age 65 for a lifetime, thereby exempting retirees from paying their share of Medicare. Wisconsin’s early retirement is out of step with the times, considering longer lives and Social Security raising its age to 66, then to 67. …
The final, and some public administrators say, the worst aspect of collective bargaining, was how the labor agreement came to supersede some civil service rules and other rightful employer prerogatives. An example is how bargaining contracts typically dictate layoffs be only by least seniority, so the last in is the first out. School districts before Act 10 sometimes were laying off their most promising young teachers because of their recent hiring. Under Act 10, for the first time in four decades, public bodies again are creating their own handbook of work rules and benefits, which are correcting these past union-imposed arbitrary situations.
That last paragraph is all the evidence you need of why Act 10 had to become law, controversial and divisive though it was. The employees do not get to decide who works and who gets laid off. That is properly the role of management, whether or not the employees like the managers.
Gov. Gaylord Nelson’s signing of the law allowing government employees to unionize might be the single worst piece of legislation signed into law in Wisconsin in the 20th century. You’ll notice that neither Walker nor any other Republican has mentioned overturning that law, though it should be overturned.
You may remember claims by Da Union during Recallarama that the teacher unions were willing to bargain bigger employee contributions for their benefits. That was a statement that lacked any credibility for two reasons. First, given that there are 427 school districts in this state, no state union official can speak for every school district union head, let alone a majority of the members of all 427 teacher unions. Contract negotiations also take place behind closed doors, meaning Da Union could say one thing in public and do the opposite in private.
Act 10 is one step, and only one step, to giving taxpayers the power over the government we’re paying for instead of politicians and government employees, whose salaries and benefits are paid for by us taxpayers.