Tag Archives: Leo Troy

Public Sector Union Reform in the States

The New York Times features an article on how some states are looking to scale back the power public sector unions currently enjoy. Prompted by the scope of the fiscal impact that pensions and other benefits are having on state and local budgets, Governors and Legislators are considering taking away collective bargaining as well as potentially banning public sector workers from organizing. The head of the American Federation of State, County and Municipal Employees says these moves are  just payback for public sector unions’ financial support for particular candidates.

The late 20th century rise of the public sector union is one of the most profound and until recently, largely overlooked, changes that occured in American government. As Rutgers economist Leo Troy has noted the rise of public sector unionism represented a “structural break” from the Old (private sector and industrial) Unionism. However, many labor economists continued to treat the two as similar a major misstep in understanding the nature, goals, and implications of government unions.

Mischievious Factions: The New Unionism

There are two Executive actions to remember when considering the fiscal straits of many state and municipal governments.

E.O. 10988, signed by President Kennedy in 1962 allowedpublic sector workers to unionize. Since 1962  public sector unionism has swelled, creating what Rutgers economist Leo Troy calls, “The New Unionism.” Today 36.8 percent  of public sector workers belong to a union. (Union participation is most dense on the local level at 42 percent.)

In 1993, President Clinton signed the Hatch Act Reform Amendments, allowing government workers to engage in political activities, such as fundraising.

Put them together and watch the near-bankrupting of California and New York, with New Jersey not far behind.

Unlike private sector unions which must negotiate with private owners, as Fred Siegel and Dan DiSavlo writing in The Weekly Standard point out…” public sector unions have no such counterweight. They are a classic case of client politics…with influence on both sides of the bargaining table.”

Public sector union workers campaign and vote for politicians who then control pay and benefit negotiations.

Seigel and DiSalvo recount how this worked in Washington State. In 2002 the Association of Federal, State, County, and Municipal Employees (AFSCME) got collective bargaining rules lifted. By 2005, their numbers doubled. More dues means more political influence. In 2004, Christine Gregorie was elected governor in a close race that was decided after AFSCME donated $250,000 for a recount. She quickly repaid the favor, negotiating salary contracts with double-digit increases.

The New Unionism is the faction politics that James Madison warns of in Federalist 10 – the only, “method for curing the mischeifs of the faction: the one by removing its causes, the other by controlling its effects.”

With the interests of politicians and their clients in such symbiosis, the extent to which such corrosive lobbying can be reversed depends on how much fiscal pain those ultimately paying for public services are willing to bear.

Furloughs v. Bankruptcy: The New Unionism

New Jersey continues to stare straight at bankruptcy.  Revenue projections indicate that this is not an ordinary crisis . A shortfall of $2 million is projected.  Income tax revenues have fallen 40 percent. It is going to be painfully tough for Governor Corzine to balance the budget by June 30th. His latest proposals to cut spending include a furlough for union employees, a request for a $2 billion line of credit, less aid for colleges, and a $125,000 cut in aid to 12 independent living centers for the disabled. But program beneficiaries are not happy. There is a protest against the latter today at the Trenton statehouse.  Union workers are threatening to take the governor to court over his proposed furloughs.

Part of the driving force behind New Jersey’s imminent bankruptcy is the growth in salaries, pensions, and health benefits for unionized workers, including teachers. The state’s income tax is 100 percent Constitutionally dedicated to providing “Property Tax Relief.” This is a misnomer. It actually goes mainly (70 percent) to supplementing school budgets, and most of that take goes to 31 Abbott districts. Administrative  costs for teachers have skyrocketed in these districts over the decades.

Another source of trouble – the state’s pension system – negotiated by unions, agreed to by the state, with the costs passed through to municipalities, which are responsible for paying for fire and police benefits.  Result – the second highest property taxes per capita in the nation.

The mark of  public sector unions in directing New Jersey’s state and municipal budgets has been strong and devastating. And New Jersey is by no means alone. Steven Malanga of the Manhattan Institute,  writes in today’s Wall Street Journal about a very important distinction that bears repeating:   these are public sector unions – not private sector,  heavy industry unions

This phenomenon – the decline of the private sector union and the rise of the public sector union was identified and developed by my  economics professor, Dr. Leo Troy of Rutgers.  See his book, The Twilight of the Old Unionism.  His work on this subject is worth reading.