In yesterday’s post I described the key issues around the drama in Madison, Wisconsin. In this post I’d like to delve more deeply into the issue of collective bargaining restrictions which are part of Governor Scott Walker’s controversial budget.
There are many aspects to this particular issue, but one of the most critical of these is the concept of “unfunded mandates”. When public sector unions negotiate contracts in state capitals, they negotiate terms and conditions which are then valid state-wide, and all local communities must comply with and fund the fulfillment of these state-negotiated contracts, no matter what the cost and no matter the will and ability of the citizens of those communities to fund them.
This creates financial “mandates” on local communities, and these communities must then collect enough tax to meet the mandates. State legislators, whose largest campaign contributors are public sector unions, are more than happy to satisfy their donors by agreeing to extremely generous health plans and retirement plans for these donors. After all, it’s no skin off their back, Madison gets to tell Racine what to do, but Madison makes no sacrifice itself.
What does this create? Let me give you an illustration. In my home town we are under the shadow of crushing local school taxes. Over the last few years our local school board has bravely (and painfully) done their best to minimize tax increases– this in spite of the fact that teachers in our community have received automatic 7% pay increases each year over the last 3 years, across the board, all subjects, all quality of teachers from best to worst. This while incomes in the private sector are flat to down. We have managed these costs by reducing hiring, increasing class size, and through teacher and administrator layoffs. But what we haven’t done, and don’t have the ability to do, is change the outrageous health and retirement benefits our teachers receive, and this is a huge cost burden for our citizens.
I speak to responsible members of our School Board, and I ask them why we can’t stem the tide of tax increases and prevent layoffs of some of our teachers. Their answer? A huge portion of the cost incurred is completely out of their control because of state-mandated collective bargaining terms that REQUIRE our town to pay what we do for health and retirement benefits for our teachers. The School Board, our local government, and the citizens in our town cannot, by law, change these benefits, under any circumstances.
As another illustration, many of you are familiar with “unfunded Federal mandates”. These are mandated expenditures required by the Federal government, passed down to state governments. These have been crushing on state budgets, and they manifest themselves in constantly rising taxes, and huge deficits. The case in Wisconsin is conceptually the same, and it is the same in New York and more than 30 other states: state governments telling local communities what they have to pay their local employees, without providing any funding for them.
Another interesting aspect of these unfunded mandates on communities surrounds the current trend of Governors (especially Republican governors) to put “caps” on local property tax increases, usually at around 2% per year. This is an approach I generally support, but consider the contradictory nature of this. A state government tells the local government they can only raise taxes x%, but then mandates huge payments that must be made in order to satisfy state-established public sector union benefit payments. These policies restrict the ability to collect revenue, while forcing additional expenditures!
The solution to this issue is to stop state collective bargaining at state levels and let local communities and local public sector employees determine what their public servants should be paid. We also need to end the absolute corruption of the vicious cycle of public sector unions donating to politicians and receiving virtually everything they ask for in return for these donations.