News Story

Public Union Reform Is Where the Money Is

A reporter supposedly asked notorious 1930’s bank robber Willie Sutton why he robbed banks, and he responded, “because that’s where the money is.”  Same thing goes for the Public Employment Relations Act today: For Robin Hoods who hope to liberate tax dollars from a privileged union establishment and overcompensated government employees and return it to taxpayers — who really could use the relief — PERA’s the place to go, because that’s where the money is.

In his analysis of government employee benefits, my colleague James Hohman found that public sector pension and retirement health care was well out-of-line compared to the private sector, costing state taxpayers $5.7 billion annually.  Most of these benefit programs were collectively bargained under state laws that put taxpayers at a disadvantage. If we can change those state laws (and whaddya know, we can!), then we can get those benefits back in line, relieve the burdens on taxpayers, and maybe even restore a stagnant state economy.

There are actually two state laws that govern collective bargaining in government.

  • At the state level, there are rules passed by the Civil Service Commission, a panel created by the state Constitution with authority over compensation and job responsibilities for state employees.
  • For all other government employees, including school district, county and municipal employees, there’s PERA, the Public Employment Relations Act, a law passed in Lansing in 1965.

Now there has been talk in Lansing of abolishing the CSC, which is understandable given some of its recent decisions: rescinding a 3 percent employee contribution on health care and extending health benefits to unrelated “friends and companions” who happen to share residences with state employees. These were reckless acts that should be undone. But abolishing the CSC without repealing or revamping collective bargaining won’t necessarily do the trick; there’s nothing that CSC has done that can’t be imposed in a union contract. And over time, as Gov. Rick Snyder gets his appointees on the panel, there’s every reason to expect that the worst will be reversed.

PERA is where the money is, and PERA is where the Legislature needs to act. Out of the $5.7 billion dollars in excessive benefits, only $707 million goes to state employees. That’s not exactly chump change, but that amount is dwarfed by $843 million in excessive benefits directed to state college and university employees, $1.7 billion that go to municipal employees, and 2.5 billion that go into public K-12 education, all of which are subject to PERA. Most of these excessive benefits were negotiated under PERA. With PERA reformed or repealed, local governments will be in a much better position to get these costs back under control.

Given the severity of the state’s fiscal situation, lawmakers may be inclined to think that time is of the essence. To the extent that speedy relief is important, they should bear in mind that  abolishing the CSC will require an amendment to the state constitution, which in turn will require a public vote. Abolition or revamping of PERA can be done through a regular bill, and could take immediate effect. And the Legislature would avoid the risk that government employee unions, with their vast reserves of (taxpayer-supported) political campaign funds, would defeat the needed amendments at the polls.

And while revamping PERA won’t help the state with its own employees, the PERA reform will ease the burden on Lansing by allowing the state to reduce revenue sharing with localities and school-aid funds to school districts. This year the state will provide over a billion dollars to state and local governments and $10 billion to school districts. Not all of that spending is required by the state Constitution; revenue sharing can be drawn down as the costs that PERA imposes shrinks.

In short, PERA’s where the money is, and where the Legislature and the administration have the best shot at making a bold change that will provide relief for Michigan taxpayers.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.