MuniLand

Recently I participated in a podcast for the non-profit Freedom Works. One of the topics was how much influence public unions have on federal, state and local politicians. I said that I had not seen academic studies, but my own belief is that their over-sized political influence has allowed them to increase wages, benefits and advantages for public workers. It doesn’t look all that different from how corporations and Wall Street buy political influence through elections and legislation.

This is from a University of Pennsylvania study that maps union support to favorable fiscal decisions:

Our empirical analysis focuses on municipal elections in the 150 largest cities in the U.S. between 1990 and 2012. We find that challengers strongly benefit from [union] endorsements in competitive elections. Challengers that receive union endorsements and successfully defeat an incumbent also tend to adopt more union friendly fiscal policies.

In 2010, the Wall Street Journal commented on public union political spending at the national level:

The 1.6 million-member AFSCME is spending a total of $87.5 million on the elections after tapping into a $16 million emergency account to help fortify the Democrats’ hold on Congress. Last week, AFSCME dug deeper, taking out a $2 million loan to fund its push. The group is spending money on television advertisements, phone calls, campaign mailings and other political efforts, helped by a Supreme Court decision that loosened restrictions on campaign spending.

In a wildly contentious move in 2011, the Wisconsin legislature voted to end union rights for public workers. Those union rights established pay rates and employment conditions via collective bargaining agreements for most government workers. The new law also ended the deduction for union dues from employee salaries. The Wisconsin State Journal reports how merit raises have replaced automatic annual pay raises:

In the first round of pay increases for Wisconsin state employees since union contracts were invalidated, supervisors delivered an average 6.52 percent boost to 2,757 workers, roughly one in 14 of those eligible.

The payout — totaling $8.2 million — is very different from union-era raises, which were much smaller on a percentage basis but cost tens of millions more because they were distributed to most non-academic employees.

Big trouble is brewing in Chicago, the nation’s second-largest school district, as negotiations between the city and teacher representatives moves closer to a strike deadline on September 10. Chicago teachers have filed a strike notice that, if acted on, would be their first strike since 1987. The main disagreement between the teachers and the city is Chicago Mayor Rahm Emanuel’s plan to lengthen both the school day and the year. The district is offering teachers an eight percent raise over four years, and it wants to form a committee to create a new pay system.

Chicago teachers, the second highest-paid teachers nationally after New York City, say the fight is not about compensation, but rather that the mayor is actively withholding resources from the Chicago Public Schools system. The rhetoric has become inflammatory. Teachers’ union president Karen Lewis called Emanuel “a liar and a bully” while exhorting a union crowd at a Labor Day rally.

The political ramifications of the Chicago feud stretch far beyond the shores of Lake Michigan. Emanuel was previously President Barack Obama’s chief of staff. He is still a leading Democratic figure representing an important voting block in Illinois. The opposition he has created with Chicago teachers, an important base of the Democratic party, could not have come at a worse time as the incumbent president and Democratic-controlled Senate fight to stay in office. There is more at stake with a teacher’s strike than whether Chicago school children will miss a few days of school.

Bloomberg’s Romy Varghese wrote an excellent piece about escalating wages and pension costs for public safety workers that mirrors much of what I’ve been writing about several bankrupt California cities. As municipal revenues slowly inch up, mandated wage and pension increases have been ravaging budgets:

Rising personnel costs have helped drive revenue-strapped cities toward insolvency from coast to coast.

“A majority of their costs are tied up in people,” said Christopher Hoene, research director for the National League of Cities in Washington. “If you look at any organization of any size around the country, you’ll see anywhere between 60 to 80 percent of their costs are in personnel-related expenditures.”

How does a bankrupt city pay its public safety workers twice the median household income of the area’s residents? More important, why haven’t the city manager and council stopped this wage bonanza?

In Stockton, California, public safety workers earn on average 126 percent of the maximum salary and at least 200 percent of the minimum wage for their respective wage categories. The California State Controller’s Office has all the data, and it’s not pretty.

Stockton’s median household income was $50,011 in 2010. In contrast, the average total wage paid to a city police worker was $93,111. For employees of the fire department, it was $110,303. Admittedly, these are dangerous professions, but surely they are not so dangerous as to require pay of double the median household income of the entire community.