Shooting at Flies: Blaming Public Employee Pensions for Budget Shortfalls

The Orange County Register’s Brian Calle fired off a hyperbolic rant on Sunday, January 30, 2011 blaming public employee pensions, and public employee unions for crushing budget shortfalls he likened to a tsunami that has reached the shoreline. Great rhetoric if you want to distract people with someone or something to blame, not so good if you actually care about accuracy.

Calle’s commentary followed a similar dump the previous day of false and misleading rhetoric exhaled by columnist Steven Greenhut, Bankruptcy one of state’s few options, which advocated for the ability of state governments to declare bankruptcy to address their budget woes, and most importantly for Greenhut, to tear up negotiated contracts and the pension benefits of public employees.

The common thread of both commentaries was the lie that public employee pensions are the problem, and that summarily dismissing those obligations will solve the problem of government budget shortfalls. This false claim is designed to demonize public employees and their right to collectively negotiate for pay and benefits.

Calle writes: “Lawmakers must also take steps to curb the power of public employee unions. In the early 1900s, unions formed to protect workers from rampant abuses and exploitation. Today they have evolved into massive special interests intent on protecting and procuring greater pay and benefits funded with tax money. To curb union influence and prevent future pension outrages, state lawmakers should begin limiting the role of unions in collective bargaining; change the way unions can collect and spend member dues on political causes, and alter laws to make contract negotiations public.”

Let’s put the costs of public employee pensions in their true context. In my article Busting The Myths About Public Employee Pension Costs I pointed out that in California, public employee salaries represent 7.5 percent of the total state budget. The costs for pension benefits are another 2.5 percent of total state spending. These costs are neither tsunami, nor crushing. If we were to eliminate all state payroll costs, including pensions and health care, you would not even address half the current budget shortfall. In March of 2010, forty-one percent of the State general fund budget was earmarked for public education, 12 percent for higher education, and 10 percent for corrections.

Calle and Greenhut argue that State bankruptcies are a reasonable solution to address budget shortfalls. The irrationality of this conclusion can be found in the history of municipal bankruptcies. In the cases of both Orange County and Vallejo, bankruptcy did not dissolve union contracts or pension obligations. The bankruptcy court rebuffed the Orange County effort to unilaterally dissolve its union contracts and Vallejo found that it was necessary to negotiate with its employees in good faith rather than unilaterally dissolve their contracts.

Bloomberg writer Joe Mysak in his article Busting Unions With Bankruptcy Isn’t Chapter 9 Way says:

“The reason bankruptcy is so rare in the municipal market is because it could blow up the borrowing costs of every government in a state, as well as the state itself.”

“The bankruptcy judge is there to help the parties negotiate a plan of adjustment, not as some avenging angel intent on gutting the police union.”

“Full-service municipalities don’t enter Chapter 9 in order to liquidate or to fire the entire department of sanitation. They do so in order to continue as going civic concerns.”

“So even if a judge rejects some collective-bargaining agreements, the municipality will still be talking to the people who provide police, fire and sanitation services.”

Jeffrey H. Keefe, associate professor of labor and employment relations at the School of Management and Labor Relations at Rutgers University concluded in his report Debunking the Myth of the Overcompensated Public Employee that public employee unions represent a response to the “power exercised by government over many critical occupations, where employees have no viable labor-market alternatives to government employment. Additionally, it is well known that taxpayers do not want to pay higher taxes and exert considerable pressure on elected representatives to resist increases in compensation, creating a formidable incentive and opportunity to hold government pay below market. Unionization represents a viable legal response to employer labor market power. Public-sector workers’ compensation is neither the cause, nor can it be the solution to a state’s financial problems. Only an economic recovery can begin to plug the hole in the states’ budgets. They do not deserve bullying or our ridicule and condemnation by elected officials and the media looking for scapegoats.”

Employee unions in Orange County have taken the lead in California and the nation in working proactively with county and local governments to negotiate common sense and realistic solutions to address efforts to reduce the overall cost of providing government services. From finding ways to reduce and eliminate waste and inefficiency, to negotiating pension benefit alternatives that reduce long-term costs, public employees through their unions, have stepped up to help solve the problem.

Rather than shooting at flies with shotgun rhetoric, talking heads and anti-union elected officials need to stop demonizing and start working with public employees.