Shadowbosses: Government Unions Control America and Rob Taxpayers Blind (26 page)

Let’s take the supposed leader of the Free states, Texas. While the average American paid 9.8 percent of their income in state and local taxes, the average Texan pays almost 20 percent less than that—7.9 percent. And Texas has also experienced brisk long-term growth, which has significantly increased its tax revenues. From 1990 to 2010, Texas state government revenues nearly tripled, even though Texans have a lower tax burden than other states.
³³
But tax burdens are still too high everywhere, driven up largely by growth of government payrolls.

So you’re paying high taxes nearly everywhere thanks to the increased numbers of government workers and their high salary and benefits. Most disturbing, your tax dollars are probably supporting someone who
makes more money than you do
. A recent analysis of government worker compensation confirms that state and local government employees are raking it in compared to their private sector counterparts.
³⁴

In America’s Pacific region, where close to two-thirds of state and local government employees are unionized, government employees’ hourly compensation is more than twice as high as private employees’ hourly compensation. Even in lightly unionized regions, government employees’ compensation is still 25 percent higher than private sector compensation.
³⁵
Similarly, economist Larry Kudlow reports: “Nationwide, state and local government unions have a 45 percent total-compensation advantage over their private-sector counterparts… The politically arrogant unions are bankrupting America.”
³⁶

So can’t taxpayers in Union states just organize ourselves into “good government” groups, cut back excesses, and work to lower taxes in these states? It’s not going to work, says Steven Malanga of the Manhattan Institute. “The next lesson we are likely to learn,” he writes, “is that voter
revolts against new taxes are no longer effective because of the might that these public-sector groups now wield.”
³⁷
Basically, the unions are so powerful in the heavily unionized states that taxpayers can’t even organize effectively against the union machine there. It’s like you’re sitting in the ejector seat of a fiscal helicopter, and you’re buckled in tight.

“What have unions done to cripple the Union states financially?” you ask.

“How much time do you have?” we might reply. Government unions don’t just negotiate for contracts that increase pay and benefits for the workers. They also negotiate for union work rules in employment contracts that allowing “featherbedding,” which is requiring that more workers be hired than are really needed for the job, or paying workers for more time than is actually worked or is necessary. These are hidden costs that unions negotiate for in employment contracts for their government employee members.

For example, police in the northern New Jersey town of Englewood
can earn roughly $3,000 extra a year in so-called “muster pay” by showing up for work just fifteen minutes prior to their shift and changing into their uniforms. Is it really necessary to pay them for this time? When was the last time you got paid extra for showing up a bit early to work to get ready for your day?

It isn’t just the police that have featherbedding rules. An audit of the New Jersey Turnpike Authority found $30 million in featherbedding. Abusive practices included extensive non-merit bonus payments to employees and management, extra bonuses for workers who worked on their birthdays, and a practice of cashing out sick days every year to get around a $15,000 limit on sick-day cash out at retirement.
³⁹
All this excessive pay was for tollbooth workers who have been kept on government payrolls under union contracts—even as automated tollbooths have made many of these jobs obsolete.

Unions also negotiate terms that allow manipulation of overtime pay and pensions. For the rest of us, working overtime is a normal part of the job. And for small business owners, staying late is part and parcel of keeping their businesses alive. That used to be part of government service, too—government workers made an effort to go the extra mile just to do a good job. Now, however, overtime is a union-negotiated perk of being a government employee.

The government employee union representing New York City’s Metropolitan Transit Authority (MTA) appears to be driving the bus over the city’s taxpayers. In 2010, a
New York Times
reporter explained how union contracts jacked up taxpayers’ cost of compensating an employee to
double
his base salary. For example, one recently retired MTA conductor allegedly made nearly a
quarter million dollars
, more than the authority’s chief financial officer. The conductor’s base salary was a bit less than $68,000, not extraordinary in a very high-cost city. All the other money came from overtime and money from unused sick days and vacation time he got upon retirement. All in all, nearly eight thousand MTA employees raked in more than $100,000 in salary in 2010.
⁴⁰

Thanks to the unions, staying late often means juicing your retirement income. This was the conclusion then New York attorney general
Andrew Cuomo came to in 2010 when he launched a probe into public-sector “union contracts that allow abuses to happen.”
⁴¹
When a union-supported Democrat like Cuomo (now governor) gets up in arms about government union-boss skullduggery, you know there must be a worm in the Big Apple.

Cuomo gave an example of one police officer who had a $74,000 annual salary. He received another $125,277 in overtime pay. How did he log so much overtime? This officer, like many unionized public employees who monopolize overtime shifts in any given year, was nearing retirement. His taxpayer-funded lifetime pension benefits would be based on the average of his last three working years’ income. So he purposefully arranged for extra overtime shifts so that he could bulk up that three-year average prior to stepping down. Such “pension-padding practices” cause a “one-two punch to the taxpayer,” charged Cuomo.
⁴²
Actually, they cause a one-two-three punch to the taxpayer. First, we have to pay the officer’s inflated salary. Next, we have to pay his inflated overtime. Finally, we have to pay his inflated pension based on his inflated salary and inflated overtime.
⁴³

In nearly any business, large or small, a supervisor who allowed even one employee to get away with more than doubling his annual base salary by racking up overtime would get canned in short order. But let’s remember—it’s the government employee unions pulling the strings, electing their own bosses. And under current rules, neither the government nor the government workers would have an easy time firing the unions.

No wonder New York State is in serious trouble, as Herbert London, president emeritus of the Hudson Institute, reminds us: “There is no doubt New York State has extraordinary assets: an educated workforce, potable water, cheap hydro-electric power, magnificent scenery. But these assets have been surpassed by manipulative leadership, profligate spending, and the appeasement of municipal union demands.”
⁴⁴
Despite all its assets, New York State and other heavily unionized states are headed in the wrong direction.

And if New York is bad, the crony union city of Chicago is even worse. In Chicago, a 1991 law allowed union officials who once worked for the city to have their city pensions determined by their higher union salaries. The
Chicago Tribune
reported that this law allows union
officials to “land public pensions that far exceeded their pay as city employees—even as they continued to earn lucrative salaries from their unions.”
⁴⁵
But union officials took this abuse one step further in a double-dipping pension scheme. Eight of Chicago’s highest ranking union officials reportedly received pension credit
twice
for their union working years—once for determining their city pensions and once for determining their union pensions. “Some of those labor leaders were participating in up to three pension funds at the same time, accruing retirement benefits that reached as high as $500,000 a year.”
⁴⁶
One union official receives a “$158,000 municipal employees pension after being rehired at the Department of Streets and Sanitation for one day in 1994,” working on union matters ever since. While officially retired from his city job, the union official continues to make $260,000 a year from his union job, from which he reportedly will receive an additional pension.
⁴⁷

These double-dipping pension schemes are considered abusive even by Chicago standards, but in a different pension-padding scandal, two union lobbyists there netted hefty city pensions perfectly legally with only a single day’s work.
⁴⁸
Legislation passed by the pro-union legislature allowed a brief window during which union officials could qualify for a teacher’s pension by teaching in the school system for just one day. Two union officials who each substitute-taught school for a single day during the window are now legally entitled to a full teacher’s pension—based on their union salaries and years of service to the union. Because their salaries are higher than the average teacher, their teacher’s pensions are estimated to be double what a teacher would normally receive. The
Tribune
reported, “Over the course of their lifetimes, both men stand to receive more than a million dollars each from a state pension fund that has less than half of the assets it needs to cover promises made to tens of thousands of public school teachers.”
⁴⁹
Is it any wonder that the heavily unionized states are heading for an abyss?

And there is even more bad news. Government employees are extra burdensome for taxpayers because they retire earlier than other Americans. Early retirement is a union creation—and makes no fiscal sense.
Retiring government employees early places a huge burden on the next generation of taxpayers.

For example, in New York City, “firefighters and police officers may retire after 20 years of service at half pay—which means that, at a time when life expectancy is nearly 80 years, New York City is paying benefits to 10,000 retired cops who are less than 50 years old,” notes labor analyst Daniel DiSalvo. That’s twenty years of work for thirty years of retirement income.
⁵⁰

The unions
love
these early retirement schemes. Why? Because for every retiree, there’s a new hire. Which means that both the retiree and the new hire have to pay dues to the union. It’s two for the price of one for the government employee unions—and one for the price of two for the taxpayers. Of course, retirees pay less union dues than active members do, but they still do pay some dues and fees to the union. Plus, by substituting a new worker for an old worker, the union gets a longer payout—the new employee has his whole government career ahead of him during which he will pay the union dues. It is a great scheme for the union to guarantee its future income stream.

As virtually everyone recognizes at this point, pensions have destroyed full-fledged industries like the American auto industry. General Motors drove itself into bankruptcy because it had triple the number of retirees and widows as actual workers. GM provides one million people with health-care coverage, but has less than 100,000 people working for it. As Mark Steyn writes, “How do you make that math add up? Not by selling cars: Honda and Nissan were making a pretax operating profit per vehicle of around $1,600; Ford, Chrysler, and GM a loss of $500 to $1,500. That’s to say, they lose money on every vehicle they sell.”
⁵¹

The U.S. car manufacturers are no longer car companies—they are pension companies. Our government will soon be a pension company itself as a greater and greater percentage of state and local revenue goes to pay for retirees instead of active government workers. And ultimately, being a pension company will even prove unsustainable for our
government. The cost of paying for retired government workers with rich union-negotiated pensions ultimately will be too much for the taxpayers to bear.

California has the notorious, budget-busting “3% at 50” scheme. At first, this deal allowed only California Highway Patrol officers to retire at 50 and a full pension based on 3 percent of their final year’s pay times the number of years worked. For example, an officer hired at 20 years old and retiring after 30 years on the job gets a pension equal to 3 percent times 30 years, or 90 percent of his final year’s pay, which is later indexed for inflation. Sweet deal for police officers, right? Then, the California Legislature authorized cities, counties, and school districts to negotiate the same deal for their employees.
⁵²

This is usually the way this works—once one group of government employees gets a benefit, government employee unions demand the same benefit for other groups of workers, even though being a policeman is more demanding and dangerous than being an office worker. And extending the greatest possible benefits to the greatest number of government employees drives up costs exponentially.