The Angry Economist

If this isn’t greed…what is? How Public Employees Unions Can’t See the Forest for the Trees
Posted by William P. McGowan, Ph. D. on Aug 28, 2005 - 7:03:00 PM

A friend of mine is a reluctant member of the California Teachers Association (CTA), the union that represents public instructors here in the Golden State.  In the June 2005 issue of California Educator, the union monthly, the organization’s president Barbara Kerr denounced the governor’s intention to build support for his initiatives by spending $30 to $50 million on direct advertising that will build a myth that California’s public employees unions are “greedy.”


Myth, hmmm?


Like so many Sacramento and Washington political insiders, Kerr suffers from beltway myopia. Like it or not Ms. Kerr, the unions that represent most if not all of the state, county and municipal employees (including the teachers) are greedy. One of the main reasons cities and counties are going broke these days is not that they aren’t generating more revenue than they did in years past, but that their expenditures (mainly on salary and benefits) grew faster than revenues.


Let us be clear: the largest problem with public employee unions is not the pay they get for their employees, but the benefits.  Raising current salaries substantially across a huge employee base is always difficult in private business, and even more so in the public arena.  This is why AFSME, the CTA and other public employee unions have focused most of their negotiating on benefits, whose costs are long term and permanent.   The problem is that the unions have been too successful.  In one Southern California county, executive level employees get to retire at 100 percent of salary after a mere 20 years on the job.  Worse, they also get to “bank” vacation time and receive a cash payout when they retire.   Already granted a generous six weeks per year, it is no surprise that many county employees leave with a bonus check equal to almost a year’s worth of “banked” vacation.


A long-term study of public education finds a trend of diverting a larger percentage of education revenue to salaries and benefits coincided roughly with the passage of Proposition 13 here in California.  From about 1980 onward, school districts increasingly cut capital budgets for things like new schools and maintenance in favor of funding current demands for salaries and benefits.  Interestingly enough, the same trend appears nationally at about the same time, so Proposition 13 is not solely to blame.  In essence, nationwide the teacher’s unions were eating their seed corn, counting on the taxpayers to bail them out later when the inevitable crisis arrived.  That many of our schools are falling down now, 20 years after this systematic neglect began, is no surprise.


This all brings us back to the notion of greed and public employee unions.  Let me be clear that the people who negotiated for the teachers, the prison guards and AFSMCE are all dedicated, intelligent, hard working people.  They understand better than most the funding machinery of the public agencies where their union members work, and so they understand the financial impact of their demands.  What makes them so different from union leaders of the past, however, is caring about the impact these demands have on their employer’s bottom line.  


The founder of the UAW, Walter Reuther, bargained as hard as the managers of General Motors who opposed him, but in the end he understood that the UAW and GM were in the same boat, and without quality, competitive products, they failed together. Perhaps because the only vibrant union these days is a public employees union, this sensitivity to the quality of product actually delivered to the public has been ignored. While the CTA insists that it speaks on behalf of California’s children, the reality has been that it has spoken almost exclusively for the benefit of its members for more than 20 years.


If that isn’t greed, then what is?


You can reach William P. McGowan at