A year after the Supreme Court’s Janus decision, the political nature of government labor unions is only more clear.
For too long, the political class has failed the people of our state. At $888 per year for each of Rhode Island’s one million residents, a family of four is paying over $3,500 annually for excessive compensation deals for government workers, while the basic needs of their own families are being ignored by politicians.
With almost two-thirds of these excessive costs being heaped upon municipal taxpayers, our recent Public Union Excesses report further estimates that property taxes could be reduced by 25% if more reasonable, market-based collective bargaining agreements were negotiated.
The RI Center for Freedom & Prosperity’s new board member, Judge Robert Flanders, recently accompanies me for an appearance on the State of the State show to discuss the effect that state-level rulings and legislation can have on cities’ and towns’ ability to manage themselves and their budgets.
This summer is the perfect time to ask yourself the question: What is my union doing for me? Is it representing my values and does it have my best interests in mind?
My weekly call-in on John DePetro’s WNRI 1380 AM/95.1 FM show, last week, was about the General Assembly’s budget, the million-dollar chiropractor, and the problems in Warwick’s schools.
The end of the 2019 school year coincides with an important milestone: June 27th will be the one year marker since the U.S. Supreme Court issued its landmark decision in Janus v. AFSCME, which determined that forcibly collecting union dues and fees from public workers, including teachers, is unconstitutional.
This summer is the perfect time to ask yourself the question: What is my union doing for me?
Maybe I’m being a little too cynical, but a serendipitous press release from the Rhode Island Senate at least provides an opportunity to contemplate how things operate at the State House.
As readers probably have heard by now, the Democrat leadership of the Senate engaged in an unprecedented last minute political stunt by pulling an abortion bill that decriminalizes fetal homicide from the Judiciary Committee and sends it to the Health and Human Services Committee, which everybody expects to pass it. The reason for this unusual move was that Senate Republicans looked like they were going to leverage their rights as a minority under the chamber’s rules to add two votes to the “nay” side and stop the radical, unnecessary, and deceptive legislation.
The odd thing about it is that Senate Majority Leader Michael McCaffrey (D, Warwick) and Senate President Dominick Ruggerio (D, Providence, North Providence) could have done the same thing. Instead, the Senate president managed to ensure that the bill passes committee without admitting that he voted for it.
Now the press release posted on the Web the same day as the committee maneuver:
The Senate today passed legislation (2019-S-803Aaa) sponsored by President of the Senate Dominick J. Ruggerio (D-Dist. 4, North Providence, Providence) that takes a new approach to economic development on large tracts of state land. Spurred by delays and impediments imposed upon the Hope Point Tower proposal for the I-195 Redevelopment District, the bill intends to create a more streamlined process for approvals on these state-owned parcels moving forward.
“We have a rare opportunity for development at the former I-195 land and some other areas across the state,” said Senator Ruggerio. “In the I-195 District, a developer is hoping to invest more than a quarter of a billion dollars to create an iconic structure that redefines the skyline. We should have welcomed this investment with open arms. Instead, we did everything we could to chase the developer away. Thankfully, he’s still here. This process has sent a terrible message to anyone looking to invest in Rhode Island.”
This is a big-money deal of particular interest to labor unions, for which Ruggerio worked until he retired after becoming Senate president. The only reason I hesitate to link this with the abortion bill is that the vote wasn’t really that close: 28 to 8. On the other hand, eight “nay” votes is pretty substantial in our one-sided legislature. Had 10 votes flipped, the bill would have failed. When the bill was in Senate Judiciary, four flipped votes would have stopped it.
So, the lesson: When considering the up-and-down votes on any particular bill, you can’t assume legislators are judging the merits alone. The lives of unborn children, in this case, can perhaps be sacrificed for the sake of a crony development deal. Or perhaps some other backroom deal has been struck so that the House will stop the legislation in exchange for a return favor from the Senate.
With the General Assembly session nearing the end, we fully expect the new state budget to contain no meaningful remedies to the many problems that plague our state, such as high taxes across the board, high energy and healthcare costs, and onerous regulatory burdens on job-producers. In our Public Union Excesses report, we identified that there are $888 million per year in excessive collectively-bargained costs, responsible for driving up local property taxes by up to 25%.
The union-management dynamic within the context of government employment changes the way both sides see compensation packages.
While we must be wary of giving credit-rating agencies the power to dictate the legislation of our elected representatives, Rhode Islanders should contemplate the significance of this development, which Katherine Gregg reports in the Providence Journal:
A warning from one of the nation’s largest credit-rating agencies, Moody’s Investors Service, has revived the debate over the union-backed continuing-contract legislation that Gov. Gina Raimondo signed last month over the objections of city and town leaders.
The new continuing-contract law indefinitely locks in wages and benefits in expired public-employee contracts. The teacher union lobbyists who took the lead in pushing the bill said it was aimed at preventing cities and towns from unilaterally slashing pay or making employees pay more for their health insurance during deadlocked negotiations.
“The law has the potential to provide collective bargaining units with advantages in negotiations,’’ Moody’s public-finance division wrote in a special report out Thursday that echoed one of the biggest concerns raised by Rhode Island mayors and town administrators.
Moody’s worries that the law may be “a significant impediment to local governments’ ability to negotiate labor contracts,” and as a local elected official participating in negotiations, I can confirm that to be the case. It isn’t just a matter of unions’ refusing to make concessions that help government agencies balance their budgets.
The legislation — and even just the fact of its passage, along with the firefighter overtime bill — is already shutting off areas of discussion. A municipality and union trying to balance current expenses with employees’ long-term interests can’t trust that the state won’t change the rules out from under them. Even in a situation when the current members of a particular union have long demonstrated a desire to work cooperatively with management, decision-makers can’t consider only that relationship, but must worry about the unknowns of what future union members might do and how union-friendly legislators might change the rules on their behalf.
As with so much in Rhode Island government, the legislature and governor have demonstrated that they don’t take the broad, long-term effects of their actions into consideration. One imagines that if they were ever to acknowledge the law of unintended consequences, they’d move swiftly to pass legislation repealing it.
One of the most objectionable schemes of government union collective bargaining process, which excessively drives up the cost of government for taxpayers, in ways or at levels that do not exist in the private sector, is being paid for not working.
Laws regulating corruption in government are the farthest thing from open and fair if they only apply to one side of an issue.
The grotesque incongruity of some of the highest per-mile infrastructure spending and some of the worst roads and bridges in the country.
My weekly call-in on John DePetro’s WNRI 1380 AM/95.1 FM show, this week, was about the governor’s decisions about labor legislation, abortion, and the new education commissioner.
Wow, has our report shaken up the status quo! We have done the research, and we have connected the dots. The number one driver of the Ocean State’s declining population and jobs numbers – the high property taxes we all pay – can now be directly connected to the excessive costs of government, as mandated by government union collective bargaining agreements.
Now, we are asking your support to help us spread the word.
The evergreen-contracts-for-teachers bill seems to have been the last stone of realization for Erika Sanzi, raising the question about which of the three possible decisions she’ll make.
My weekly call-in on John DePetro’s WNRI 1380 AM/95.1 FM show, this week, was about the likely future of legislation supporting organized labor and promoting abortion, as well as the governor’s chances of spinning her performance for state and national consumption.
At $888 per year for each of Rhode Island’s 1 million residents, a family of four is paying over $3,500 annually for excessive compensation deals for government workers, while the basic needs of their own families are being ignored by politicians.
With almost two-thirds of these excessive costs being heaped upon municipal taxpayers, the report further estimates that property taxes could be reduced by 25% if more reasonable, market-based collective bargaining agreements were negotiated.
A simple debate about numbers that ought to be easily resolved points to a key strategy of special interests to maintain their unfair status quo.
Beyond these extreme financial costs, an even more corrosive impact from this political cronyism is at play. People have lost trust in their government and are fed up with betrayals from lawmakers who have forgotten them, who cater only to special-interest concerns. Lawmakers make it ever-harder for people to take care of their families and reside in Rhode Island.
For these reasons, Rhode Island is not keeping pace with the rest of the nation when it comes to jobs and population growth. After 10 years of perhaps the slowest economic recovery among all states, Rhode Island’s political leaders are failing on their promises to help the average family.
Instead, by heaping more privileges upon those who help get them elected, politicians continue to lose the trust of the people, who are also losing hope for their state. These tragic circumstances have conspired to make it a virtual certainty that the Ocean State will lose a prized U.S. congressional seat after the 2020 national census because of its stagnant population growth.
Rhode Island strangles its families and businesses with taxes and regulations, but often, the sheer unfairness of the system can be the real poison. As a member of the Tiverton Town Council, yesterday I participated in a “business walk” hosted by the Newport County Chamber of Commerce, which involved stopping in to talk with some business owners around town.
Of course, we heard about the problem of taxes, but the subjects that really animated business owners would better be classified as injustice. The cost of government labor was seen not only as a cause of high taxes, but also as a budget imbalance preventing infrastructure improvement. Similarly, the capriciousness of enforcement, with the rules not seeming to apply fairly to every business and changing depending on which government inspector paid a visit, is irksome beyond the cost.
Even after figuring out how to overcome all the regulatory obstacles that the state throws in their way and even after building high taxes, regulation-driven energy costs, and government bungled healthcare expenses into their business models, they still never know when an inspector will find some new rule to enforce or the legislature will come up with some new fee or obstacle to impose.
My weekly call-in on John DePetro’s WNRI 1380 AM/95.1 FM show, this week, was about the Wall Street Journal turning on Gina and the cost of unions and the legislation they inspire.
Dr. Dennis Sheehan and I had the pleasure of appearing in-studio with Mike Collins and Chris Maxwell this past Saturday for their WPRO show, Changing Gears, to talk about the report that we co-authored for the RI Center for Freedom & Prosperity about the excess costs of state and local government attributable to collective bargaining with labor unions.
With the third highest property taxes in the country, a major encumbrance within an overall anti-taxpayer and anti-business climate that has dropped Rhode Island into bottom-10 rankings in a number of critical national indexes, the excessive costs of collectively bargained government services can be directly linked to this statewide problem.
A summary for Pensions & Investments of Rhode Island’s latest report concerning local pension plans passes a spotlight quickly past the ways in which government agencies, aided and abetted by labor unions, obscure the costs of benefits:
For the underfunded plans, assumptions about investment returns and payroll growth “may not be realistic,” said the report, which cited Providence’s 8% return assumption as the highest in the state.
“In more than a few cases … local pension liabilities are, or have the potential for, crowding out other important budget priorities.”
Take a look at the scorecard for Providence on page 22 of the report. The plan is 26.3% funded, which means it would have to have about three times more money in the fund collecting investment returns right now in order to be solvent. The city assumes that its payroll will only grow 3.5% per year, which must account for both raises and new hires. It also assumes an unrealistic 8% return on its investments every single year, which means it can put less actual money into the plan each year, because it assumes more will come from investments than is likely.
To top it all off, Providence has more former employees collecting pensions than it has employees paying into the system. Consequently, it pays out more every year than it adds to the fund, by about 4%.
Think about that. The city’s pension fund is actually shrinking, not growing.
In order to buy labor peace, Rhode Island governments have made huge retirement promises. So they don’t break the bank, they’ve then disguised the true cost with unrealistic assumptions.
That sword cuts both ways, though. Because the pressure that the pensions should be applying to budgets is drastically understated, labor unions are able to push for bigger raises and benefits for active employees, which has crowded out the money for appropriate pension funding. Now that accounting standards are making pension funding more visible and even mandatory, it has joined with other labor costs in squeezing the budgets for other expenses — even as prevailing wage and other union rules have ensured that the money for those other expenses cannot go as far as it should.
As the RI Center for Freedom & Prosperity’s new report on excessive labor costs shows, these and other problems are creating a huge additional burden on our state, which is already struggling to meet budgets while allowing its economy to grow.
Today, the RI Center for Freedom & Prosperity released a major study that I coauthored with Penn State business professor Dennis Sheehan about the effects of collective bargaining in the public sector on the cost of government. Using both statistical estimates and reviews of specific contract provisions and budgets, we found that the state government’s cost of labor is $96–299 million too high, with an additional total for all municipalities, school districts, and fire districts coming in at $228–825 million.
Our “best estimate” for the combined total excess for the whole state is $888 million, or 21%. This is money that state and local governments should be able to use for other purposes, including tax relief. In this sum, we see the primary reason that state and local governments never seem to have enough money to accomplish basic objectives like maintaining buildings, roads, and bridges and why our taxes are still among the highest in the country.
There is a lot to the report, and we’ll be laying it out in detail and building on it over time. The ultimate conclusion, however, can be seen in the following chart. We chose Portsmouth for our most-detailed analysis because it is the median town for taxes and population and also makes a good amount of the required information publicly available.
One way to understand this chart is to take the two largest segments as the baseline budget that the town must have to do everything it currently does, with market-rate employee compensation in green and the budget for everything else in dark blue. Right now, every wedge on the chart in between those two goes toward employee pay and benefits.
If the report’s “low-end estimate” of excess compensation is correct — that is, if we use our most conservative methodology — the second-darkest blue wedge could shift from employee compensation in order to pay for other expenses or to provide tax relief. At the other end, if even our “high-end estimate” of excess is accurate, nearly one-quarter of the town’s entire budget could be shifted away from paying employees.
This idea of giving government retirees a stipend in years that they don’t receive cost of living adjustments (COLAs) to their pensions seems to me a much more dangerous one than it might appear on the surface:
In legislation debated in a House Finance Committee hearing Tuesday night, Reps. Robert Craven, Michael Morin (a retired firefighter), Carol McEntee and Justine Caldwell propose that “an increasing stipend″ be paid retired state employees, municipal employees and teachers or their beneficiaries in years when there is no scheduled cost-of-living adjustment. …
Starting in the year that begins Jan. 1, 2020, the legislation would have the state pay a 3% “stipend″ on the first $15,000 in pension benefits, a boost of up to $450 initially, in each year in which there is no scheduled COLA payment.
In 2022, the stipend would increase to 3% of the first $20,000 in pension benefits, up to a maximum of $600 a year, and in 2026 it would increase again to 3% of the first $25,000 in benefits, up to a maximum of $750 per year.
Starting in 2030, the proposed increases would be tied to an annual index.
The pension system is a fund into which the employee and the employer pay throughout his or her career. The supposition is that those contributions will be enough by the time the person retires to cover his or her retirement with no further additions. If the system is not working, adjustments should be made within the system or funding increased to the system to shore it up.
To take the approach of adding some additional direct payment to the pension plan’s members is, in principle, no different than having the state pick any group of people and start giving it money. As a practical reality, that happens all the time — far too much — but this legislation would cross another line and destroy the principle that government shouldn’t do such things. A lingering sense of propriety may be all that’s holding our government together at the moment, and it’s a thread that shouldn’t be cut.
Although the state’s rank stayed the same, this month was not a good month for the state on the Center’s Jobs & Opportunity Index. Rhode Island remains last in New England at 47th place in the country. Employment was down another 521 people from the first-reported number for February, and the labor force dropped 1,234.
Why would the General Assembly ram through labor union gimmes, skirting legislative and ethical rules?
A week ago, Providence Journal reporter Katherine Gregg tweeted out that the state’s revenue was under performing by about 7%:
Note two things. First, if not for the application of sales taxes to new items, especially online, and an increase in the various fees and such that make up “departmental receipts,” the picture would be significantly worse. Second, about half of the shortfall is attributable to unexpectedly low income taxes.
This is fully in keeping with the latest Jobs & Opportunity Index report from the RI Center for Freedom & Prosperity, which found that Rhode Island is uniquely lagging the country in residents’ personal income growth. In fact, we were the only state to lose personal income between the latest report from the Bureau of Economic Analysis and the originally reported numbers for the prior quarter.
Combine that fact with a downturn in employment in the Ocean State, and we’ve got a clear warning sign that we need to change direction. Unfortunately, our governor is busy pushing progressive social-welfare policy while the General Assembly is hurrying to grab the unions everything they can before the next downturn.
That last note kind of makes one wonder what the legislators know that the rest of us don’t. If they are expecting another recession in Rhode Island, that would be the time to lock in as much as they can for their friends in the labor unions.