Unions & Labor Policy
Paycheck protection ends the use of public resources to collect government unions’ political money.
Under current law, state and local governments (including school districts) take both union dues—a portion of which is used for politics—and campaign contributions out of workers’ paycheck and send the funds directly to union leaders.
Paycheck protection will benefit union members, protect taxpayers, and has bipartisan support.
One government union’s insatiable appetite for more tax dollars has hit a brick wall.
The Wolf Administration is in the process of negotiating a contract with the state’s largest union—the American Federation of County, State and Municipal Employees Council 13 (AFCSME). The current contract expires at midnight, and it’s highly unlikely a deal will be reached before then.
AFSCME agreed to postpone negotiations because the sides could not reach an agreement. According to AFSCME, the Wolf Administration would not sign off on proposed wage increase and wants members to contribute more to their health benefits. The administration is making these requests in light of the state’s precarious fiscal position.
The costs of public employee compensation is exploding. Benefits are particularly out of control. They’ve risen by more than 71 percent over the last 10 years. Benefits for AFSCME members make up about 44 percent of their total compensation (see page 21). In the private sector, the average is 34 percent.
The growing costs of pensions factor into the dramatic rise in compensation, but health care costs are part of the picture as well. According to the Office of Administration, public employees pay 11.7 percent for their healthcare. The private sector average is 20 percent. To their credit, the Wolf Administration wants to reduce this inequality by requiring employees to pay more for their coverage.
The governor should continue to stand firm and protect taxpayers—especially as the legislature debates a bloated budget that will probably require tax hikes. Capitulating to AFSCME now will only compound this problem.
Fortunately, the public will have an opportunity to review the labor contract before the deal is approved.
Pennsylvania's pension problem is nothing new. Over the years, lawmakers have tried to salvage the fundamentally broken system instead of creating a system that works. The latest attempt, SB 1071, passed the state House this week.
Like Act 120 of 2010 and Act 40 of 2003, this legislation makes cosmetic changes and promises modest savings that will never materialize.
Pennsylvania's pension plan for teachers and state workers is failing because defined benefit pension plans are vulnerable to swings in the stock market and political whims, leaving taxpayers with a huge bill. In the past six years, our unfunded pension liability has grown from less than $30 billion to $63 billion.
Instead of addressing the retirement systems' exposure to politics and stock market swings, SB 1071 leaves a defined benefit plan in place until a worker reaches $50,000 in salary or 25 years of service. Stacked on top of the defined benefit plan is a defined contribution plan (similar to a 401k), but the $50,000 threshold increases by three percent each year.
Public labor unions could easily accelerate this threshold in the future, lobby to defer payments or increase the multiplier. After all, the original proposal called for a 1% yearly increase.
If that's not a red flag, the cost of the plan should have you scratching your head. The PERC actuarial note claims $5 billion in savings over 30 years, but the savings amounts to just $1 billion in present value terms. A drop in the bucket.
In fact, SB 1071's insignificant savings were wiped out after PSERS announced they are reducing their assumed investment rate of return from 7.5% to 7.25%. This change instantly adds upwards of $2.5 billion to taxpayers' tab.
It's clear SB 1071 is not a step in the right direction. Rather, it's the latest in a long line of pension reform efforts that sweep Pennsylvania's pension problems under the rug.
The next step for SB 1071 is consideration in the state Senate. However, the Senate seems less than keen to advance the bill in its current form. Senate Majority Leader Jake Corman noted, "I'm not going to pat myself on the back and say, 'I did pension reform' and end up accomplishing nothing."
Senator Camera Bartolotta expressed her reservations as well, saying, “We need to put some more teeth into it, we really do.”
There's no easy way to fix our pension system, but going back on our promises to state workers or saddling future generations with debt isn't an option.
Are ghost teachers about to be put to rest?
Ghost teachers in Pennsylvania would be strictly limited under legislation approved by the state House Education Committee today. HB 2125 restricts teachers unions’ ability to pluck teachers from the classroom to work full-time for the union while remaining on the public payroll.
In Allentown, taxpayers have paid more than $1.3 million to fund the salary and benefits of the Allentown Education Association (AEA) president—using money meant for educating students. That practice is being challenged in a lawsuit by local taxpayer Steven Ramos and former school board member Scott Armstrong.
Another lawsuit is pending in Philadelphia, where last year, 16 ghost teachers earned $1.5 million while working for the Philadelphia Federation of Teachers.
HB 2125 ends ghost teaching with two exceptions:
- Statewide teachers’ unions (like the American Federation of Teachers Pennsylvania and the Pennsylvania State Education Association) could have three officials on leave for up to six years, and
- School district employees may be on leave for 15 total days each school year but no more than three consecutive days.
Most importantly the bill requires teachers unions to reimburse every cent associated with school employee leave. CF's James Paul explains:
Year-in and year-out, Pennsylvanians are asked to contribute more and more of their hard-earned dollars to public education. The least state government can do is ensure this funding is used in the classroom and not tapped to staff private organizations. HB 2125 strictly limits ghost teaching and is a victory for Pennsylvanians.
If Pennsylvania were a ship, say the Titanic, then the iceberg that ship is bearing down on is the commonwealth’s public pension funds.
At a combined $63.2 billion in debt, the two funds threaten to sink Pennsylvania’s finances, according to a new policy memo authored by CF senior fellow Richard Dreyfuss.
Dreyfuss warned about the unsustainability of the state’s pension systems back in 2006. In his paper, Beneath the Surface, he outlined the problems with the pension funds and called on Harrisburg to act before the retirements of hardworking public employees were put in jeopardy:
The long-term commitments and liabilities made by policymakers on behalf of taxpayers are unsustainable, particularly given the difficult economic environment facing both the public and private sectors in Pennsylvania.
Unfortunately, public employee unions like the American Federation of State, County and Municipal Employees (AFSCME) denied the realities of the pension systems’ structural problems. Here’s what AFSCME wrote in 2006: “Pennsylvanians should rest assured that Pennsylvania is not the Titanic, and there are no icebergs in our pension fund’s future.”
Since that statement, the unfunded pension liabilities have grown by 730 percent while the market value of assets has fallen by 10 percent. In 2010, the legislature did attempt to stop the bleeding by passing act 120. The law limited reform efforts to new hires and deferred state contributions to the pension systems. That proved to be an imprudent decision.
“Letting Act 120 work” is no longer an option. The commonwealth must rise to the occasion and change our ship’s bearings. Harrisburg must reform pensions by moving all employees to a 401k style plan and fully fund all of our pension obligations without further burdening taxpayers.
posted by HUNTER L. AHRENS | 11:01 AM | Comments
Teacher Linda Misja is a religious objector to unionism, and as such, can donate the equivalent of her fair share fee--otherwise owed to the union--to charity. But four years ago, the Pennsylvania State Education Association rejected Linda's charity of choice and instead has been holding her money in a union-controlled escrow account.
Today, the House State Government Committee voted in favor of HB 267 to protect religious objectors, like Linda, by eliminating a legal loophole that lets union leaders roadblock employees’ charitable contributions.
Under current law, public employees who object to union membership on religious grounds must donate the equivalent of their “fair share” fee, otherwise owed the union, to a non-religious charity they and the union agree upon. The PSEA, however, has repeatedly rejected teachers’ charities of choice simply because they don’t support the union’s political ideology.
Yet, a list of charities pre-approved by the union spent $27 million on political activity, according to the Fairness Center, which has filed lawsuits against the PSEA on behalf of Linda and two other Pennsylvania teachers.
Unfortunately, the law gives no clear instructions in the event that a union refuses to accept the employee’s charity of choice. If a dispute ensues, the money may be placed in a union-controlled escrow account indefinitely.
HB 267, sponsored by Rep. John Lawrence, would protect the right of religious objectors to give their money to a recognized 501(c)3 of their choosing--even if it doesn't align with the ideology of the PSEA.
CF President and CEO Matt Brouillette explains the treatment of religious objectors is just one more instance of teacher unions putting their interest before the interests of teachers:
Government unions already enjoy the perk of using taxpayer funded payroll systems to collect their union dues, which they then use for political purposes. And unions already trap their members, letting them leave the union only during short windows of time. As if this weren’t enough, union leaders also want to control nonmembers’ paychecks.
Today’s vote is an important first step in protecting the constitutional rights of Pennsylvania’s public employees.
In a crucial victory for both students and teachers, the Protecting Excellent Teachers Act passed the Senate this afternoon with a vote of 26 to 22.
HB 805, championed by Rep. Stephen Bloom, provides that public school teachers are retained based on effectiveness in the classroom—not merely seniority—in the unfortunate event of furloughs. Today’s passage ensures Pennsylvania’s best teachers remain in the classroom, helping every child reach their maximum potential.
Reform to rigid seniority mandates is long overdue in the commonwealth. A strict, seniority-based system punishes young, effective teachers who excel in the classroom but have not racked up sufficient service time. This is plainly unfair. Every teacher should be evaluated based on their talents as educators, not just their years of service.
That’s why HB 805 is so important. The legislation now moves to Gov. Tom Wolf, whose options are clear: Side with the teachers’ unions which oppose the bill, or side with public school students and excellent teachers—both of whom stand to gain tremendously from the governor’s signature.
Sounds like a no-brainer.
In truth, SERS' unfunded liability grew by about $1 billion this year due to artificially low employer payments. A more accurate calculation comes from the SERS actuary, The Hay Group. They estimate an unfunded liability of $19.45 billion as of December 2015.
Artificially low employer payments aren't the only reason the unfunded liability has grown. SERS assumes a 7.5 percent rate of return for investments, but the actual rate of return has been far less, only 0.4 percent in 2016.
Keep in mind that SERS liabilities represent less than half of the overall pension liability taxpayers will pay. The larger Public School Employees' Retirement System is carrying a $37 billion liability for a total of $56 billion.
Clearly, letting Act 120 work means more debt for taxpayers. Giving state workers greater control over their retirement is the only way to boost worker security and stop the flood of red ink.
Gov. Tom Wolf just signed Senate Bill 644, empowering the Independent Fiscal Office to estimate the cost of government union contracts before they are finalized.
Matthew Brouillette, president and CEO of CF responded:
For years, the government has negotiated billions of dollars in contracts with public sector unions, many of which donate heavily to the very politicians they’re negotiating with. As a result of this legislation, costs negotiated in secret will come to light before, not after, contracts are ratified. We commend Sen. Folmer and members of the state Legislature for championing this critical reform.
Gov. Wolf has been a vocal advocate for transparency reform. He should be applauded for walking the transparency talk and putting people before public union interests.
We hope the governor applies this accountability measure to contracts he is currently negotiating, even if they are resolved before the law goes into effect in 60 days. Such action would resonate by providing greater transparency to all Pennsylvanians.
The contracts under negotiation could add significant costs to the 2016-17 budget, putting more pressure on state lawmakers to raise taxes.
Meanwhile, there are two more contract transparency reforms making their way through the legislature.
- SB 645, sponsored by Sen. Patrick Stefano, requires public sector collective bargaining agreements to be posted on state, school district, or local government websites two weeks prior to signing.
- SB 643, sponsored by Sen. Ryan Aument, requires public notice and open meetings when public sector collective bargaining agreements are negotiated.
Last month, Gov. Tom Wolf unveiled his “Government that Works” plan to reform contracting practices and increase transparency in government. Now, the state Legislature has given Wolf a chance to back up his rhetoric with action.
Today, the Senate passed Senate Bill 644, which would empower the Independent Fiscal Office to put a price tag on government union contracts before their ratification. The bill now awaits the governor’s signature.
“We congratulate SB 644 sponsor Sen. Mike Folmer for championing this vital transparency reform,” commented Matthew Brouillette, president and CEO of the Commonwealth Foundation. “Governor Wolf now has the opportunity to walk the walk on government transparency and accountability reforms.”
Wolf is negotiating contracts worth a combined $3.6 billion with 18 government unions, several of which donated millions of dollars to his election campaign. These contracts cover salary and benefits for state workers as well as special union privileges like release time and automatic payroll deduction for campaign contributions.
“If the governor is serious about ending conflicts of interest and fostering ‘government that works,’ he’ll sign this bill and shine light on contract costs,” Brouillette said.
Last year, taxpayers learned about $23 million in additional costs in a one-year contract with AFSCME only after the contract was finalized. Since 2000, average government worker benefit costs tripled from $12,732 to nearly $39,000. Total compensation per employee reached an average of nearly $93,000 in 2014-15.
One year ago, Governor Tom Wolf began negotiating contracts worth billions of dollars with state employee unions. Despite his rhetoric about improving government transparency, these negotiations took place behind closed doors. To make matters worse, six of these government unions contributed more than $2.6 million to Wolf’s campaign.
Thankfully, yesterday's passage of SB 644 is a huge step toward revealing the price of these contracts before taxpayers are asked to foot the bill.
SB 644 garnered wide support in the House with a 108-83 vote and returns to the Senate, where it passed last summer by a wide margin. The bill provides taxpayers with an IFO (Independent Fiscal Office) estimate of the costs associated with each collective bargaining proposal before a ratification vote.
Why is this legislation so critical? Case in point: Last April, a contract was negotiated that added $23 million to the state budget—and taxpayers only discovered this news weeks after it was a ratified.
Unfortunately, rapid increases in state employee costs are nothing new. Since 2000, average government worker benefit costs tripled with total compensation per employee reaching an average of nearly $93,000 in 2014-15.
Two more contract transparency reforms are also under consideration. SB 645, which requires collective bargaining proposals be posted online before a ratification vote, and SB 643, which opens collective bargaining negotiations to the public.
CF President and CEO Matt Brouillette noted the similarity between SB 644 and the governor's recent calls for transparency,
Last week, Gov. Wolf called for expanded government transparency, claiming, ‘special interests still wield too much power and influence in Harrisburg’. Now, Wolf has a chance to put his money where his mouth is.
Just last year, Wolf's spokesman explained that the governor is,"keeping an open mind on the bills and would review them on the merits if they reach his desk.” Wolf should back up his rhetoric on transparency by supporting this legislation.
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