2010 May 31 Monday
WPost Sees Problem With Public Employee Unions

Montgomery County Maryland has a big financial problem compared to neighboring Fairfax Virginia.

MONTGOMERY COUNTY has just completed a nightmarish budget year. Stressed, squabbling and besieged elected officials savaged services and programs and jacked up taxes to eliminate an eye-popping deficit of almost $1 billion in a $4.3 billion spending plan. Meanwhile, across the Potomac River in Fairfax County, all was sweetness and light by comparison. With a budget roughly equal to Montgomery's, Fairfax officials erased a deficit a quarter as large with relative ease and far less drama.

Click thru and read the details. Montgomery County Maryland voters basically get less service for the money.

Why the difference? Unions. Maryland allows collective bargaining by government employee unions while Virginia does not allow government employees to organize. Keep that in mind when choosing where to live.

Virginia law denies public employees collective bargaining rights; that's helped Fairfax resist budget-busting wage and benefit demands. As revenue dipped two years ago, Fairfax officials froze all salaries for county government and school employees with little ado. By contrast, Montgomery leaders were badly equipped to cope with recession. County Executive Isiah Leggett took office proposing fat budgets and negotiating openhanded union deals after he succeeded Mr. Duncan. Then, as economic storm clouds gathered, he shifted gears and cut spending -- while still trying to appease the unions.

Notoriously, one such deal guaranteed almost $300 million in pension benefits over 40 years to thousands of employees based on salary increases they never received. The giveaway became known as "Phantom COLAs," for the cost-of-living raises that were never paid. And even when Montgomery's teachers agreed to give up cost-of-living raises last year, about two-thirds of them continued to receive step increases of up to 4 percent.

Public employee unions spend big on elections. Elected officials become tools of the unions. The voters mostly do not understand what's going on and naively think that endorsements by firemen, police, and teachers mean that a candidate is for keeping houses safe from fires, the streets safe from criminals, and good teachers in classrooms. But in reality what voters are voting for is more money for less work for employees of government agencies.

Since I'm expecting economic contraction due to a peak in world oil production the ability of governments to cut costs rapidly is going to become far more important than it already is. For jurisdictions where government workers can form unions what's needed are better laws for handling government bankruptcies. Governments are going to need ways to dump liabilities quickly and efficiently so that they can continue to deliver needed services.

Anyone know a good list of which states allow unions to do collective bargaining for government employees? I wonder how strong the correlation is between states with large unfunded pension liabilities and states that allow collective bargaining. Do any states allow collective bargaining but manage to avoid ruinous labor contracts due to very rightward-leaning electorates?

Share |      By Randall Parker at 2010 May 31 06:03 PM  Economics Sovereign Crises


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