published Wednesday, February 9th, 2011

States may find targeting workers isn’t easy

By CHRISTOPHER WILLS and MICHAEL HILL

Associated Press

SPRINGFIELD, Ill. — New Wisconsin Gov. Scott Walker has all but declared war on government employees and their unions — or as he calls them, the “haves” in an economy full of “have nots.”

In Ohio, Gov. John Kasich says state law should be changed to weaken unions in contract negotiations. And Arizona House Speaker Kirk Adams wants to cut pension benefits.

But state officials trying to close crippling budget deficits may find it difficult, perhaps impossible, to translate their words into action.

Many will find that contracts and state law limit their power to lay off public employees. Case law, and in some cases state constitutions, restrict what can be done to pensions. Efforts to impose furloughs are likely to trigger court battles.

“It’s going to be tough,” said David Primo, a scholar at George Mason University’s Mercatus Center and author of a book on state budgets. “I think there are going to be a lot of hard-fought battles over the next few years.”

As most states struggle with crushing budget deficits this year, government employees are frequent targets for officials looking to cut expenses. That’s partly because they’re easy targets. There’s a lot less political risk in talking about cutting bureaucrats than in cutting services, although the two often amount to the same thing.

It’s also because employee wages, benefits and retirement costs account for a significant chunk of government spending. The Center on Budget and Policy Priorities estimates employee costs account for roughly one third of state operating expenses.

Nicholas Johnson, head of the center’s State Fiscal Project, said the meltdown of so many state budgets has far more to do with falling revenues and climbing expenses in other areas than it does with employee benefits.

Still, the pension and health care portions of employee benefits have been rising steadily and budget-cutters can’t ignore the issue.

In Ohio, Kasich has talked about trying to change state law so that public employee unions couldn’t go to an outside arbitrator to decide contract disputes. “We are going to have collective-bargaining reform,” the Republican said during his election campaign. “It’s just a matter of how far we go.”

His Wisconsin counterpart has been even more outspoken. Walker wants government employees to pay more for their health insurance and pensions. To make that happen, he talks about weakening the unions that represent 39,000 workers — perhaps turning Wisconsin into a right-to-work state where labor unions can’t force employees to be members, or even getting rid of unions altogether.

His choices boil down to either changing state law, which will be difficult even with a Republican majority, or negotiating with unions who are livid with Walker. “The guy has created the hostile environment,” said Marty Beil, executive director of the Wisconsin State Employees Union. “Now he’s going to have to learn to deal with it.”

Other governors have found that employees are a difficult target to hit squarely.

Illinois Gov. Pat Quinn, a Democrat, moved to lay off state employees but was blocked when the courts ruled any job cuts had to be negotiated with the union. Ultimately, he imposed furloughs on non-union employees and negotiated a deal that cut union salaries but protected their jobs.

California Gov. Arnold Schwarzenegger fought years of legal battles to impose unpaid furloughs and offer reduced retirement benefits to future employees. The court cases continue. “He stopped the forward movement and pushed it back slightly,” said Marcia Fritz, president of the California Foundation for Fiscal Responsibility. “He never got a touchdown.”

Advocates say focusing on workers saves relatively little and distracts from larger questions of making taxes and spending match up, such as by controlling soaring Medicaid costs. “I think we have too many politicians who say you can have it but you don’t have to pay for it,” said Steven Kreisberg, director of collective bargaining for the American Federation of State, County and Municipal Employees.

Public employees in many struggling states have agreed to financial concessions, but that hasn’t solved any budget crisis. In New York, for instance, Democratic Gov. Andrew Cuomo wants to freeze government wages. But the state could cut all salaries to zero and would still reduce spending by only 10 percent. A wage freeze, of course, would save far less.

Going after pensions is even more difficult, although most public-sector workers receive the sort of guaranteed pension benefit plans lost to the majority of private-sector workers. While direct comparisons are difficult, the Employee Benefit Research Institute reported that median annual pension income for public-sector workers with 20 or more years on the job was $18,600, based on 2006 figures, compared to $8,424 for private-sector workers.

In many states, the law or the constitution specifically bars officials from reducing pension benefits that have already been promised. In other states, case law can hamstring governors who want to raise the retirement age. “States’ hands are really tied when it comes to reducing liabilities for current employees,” said Laura Quinby, researcher at the Center for Retirement Research at Boston College.

Arizona is one state where government employees are guaranteed their retirement benefits won’t be slashed. The House speaker said that means the state will be limited to offering stingier retirement packages only to future state employees — a change that would do nothing to reduce the amount already owed.

Primo, from the Mercatus Center, said government officials may end up backing away from salary battles and instead using their political capital to insist on pension changes that will save more money in the long run.

He also predicted they’ll look for ways to cut benefits without needing union approval. Maybe they can require employees to pay more for their health insurance, he said. Maybe they can cancel pensions for newer workers who aren’t yet vested in the system.

“I think it’s going to require a fair amount of creativity on the part of elected officials,” Primo said. “I’d be looking very carefully at what your legal options are.”

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Hill reported from Albany, N.Y.

Associated Press writers Scott Bauer in Madison, Wis., and Paul Davenport in Phoenix, Ariz., contributed to this report.

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