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Wednesday, May 23, 2012

The Wisconsin Turning Point

The coming vindication of Gov. Scott Walker.

The recall election for Wisconsin Governor Scott Walker is scheduled for June 5. That election is now a crucial battleground for the future of America, and even a critical bellwether for how this fall's elections will turn out. Walker is staring down the national political machine of government workers unions, and the entire Obama campaign. This is a Paul Revere moment for all conservatives across America. The future of your country is at stake. Walker needs your support now.

Walker's Reforms Are Working, Spectacularly

Walker came into office facing another state budget deficit of $3.6 billion. Historically, Wisconsin like many other states would raise state taxes to counter these recurring deficits, on top of annual stiff property tax increases to fund skyrocketing school and other local government costs. But those continual tax increases were imposing greater and greater costs on state economies in terms of lost economic growth, jobs and wages.

Walker, based on his experience serving as County Executive for Milwaukee County for 8 years, and in the state legislature for 8 years before that, focused on cutting the growth in state and local government spending instead. That spending restraint included requiring state and local government workers to contribute to their own benefits more like private sector workers. After all the yelling and screaming in Wisconsin, in the end these government workers were only required to contribute 5.8% of their salaries towards their pensions, which is matched by their government employers (taxpayers), and 12.6% of the costs of their health insurance, with the other 87% paid by taxpayers. This compares to private sector workers paying on average 21% of the cost of their company health insurance, with most private sector workers having no pension at all.

The state budget reforms also made payment of union dues voluntary for government workers, empowering these workers to each decide for themselves if they want to be full dues paying members of the public employee unions. That is a potential savings for families of $1,000 a year for each government worker in the family. This forces the public unions to focus on serving their members and convincing each one that their services are worth the dues, just like every other private sector institution in American society.

The budget reforms also limited collective bargaining to negotiations over salary but not over benefits or working conditions and rules. This gave counties, cities, and school boards the flexibility to make management changes to increase efficiency in serving the public and to reduce costs, without laying off workers and reducing services to the public.

A chief example of how this flexibility has been used is for these local governments to open their employee health insurance to competitive bidding. Previously, the unions demanded that public employers use the unions' own sponsored insurance entity as their insurer, without market bidding. But since Walker's reforms removed benefits from collective bargaining, government employers were freed to turn to competitive bidding on the open market, where many have found their coverage at substantially reduced costs. For school districts so far, the savings from this competitive bidding alone have amounted to $211.47 per student. Statewide that would add up to nearly $200 million in savings.

The state has also used this flexibility to halt fraudulent sick leave abuses that unions used to inflate overtime expenses. Workers had called in sick for their own shifts, and then worked the next shift on overtime pay. School districts have also been freed to pay teachers based on performance and not just seniority, and to keep better performing teachers rather than longer term time servers who have long given up caring about their job performance.

Walker's collective bargaining reforms have added up to over $1 billion in documented savings for state and local governments in Wisconsin in the first year alone. That enabled the entire state deficit to be eliminated without yet another tax increase, and without layoffs of teachers and other government workers, except in three school districts that have continued to resist implementing the reforms.

Moreover, because of the reforms the budget was balanced while property taxes declined on average statewide for the first time in 15 years. The Wall Street Journal reported on April 17, "The [Wisconsin] state budget office estimates that the typical homeowner's bill would be some $700 higher without Mr. Walker's collective bargaining overhaul and budget cuts." Soaring property taxes had previously increased every year since 1998, up 43% during that time. The Journal added, "A year ago amid their sit-ins and other protests, the unions said such policies would lead to the decline and fall of civilization, but the only things that are falling are tax collections."

In short, Walker's reforms are working, spectacularly.

Getting Collective Bargaining Right

The right of collective bargaining for private sector workers is not at issue in Wisconsin, though President Obama and the Democrats want to confuse the public on precisely that question. Under current law, there are plenty of market and legal checks on private sector unions to keep them from abusing the public. The ultimate limit if they push too far is that their company will be driven out of business. Though that does happen sometimes, that is only when management fails to do its job in resisting excessive union demands. Otherwise, within current market and legal checks, private sector unions actually perform a helpful market function in ensuring that employers keep up with market wages and working conditions as expeditiously as possible.

Not so for government unions, which are two words that together spell oppression. Federal, state or even local governments cannot be driven out of business. They gain their revenue forcibly through taxes. As a result, there is no market limit to how much such unions can pirate from the public.

Indeed, public sector unions choose their own employers, by voting for the governing policymakers for each political entity -- county boards, school boards, legislators, Governors, etc. This creates an inherent conflict of interest, as a politician can be negotiating regarding the pay and benefits for his own political supporters at public expense. That can lead to oppressive political corruption, where there is no political limit as well as no market limit to the plunder of the public by government unions.

As a result, nationwide public employee unions plunder taxpayers for pay for state and local government workers that is on average 45% more than the taxpayers paying those salaries make in the private sector. The bill to taxpayers for each of these workers includes an average hourly wage of $26.25, plus another $13.56 in hourly costs for benefits, for total hourly costs of $39.81, or $80,000 per year on average. This is true in Wisconsin as well. Indeed, the Manhattan Institute's E.J. McMahon reports that for public school teachers in Milwaukee, the annual cost of family health coverage is $26,844, for which the teachers were paying nothing.

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