IssuesPA

January 7 2011

by Neal Peirce, Citiwire.net

For Release Sunday, January 9, 2011  © 2010 Washington Post Writers Group

Will 2011 mark massive Athens- and Paris-like street demonstrations as American state and local government workers protest recession-triggered cuts in their pay and retirement benefits?

Some are making that prediction. I don’t, because I don’t believe the public will be with the workers. For good or ill, we chronically regard government — and its employees — as “somebody else,” not “us.” We exhibit little of the class or cultural solidarity that undergirded the protests in Europe.

But there’s no doubt that a major showdown on public sector wages and benefits is at hand. On the very day of his inauguration, Democratic Gov. Andrew Cuomo of New York agreed to an order by his predecessor to lay off 900 state workers because union leaders had refused to agree to $250 million in concessions.

And in Chicago another Democrat, Mayor Richard M. Daley, lashed out angrily at a union-backed state bill, signed by Democratic Gov. Pat Quinn, that forces cities to move toward 90 percent funding of police and fire pensions by 2040. The state’s authorized to withhold sales and income tax revenue from cities that don’t. Daley warns the legislation will trigger “the highest real estate tax increase in the history of Chicago” — over a half billion dollars a year — raising assessments so much it will be tough to sell a house in the city.

Pensions were a major factor forcing hard-pressed Philadelphia to raise its property taxes 9.9 percent last year. Older towns from Hamtramck, Mich., to Prichard, Ala., are on the verge of pension-benefit driven bankruptcy.

And things are all but assured to get worse. Urban property tax yields will slump this year as recession-impacted reassessments reduce revenues. The National League of Cities reports that overwhelming majorities of cities are far from bankruptcy. But it’s also true that municipal debt (adjusted for recession) has almost doubled since 2000.

And a huge equity issue is rising. Most private sector employees have seen their guaranteed pensions or 401 K plans disappear or decline dramatically in value. Yet “defined benefit” (i.e., guaranteed) retirement plans are enjoyed now by some 7.5 million state and local government retirees, and 15 million coming after them.

Unionization has shifted in character, too. Once public workers were a small minority of the country’s unionized workforce. No longer. The Bureau of Labor Statistics last year reported that government employees now constitute an actual majority of the nation’s union members.

And the public sector workers earn more — their total compensation package averages $40.10 an hour, compared to $27.88 in the private sector. It’s true government hires higher percentages of technical and professional workers. Still, the wage gap is not one to generate public support for government workers’ wage and benefit demands.

And popular critiques of the unions are increasing. Commentator-historian Fred Siegel notes that public sector unions, unlike those in private industry, lack an adversary — profit-motivated management — to counterbalance their strength. In fact, Siegel observes, they’re able to make campaign contributions and “organize get-out-the-vote drives to elect politicians who then control the negotiations over their pay, benefits and work rules.”

Symptomatic of labor’s clout has been the power of public safety unions to secure agreement to work careers as short as 20 years for police officers and firefighters, with retirement as early as 50. With today’s extended life expectancies, that easily translates into more years pensioned than in active work. And again, it is the private sector workers, many facing a bleak future without even a year of retirement benefits, who pay the bill.

There’s a fair comeback — that government unions’ pressures can serve to raise the “pay floor” for the low- and mid-skilled workers, especially at a time of high and climbing income differentials in the U.S. It’s hard not to question the motivation of some commentators who’ve pounced on seemingly excessive retirement benefits to “bash” unions — yet never mention the yawning chasm between our tax code-subsidized rich and ordinary working people.

Still, when mayors like Detroit’s Dave Bing run into substantial union opposition as they try to put limits on what they believe are truly “unsustainable” government wages and benefits, it’s time to listen.

“Who would think that GM and Chrysler, two of our biggest corporations, would ever file for bankruptcy?” Bing asked at a recent CEOs for Cities conference, continuing: “If those changes are occurring in the private sector, how can we expect that government benefits can’t be affected?” If a city’s to be competitive and serve its citizens in today’s global economy, he notes, “we must, from a payroll and benefit scale, be competitive.”

Or Los Angeles Mayor Antonio Villaraigosa: “I was a union organizer. But when so much of your future deficit has to do with pension funds that aren’t sustainable, with benefits you can’t continue over time, you have to ask: ‘How do we share responsibilities?’”

The answers are all tough, but Villaraisoga’s question is right-on.


Neal Peirce’s e-mail is npeirce@citistates.com.

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