The 2017 Iowa legislative session has been one of the more rancorous in recent memory, driven in large part by proposed amendments to the public sector collective bargaining law. Following all-night debates and massive protests by union supporters, the house and senate both voted on February 16 to make the most sweeping changes in the public sector collective bargaining statute since it was first enacted in the 1970s. Governor Branstad signed the bill into law on February 17, a Friday. Predictably, by the following Monday, the State’s largest public employee union, AFSCME Local 61, filed a lawsuit to prevent the law from going into effect.
In our view, the amendments are a much needed re-set of the relationship between public employees and the state agencies, municipalities, and school districts that employ them. It’s true that the vast majority of public employees are hard-working, conscientious, and have a true spirit of public service. Very few citizens begrudge paying competitive wages and benefits to public employees. But, granting public employees the right to collectively bargain has, over time, unduly favored the interests of employees and unions at the expense of public employers and taxpayers. It’s no coincidence that public employee union membership exceeds private sector membership by more than five times (34.4 percent to 6.4 percent in 2016).
When benefits such as health insurance and pensions are taken into account, there can be little doubt public employee compensation typically exceeds the compensation of comparable private sector employees. In some circumstances, public employees are eligible to retire in their 50s and receive their full pension benefit under the Iowa Employee Public Retirement System (IPERS). Early retirees can sometimes “double-dip;” that is, they return to public employment while at the same time drawing a pension. Much of the criticism of public sector compensation is based upon the fact that, while receiving generous wages, benefits, and retirement payouts, public employers have more job security and less accountability for poor performance compared to a similarly situated employee in the private sector.
Unfortunately, most of the news coverage and commentary published while the legislature debated the new law glossed over or even ignored fundamental differences between public and private sector employment that justify limiting the subjects over which public employees are allowed to bargain. The most important difference is that the market imposes at least some check on a private sector union’s ability to bargain for economically unsustainable wages, benefits, and work rules. Private employers have customers that won’t necessarily accept ever increasing prices or poor quality goods or services. History is replete with examples of companies that failed or became less competitive under the weight of unsustainable collective bargaining agreements. Public employers, on the other hand, are almost always a monopoly. Citizens have nowhere else to go for public services, and governments can always raise taxes to pay for ever increasing wages and benefits.
Before the recently enacted changes, unions held most of the advantages in bargaining. If the two sides could not reach an agreement on wages, insurance, and other items, the matter was submitted to binding arbitration. Each party submitted its final offer to the arbitrator, who had to choose between them. Among the criteria the arbitrator could rely upon in the decision was the arbitrator’s judgment whether the public employer could levy taxes and appropriate funds to pay for the wages and benefits in question. Thus, even if a public body did not want to raise taxes to pay for the union’s proposed wage or benefit increases, an arbitrator had the effective power to impose a tax increase (or force the public body to cut services to pay for the arbitrator’s decision).
There is one other important reason public sector collective bargaining has unduly favored employee interests over those of employers. Before it was amended, Iowa law allowed unions to demand that public employers withhold union dues from employee’s paychecks. Public sector unions, in turn, use this dues money to support candidates running for city council, school board, or other public offices. Over time, the unions end up negotiating contracts with the very public officials they helped elect to office. In effect, the employee’s interests are represented on both sides of the bargaining table.
Even Franklin Roosevelt, one of history’s greatest supporters of workers’ right to collectively bargain, expressed opposition to public sector collective bargaining. “All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service,” he wrote. “It has its distinct and insurmountable limitations when applied to public personnel management.” He added: “[t]he very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations,”
The amendments to Iowa’s law are not perfect. One of the gaping loopholes is the exemption for certain “public safety” employees. The AFSCME lawsuit relies upon the public safety exemption in its constitutional challenge to the law. We will discuss the lawsuit in a future post. It is sufficient for now to say that its ultimate outcome is far from certain, and the loophole in the amendment may yet serve as the law’s undoing.
Image Credit from Google, Creative Commons license, Gov. Walker Protests