Collective Bargaining is Not the Cause of State Budget Problems
WHEN STATES GO BROKE: ORIGINS, CONTEXT AND SOLUTIONS FOR THE AMERICAN STATES IN FISCAL CRISIS, Peter Conti-Brown & David Skeel, eds, Cambridge University Press, 2012
17 Pages Posted: 1 Sep 2011 Last revised: 15 Mar 2014
Date Written: August 22, 2011
Although the political discussion in Wisconsin and other states has suggested that government employees’ pay and benefits are the cause of the state budget problems and that elimination of collective bargaining will help solve it, the data show otherwise. As to pay, holding education and other human capital factors constant, government employees are paid on average slightly less than their private sector counterparts. Nor are pension costs the cause of the states’ fiscal problems: on average, pension contributions account for only about 2.1 percent of the states’ annual budgets. The unfunded pension liabilities are a result of the massive economic downturn in 2008-2009, will shrink as the stock market recovers, and in most states can be funded over many years through reasonable measures. The data on state budgets and state labor costs shows that across all 50 states and the District of Columbia there is no correlation between the size of a state’s budget problems and whether or the extent to which its government employees bargain collectively. Some states with no public employee bargaining rights have severe budget problems; other states with expansive bargaining rights do not have substantial budget problems.
Having demonstrated that public employee collective bargaining is not the cause of state fiscal problems, we suggest ways in which collective bargaining could nevertheless facilitate the search for solutions. After first dispelling the notion that states could solve their budget crises by slashing public sector compensation through repudiating existing labor agreements or seeking to discharge them in bankruptcy, we offer examples of ways in which public employees, through their unions, have partnered with governments to reduce costs and suggest other ways in which they could do so.
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