The Hangover

06.07.12

Past Scott Walker: Fight Crosses Party Lines as California Voters Back Pension Reforms

After decades of purchasing peace with costly promises for future benefits, the $4 trillion bill has arrived, writes John Avlon.

The most significant election on Tuesday wasn’t in Wisconsin.

It was in San Jose and San Diego, where nearly 70% of citizens voted for public-sector union pension reforms, introduced by Democrats, that could save their cash-strapped cities billions of dollars.

California voters rallying behind pension reforms introduced by mayors shows the sea change in the politics of public-sector unions. Connect the dots between Scott Walker’s decisive defeat of the recall effort spurred by his rollback of collective bargaining and the push by Democrats and Republicans to restore a semblance of fiscal responsibility and you’ll see this once controversial idea is beginning to garner bipartisan support.

The numbers don’t lie. San Jose has seen its pension costs more than triple over the past decade, from $75 million to $245 million today. That quarter-of-a-billion dollars transferred from taxpayers to retired city workers makes up nearly a fourth of the city’s total budget, money that can’t be spent on schools, roads or services. Those costs are simply unsustainable, and the public is recognizing that fact.

This vote resonates because it reflects a national problem. American cities and states face $4 trillion of unfunded pension liabilities. For decades, local leaders cut sweetheart deals with the workers who helped elect them, essentially suing for peace with labor by promising generous future benefits. Now, the party is done and the hangover is here. And the check is arriving as boomers retire at precisely the same time that we are struggling to emerge from a fiscal crisis.

It just doesn’t add up.

That’s why polls are showing a decided shift on this issue.  First, support for labor unions is near a historic low, according to Gallup. But more specifically, when asked what is the best way to balance state budgets, 62% of people said “reducing the number of state workers” and more Americans – 49% – backed “changing state laws to limit the bargaining power of state employee unions,” than opposed it (45%). The only other more popular solutions for balancing state budgets was reducing or eliminating programs (65%).

Video screenshot

Watch Scott Walker's victory speech.

Contrary to the campaign rhetoric voters rejected Tuesday, this impulse does not reflect disrespect for teachers, cops or firefighters. It reflects a discomfort with work rules that allow individuals guaranteed lifetime employment after three years on the job and retirement after 20 years with a full pension guaranteed by taxpayers for the rest of their lives. With government workers now representing for the first time a majority of the unionized workforce, this is a different battle than the union politics of old that centered around letting workers organize to negotiate with companies, with no taxpayers involved.

Public-sector unions have the sort of outsized influence as core supporters and election troops in the Democratic Party that the religious right has in the Republican Party.

Citizens are getting wise to the fact that spending millions if not billions of tax-payer dollars on retired workers is not synonymous with social justice. And tax-payer subsidized workers are not representative of all “working families.”

The point is not that these aren’t tough decisions. But these are tough times. And cash-strapped municipalities can’t solely cut or tax their way out of this problem.

For the Obama administration, the growing desire to reform and reduce the costs of public sector unions might be an Achilles’ heel this election year. After all, most elected Democrats depend on organized labor for their election efforts. Public-sector unions have the sort of outsized influence as core supporters and election troops in the Democratic Party that the religious right has in the Republican Party.

The problem is particularly pronounced in the Obama administration, because its political director Patrick Gaspard was formerly the political director of the powerful Service Employees International Union local 1199 in New York. It is difficult to have perspective on a problem when you have been personally part of the apparatus. And that’s got some centrist Democrats worried.

“I understand the impulse to fight back against Scott Wilson's union-bashing, but Democrats need to choose their ground carefully and draw distinctions between private and public unions,” says Will Marshall of the Progressive Policy Institute. “Here's why: reflexive defense of public sector unions pits Democrats against a public that wants leaner, more efficient and less costly government. That's especially true now as so many states struggle to get runaway pension and health costs under control. It's easier to sympathize with private workers squaring off against heartless capitalists than with public workers who can help elect the public officials who set their pay and benefits.”

Even in a Democrat-leaning state like New Jersey, Republican Governor Chris Christie has been able to rein in some public sector union costs by working with the Democratic State Senate President Stephen Sweeney, who doubles as the head of the local Iron Workers union. His members have seen their tax-payer subsidized union counterparts getting benefits that exceed anything they receive and they’re getting tired of funding this largesse through rising property taxes. Even in Democratic-dominated states like Illinois, Governor Pat Quinn and Chicago Mayor (and former Obama Chief of Staff) Rahm Emmanuel are realizing that the need for pension reform outstrips the political calculation of staying cozy with unions. The status quo is simply unsustainable.

The vote in Wisconsin went Walker’s way because there are signs that his reforms have worked to help close the state’s $3 billion budget gap without layoffs. The real problem may have been the polarizing way that Walker went about it, rather than broad opposition to the reforms themselves. After all, Indiana Governor Mitch Daniels achieved similar reforms and savings through executive order and he remains popular today.

President Obama gained credibility on education reform by being willing to stand up to the Teacher’s Unions on issues like merit pay and support for Charter Schools. And while the pension obligations are fundamentally a local issue, the president and other Democratic leaders will need to show a willingness to embrace pension reform as part of a plan to get city and state governments out of debt. It is consistent of the equation they’ll need to advance bipartisan deficit and debt reduction on the federal level like Bowles-Simpson. But if they simply stay in the public sector unions’ corner for political purposes, they will hand an effective issue to the Romney campaign, one that increasingly resonates beyond ideology because it is rooted in a sense of generational responsibility.

It is a matter of dollars and common sense.