Sunday, February 20, 2011

Ways to Help Local Governments Control Their Costs

Governor Rick Snyder’s Budget Proposal contained many reductions to local governments (including school districts). Many local governments will have a very difficult time achieving cost reductions under current laws. Assumed reductions in compensation costs of state employees will also be problematic under current laws. We, as legislators, have a responsibility of giving the state and the local governments the tools to deal with the financial stress.

In a perfect world, the state and local governments could reach agreements with their employees for the reductions in compensation costs necessary. But from the immediate reactions of the public sector employee unions (see A letter to EMU faculty on the growing threats to collective bargaining and Michiganders, will you March Tuesday against Gov. Snyder?,-will-you-March-Tuesday-against-Gov-Snyder) we know we don’t live in a perfect world. They are calling for massive protests, similar to those occurring in Wisconsin.

Now, I don’t blame the unions for their stances. After all, that is their role – to push for whatever they can get for their members, regardless of the damage to anyone else or to the general public interest. But, it is the role of us legislators to consider and pass legislation to further that general public interest.

Public Union Reform Is Where the Money Is by the Mackinac Center analyzes the situation keenly. One way to reach the state employees’ compensation is to eliminate the Civil Service Commission’s role in setting state employees’ compensation. But, that requires a Michigan Constitution amendment, which if approved by 2/3 of both houses of the legislature and approved by the voters in November, could not take effect until sometime during the 2012 fiscal year, rather than be in effect for the entire fiscal year.

Another approach would be to negotiate in good faith until it is clear that no agreement can be reached, then impose a contract upon the unions as provided for in Michigan law (which procedure I outlined in my paper Taking Back the Ship – A Strategic Approach to Better Bargaining that I presented at the 2006 Michigan School Business Officials Annual Meeting). Unfortunately, this process takes about 18 months if all of the hoops are jumped through, and that again would push the resolution well past October 1, 2011, the beginning of the 2012 fiscal year.

The Mackinac Center suggests the way out of this dilemma is to repeal PERA (the Public Employee Relations Act). While the National Labor Relations Act gives the private unions the right to collectively bargain, the public sector employee unions do not have that right, unless authorized by state legislation such as PERA. The repeal of other states’ enabling acts are currently being considered – in Wisconsin and Ohio, and perhaps also in Indiana. The proposed repealing legislation is being strenuously resisted by the unions, as expected.

Local governments would be able to achieve the cost savings they need to remain solvent in the absence of PERA. The compensation cost reductions assumed by the Governor in his budget proposal could be obtained if the state did not need to collectively bargain.

I am not proposing (nor would I support) that the entire budget balancing be done “on the backs of the public employees” (dang, I hate that mantra), but even a reasonable amount will not be voluntarily achieved without the repeal of PERA. We might as well face that fact. And, we might as well face the fact that any legislator who votes for even reasonable reductions in public sector employee compensation will not garner the support of those unions in the 2012 elections. We might as well deal with the underlying problem once and for all, and truly reinvent Michigan.

Without reasonable reductions in public sector employee compensation, as I laid out in the Economic Presentation accessed online at, even more of the remaining three options would need to be done:

• Cutting programs,

• Reducing or eliminating “Tax Expenditures” (primarily involving those applied to income taxes – credits, exemptions, and deductions – remember, those in the MBT will be gone with the repeal of the MBT), and

• Increasing taxes

Public sector employees must do their share of balancing the budget – not because we don’t like the police officers, fire fighters, teachers and other public employees, because we do like them – but because we can no longer afford what they demand.

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