Tough Talk Yields Milquetoast Results in Public Employee Union Contracts

Gov. Kitzhaber has settled with the state’s two largest public employee unions. During his campaign he crowed that only he could deal effectively with the state’s public employee unions and that he would rein in the excesses of the healthcare and pension benefits granted by previous Democrat administrations (including his own previous two terms). So let’s see how he did against the people who were principally responsible for financing his gubernatorial campaign.

The Statesman Journal ran successive articles detailing the settlements with AFSCME and SEIU. The reporter, Dennis Johnson, should be commended for waiting through labor agreements that are designed as much to obfuscate as to enlighten.

But before we delve into the elements of the public employee unions’ labor agreements let’s measure it against a backdrop of what is happening in the private sector. During the recent recession, 152,000 private sector jobs were lost – during the same period of time the number of state public employees increased by 4,300. Within that 152,000 private sector jobs lost, the highest paying sectors were hit the hardest – 33,900 Construction, 12,200 Manufacturing, and 35,800 Trade & Transportation. As of June of 2011, the Trade and Transportation sector had recovered 5,300 of those jobs, while Construction lost another 200 and Manufacturing lost another 23,100. During that same period of time, according to the United States Bureau of Labor Statistics, Oregon’s per capita income grew by $342 or 0.953 per cent – that is less than 0.5 per cent per year. Then, as now, Oregon’s per capita income lags behind the national average by a significant margin – about $3,500 annually.

By any measure, Oregon’s private sector employment was (and still is) devastated. Jobs are down and high paying jobs continue to decline. But during that economic downturn, while the public employee unions were increasing their numbers, their two per year wage increases continued unabated and the costs of their gold plated healthcare insurance and pension plans rose annually – in fact, as the stock market sank, the cost of the pension plans (PERS) rose to make up for losses in the stock market. Their largesse was so great that former Gov. Ted Kulongoski threw in an extra five percent salary increase for the public employee unions members in 2007 – an increase that was in addition to the two per year raises the public employee unions were already getting.

But Mr. Kulongoski is gone – gone to that great PERS full salary retirement benefit for the remainder of his life. Now we have the “tough-minded” Gov. John Kitzhaber, M.D. who promised triage on Oregon’s out of control public employee benefits. Well, there are four major components to the public employee union contracts – wages, healthcare benefits, pensions, and work rules.

Wages. According to the Statesman Journal articles the public employee unions will receive a one and one-half percent cost of living (COLA) at the end of this year and a similar amount the following year. (Just to put that in context, the COLA adjustment for the nation’s senior citizens under Social Security has been zero for the past two years – apparently there are two different measures of inflation, one for public employee union members and another for everyone else.) And in addition to the COLA increase, the union members will receive another 4-5% annual “step” increase – the step increase being the reward for just showing up for another year. The average public employee makes about $50,0000 annually – not counting the cost of their benefits or the employers FICA contribution. That means the average state public employee will receive a first year salary increase of $2,250 to $2,750. Not bad considering the per capita income for Oregonians increased by only $900 last year.

Healthcare benefits. Oregon’s public employee unions have historically had one of the best – and most expensive – healthcare insurance plans in the state. This gold-plated benefit has cost the taxpayers between $12,000 and $18,000 per year per employee depending on whether the employee is married and/or has dependents. Under the new union contracts, union members will now have to pay between $600 and $900 annually. – they should be able to afford that given that they just got a raise of between $2,250 and $2,750. But even that isn’t enough because the contract calls for the state to pay a “subsidy” of $480 per year to those employees making under $35,000 per year. In contrast, the average private sector employee’s cost of healthcare insurance, according to a recent release by the Bureau of Labor Statistics is about $5,500 annually of which the employees pay a substantial portion.

Pension (PERS) benefits.The cost of PERS, including the six percent employee contribution actually paid by the state, now exceeds twenty-five percent of payroll and is scheduled to increase to over thirty percent of payroll. This platinum plated retirement plan allows some Tier I employees to retire at benefits in excess of their wages at the time of retirement. For this special privilege, the public employee union members pay exactly nothing. At the conclusion of Mr. Kitzhaber’s tough talking negotiations with the public employee unions, the union members will now pay exactly nothing. Way to go Governor.

Work Rules. There are a myriad of work rules included in union contracts – most ensuring job security and low productivity from workers. The most burdensome of these rules from the taxpayers standpoint is the prohibition against outsourcing any work ever performed by a union member regardless of the savings to the state. The new union contracts failed to address or change this “featherbedding” clause.

As a part of the negotiations, the unions agreed to a number of “furlough” days based on the salary level of the employees – ten for the lowest wages and up to fourteen for the highest wages. This is a trick that the unions have used forever to avoid either wage cuts or salary reductions. Most public employees will simply take “vacation” days or “sick leave” for the forced furlough days thus eliminating any savings to the state and any reduction in their gross pay. The end result is that the baseline for salaries remains high and the number of employees remains unnecessarily high.

And to make matters worse, any number of agencies require all employees to take the furlough days at the same time thus effectively, and unnecessarily shutting down that function of government. The Department of Environmental Quality (DEQ) is notorious for a total shut down thus inconveniencing the motoring public who must get an emission test prior to licensing. Its just their way of reminding the taxpayers as to who really has the power – the public employee unions, not the citizens.

So, over all, how do you think the public employees unions made out? While Oregonians in the private sector continue to suffer, the public employees unions have made out like a bandit. Ironically, the very sectors where private sector unions have the largest numbers of employees have suffered the most and have seen the least recovery. So much for solidarity.