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NRO’s domestic-policy blog, by Reihan Salam.

Schieber and Longman: Let the Voters Have A Say on Pensions



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I found many things to disagree with in Sylvester Schieber and Phillip Longman’s take on collective bargaining for public sector workers, but it is an impressively sane, lucid take on the issue from a union-friendly perspective, e.g., 

Public employees sometimes complain that they receive lower salaries than their counterparts in the private sector. That’s often true, but when the value of their pensions and other benefits are factored in, their total compensation, especially for blue-collar jobs, is frequently at least competitive, if not superior. Proof of this is how few public employees quit. It’s telling that workers in the private sector, according to the Bureau of Labor Statistics, are more than three times more likely to quit their jobs than state and local workers, whose monthly turnover is just .5 percent.

Schieber and Longman’s core point is that “union-busting” won’t address the underlying problem of unchecked growth of deferred compensation for public workers. To that end, they offer an even more dramatic solution:

But the preferred solution by some policymakers— bust the unions—isn’t the appropriate response. That’s because it doesn’t address the core problem, which predates collective bargaining in the public sector and is found even where unions don’t exist. Instead, the real problem is something no one wants to talk about precisely because it’s so bipartisan: both political parties, for different reasons, have incentives to use pensions as ways to borrow from the future. The way to fix, or at least alleviate, this problem is not to take rights away from unions. It is to give more power to voters.

Wow. One could say that negotiations with public workers introduce very serious agency problems: it is future taxpayers who are on the hook for deferred compensation, and present-day elected officials who reap the benefits from keeping public workers happy. This is true, as Schieber and Longman argue, even in non-union environments:

Military retirees, after all, don’t have a union, and yet the cost of the pensions promised to them by Congress over the years now comes to $1.3 trillion, or $10,700 for every U.S. household. Similarly, long before most federal workers earned any formal right to collective bargaining under the Civil Service Reform Act of 1978, the Civil Service Retirement System, created in 1920, was amassing huge unfunded liabilities for which we are still paying now. Today, the handful of states that don’t allow collective bargaining among their public employees generally have benefit plans that are just as generous as states that do allow it. One of those nonunion states, Virginia, faces $17.6 billion in unfunded pension liabilities.

After outlining the nature of the conflict of interest facing government decisionmakers, Schieber and Longman float an analogy to floating bonds:

 

When a city or state is considering whether to float bonds to finance a major project, like building a school or a highway, the rule almost everywhere is that the issue has to be approved by referendum. In Wisconsin, for example, no school board can commit to a capital project of more than $1 million without taking it to the district for a vote. That’s because otherwise there is too little check on politicians borrowing from the future to benefit their favorite contractors and other constituents. With so much backroom self-dealing possible, sunshine and direct democracy are a necessary corrective.

We could easily apply the same rule to public employee pensions. Let the unions and the politicians negotiate all they want, but if they come up with a contract that puts future taxpayers on the hook for the cost of making pension and other retirement benefits more generous, it should go to a vote of the people. If the people are feeling generous, or if they feel there is indeed a strong case for why public employees need more generous pensions, they may well go along. If they feel there are more compelling purposes for which they should be spending their own or their children’s money, they will not.

I’m sorry, but this is absolutely brilliant and it pains me that Schieber and Longman are only proposing this excellent idea now. Gov. Christie in New Jersey has said that the important isn’t collective bargaining rights per se, but making sure that the collective bargaining process is sufficiently adversarial rather than collusive. Though a referendum isn’t a perfect tool, as the authors acknowledge, it does change the incentives in a significant way.

This is easily one of the best ideas I’ve seen in some time. Note that it will have a restraining effect on government decisionmakers from the start. I still think that public sector unions have more political power than is appropriate, which is why I’d favor opt-in instead of opt-out for political expenditures at a bare minimum. This political muscle-flexing would become a bigger deal in the referendumverse, particularly in low-turnout elections.

Think about how different the politics of Wisconsin would have looked had the Schieber-Longman proposal been on the table. 



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