On November 8, Ohioans will vote to approve or reject Senate Bill 5, Gov. John Kasich’s public-sector-union reform. The law, enacted earlier this year but put to a referendum thanks to the efforts of organized labor, is vital to the fiscal health of the state’s municipal governments, and it should remain on the books. Turnout will be major factor, so fiscally conservative Ohio voters owe it to their cause to head to the polls on Election Day.
Senate Bill 5 is broadly similar to the collective-bargaining reforms enacted by Gov. Scott Walker in Wisconsin. While the law allows collective bargaining on many issues — exceptions include health insurance, pensions, and staffing levels — local governments can impose a contract unilaterally if negotiations falter. Unions can no longer charge “fair share” fees to workers who choose not to join. Also, government workers are required to pay 15 percent of their health-care costs and contribute 10 percent of their salaries toward their pensions.
In short, Senate Bill 5 limits the ability of government workers to negotiate higher salaries, and it cuts their total compensation by requiring them to contribute more to their benefits. Both of these effects should be celebrated.
As even pro-labor Democrats once understood, it’s not “negotiating” when a union sits down with a public official it helped elect to decide how much of the taxpayers’ money it gets. And government-employee unions are a huge factor in Ohio politics. According to the 1851 Center for Constitutional Law, an Ohio think tank, four of the top six donors to legislators and legislative candidates in the state are public-sector unions — and these donations come from dues that are automatically deducted from employees’ paychecks. Few workers realize they can demand refunds for the portion of their dues that is used for political purposes — a problem addressed by another Senate Bill 5 measure, which would require unions to get workers’ written consent before giving dues money to political-action committees.
Cutting compensation for public employees is also a good move. Of course, there is an intense debate unfolding over whether public-sector employees are paid more than their private-sector counterparts — a debate that will never see a definitive resolution, because the methodology is so subjective. Nonetheless, one sophisticated estimate, that of Andrew Biggs and Jason Richwine of the American Enterprise Institute, suggests that public employees in Ohio are overpaid by as much as 43 percent. Simpler measures point in the same direction: Nationwide, for example, public-school teachers are paid considerably more than private-school teachers, despite having essentially the same job.
Why not put Biggs and Richwine’s estimate to the test? If the unions are to be believed — and public employees are, if anything, underpaid already — Senate Bill 5’s compensation cuts will create a shortage of public employees, and Ohio governments will have to raise wages regardless of how much power the unions have. While this would impose short-term hardship on Ohio’s governments and their employees, it would prove that, by and large, public-sector workers provide a good value relative to their compensation. The similar estimates Biggs and Richwine have arrived at for other jurisdictions would be immediately discredited.
By contrast, if Biggs and Richwine are correct, Ohio governments will have no problem hiring at the lower compensation level — and they’ll save some much-needed money. Ohio’s pension system has a liability of $171 billion, only 66 percent of which is funded, according to the Pew Center on the States. (A healthy funding number is 80 percent.) In addition, Ohio is liable for $43 billion in retiree health-care costs, only 33 percent of which is funded.
If it works as predicted by Biggs and Richwine — and we expect it to — Senate Bill 5 is a crucial step toward fixing this problem in Ohio and a model for addressing similar issues elsewhere. Ohio voters should opt to keep Senate Bill 5 when they take to the polls November 8.