The following article appeared in the July 8, 2003
Edition of Investors Business Daily as written by
George Schiele, a board member of the Yankee Institute
for Public Policy in Hartford, Conn.
Public
Employee Unions Sap States of Essential Resources
Looking back
just a generation, federal spending in 2002 constant dollars has climbed from
$11,000 per taxpayer in 1970 to $14,700 per taxpayer in 2002, a near 30%
increase in absolute terms. Total state and local spending has in that same
period climbed even faster, from about $6,100 per taxpayer to almost $9,100.
Although the
activities of union lobbyists in the halls of congress are regularly
documented in the national media, their successful effort to influence
legislation at the state and local levels too often goes under-reported. With
the decline of the stock market and the resulting fall in capital gains
income, most pundits have blamed the explosion in state budget deficits on
tax receipt shortfalls.
But a closer
examination of the facts suggests the problem lies elsewhere, particularly in
those states in which lagging population growth is combined with a strong
union presence. Connecticut offers a particularly egregious example of how
political forces paint the taxpayers into a budget corner from which escape
becomes improbable.
On The Edge
The Nutmeg
State, driven by the actions of its General Assembly and an assortment of
Democrat, Republican and Independent governors, has reached the budgetary
equivalent of an automotive redline, roaring for breakdown. The cumulative
effect of a near static population, a chronically lagging business base and
the relentless growth of state spending compounded over decades has brought
it to the edge.
As always,
raising taxes and imposing new ones, like the income tax created in 1991 by
then-Gov. Lowell Weicker, have not made the budget easier to balance, just
bigger. For those who still accept the bright-eyed optimism of politicians as
they pile on spending and debt, a look at the Nutmeg numbers trend should induce
sober reflection. In 1970, Connecticut had just over 3,000,000 people; by
2002, it had grown only 13%, a span in which the U.S. population grew by
nearly 40%. Not surprisingly, many of the state’s historically important
industries also grew too slowly or just packed up and left for warmer tax
climes. What grew most vigorously during those decades was political spending
on public employees.
In 2003 dollars,
Connecticut’s 1970 budget was just over $3 billion. Today the cost of state
government has grown to more than $14 billion, a startling increase relative
to population growth that is clearly unsustainable. Beginning with an
inflation adjusted $1,000 per capita in 1970, the state today spends more
than $4,200 per capita. In just over a generation the state has more than
quadrupled its real spending.
This contrasts
with Colorado, a state of over 4,400,000 whose budget is hundreds of millions
less than Connecticut’s and just $3,136 per capita. Frugal Nevada holds per
capita spending to $883, actually down from the $1,223 of 1970.
Heaping On Debt
The growth rate
of states with right-to-work laws routinely outstrips those without. In such
states citizens benefit from adequate public services while enjoying the
superior job opportunities that typically accompany a friendly business
climate. Spending restraint is possible, just not common.
In addition to
spending all the money that it takes in, Connecticut’s generous government
also spends money that future governments and taxpayers will be obliged to
repay with interest. Its inflation-adjusted 1970 bonded indebtedness of $973
per capita was by 2002 almost $3,700 per capita, another painful near
quadrupling. Connecticut residents now have the dubious distinction of
carrying reportedly the highest per capita debt load in the 50 states.
What are those
once frugal Yankee taxpayers getting for quadrupled taxes and a record debt
load? How did they reach this sorry state? Public payrolls offer the best
clue: In 1975 the state employed 45,000 workers. By 2000, there were 92,000
employees to serve a near static population.
In contrast,
Florida - population 16,400,000 - has grown at triple the national rate and
carries all the special burdens of rapid infrastructure growth and large
elderly, immigrant and minority populations, still has only 171,000 state
employees, including state university staffs.
How is it that
just 10 public employees per thousand suffice in Florida and the national
average is only 15, but 27 can’t seem to keep up with the work of
Connecticut?
Taxpayers Pay
Moreover, with
the cost of state employee pensions scheduled to increase 18% and medical
coverage to increase 25% in the next fiscal year, the liens against
taxpayers’ paychecks grow more threatening.
Connecticut also
pays its public employees even more than New York and Massachusetts, its
famously high-tax/big-spending/strong-union neighbors. The central role of
public employee unions in state budget growth is widespread and inescapable.
Education spending, paid for by a combination of local property taxes and
state subsidies to poorer towns, also mirrors a disproportionate growth in
wages and staffing which, in turn, reflects the unions’ influence on labor
laws in Hartford. Binding arbitration laws create inflated labor costs and
unproductive work rules in all municipal school districts, while the “highest
prevailing wage” rule requires town and cities to bond new school
construction at twice the necessary cost.
At a recent
press briefing where the Yankee Institute - a free-market oriented think tank
- released its latest study of the state budget, the presence of public
employee union members and supporters outnumbered the media. And when a
coalition of non-profits began earlier this year to seek legislative support
for private-school scholarships for learning-disabled children similar to
Florida’s highly successful McKay scholarship bill, they found the doors of
the House Education Committee chairman consistently manned by a
representative of the teachers union who kept tabs on all visitors.
This suggests a
union presence in the political process that is reminiscent of the “minders”
Saddam Hussein assigned United Nations inspectors and clearly skirts the
Orwellian.
Example Of
Excess
Connecticut has
ballooned itself into the unenviable position of being the national poster
child for out-of-control-government. But it is not the only state on a
spending joy ride. California and New York draw the most attention on the
sheer size of their deficits, but Ohio, Illinois and such smaller states as Montana
and Nebraska are also in the forefront of those appearing out of touch and at
risk.
What happens
next for states with free-spending ways? In spite of the supposed bailout for
states in the recent tax bill, there is relatively little the federal government
can or will do. The $200 million Connecticut is scheduled to receive has
already been spent by the legislature’s approval of a plan to integrate
Hartford schools with bussing and new school construction (another sop to the
unions) that experts believe could cost the state as much as $1.5 billion
over the next two years.
The market
forces that rule even governments will ultimately restore equilibrium to such
unbalanced situations. Ideally this would take the form of a prompt and
substantial reduction in the public payrolls, rather than bankruptcy.
However, such a
positive outcome is contingent upon the taxpayers first understanding the
problem and then recapturing control of the political process from the
interest groups that now rule.
George Schiele
is a board member of the Yankee Institute for Public Policy in Hartford,
Conn.
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