News Story

Engler-Era Pension Reforms Saved Billions; Teacher Pensions Not Part of Deal

When former Gov. John Engler and Michigan lawmakers switched new state employees from a defined-benefit to a defined-contribution, 401(k)-type retirement plan in 1997, it saved taxpayers billions in additional unfunded liabilities and another $167 million in other costs, according to a new policy brief released by the Mackinac Center for Public Policy.

The change to the Michigan State Employees’ Retirement System saved the state an estimated $2.3 billion to $4.3 billion in unfunded state employee pension liability from 1997 to 2010, according to the report, authored by public pension expert Rick Dreyfuss. Even with these savings, the MSERS unfunded liability for employees hired prior to the reform date increased to $4 billion in 2010, according to a recent actuarial report.

The state employee defined-contribution 401(k) plan provides a 4- percent of salary automatic contribution with an additional 3 percent match on employee contributions, meaning the state will kick in up to 7 percent of state employee salaries.

James Hohman, assistant director of fiscal policy at the Mackinac Center, said the study was more evidence that the state needs to go a similar route with its public school employees’ pension plan — the Michigan Public School Employees’ Retirement System (MPSERS).

Most public school employees are enrolled in a defined-benefit plan that pays out an annual pension in retirement. The MPSERS pension system has a $11.98 billion unfunded liability.

“Something has to be done about that,” Hohman said of the growing MPSERS unfunded liability. “This is the way to get out of it.”

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

Commentary

Just Shut It

The Obama administration moves to silence employers

There really is no other way to interpret recent actions by the Department of Labor and the National Labor Relations Board: It is the goal of this administration to muzzle employers who for whatever reason prefer a non-union workforce and who want to make the case to their employees. The quaint notion behind the First Amendment — that people should be able to speak their minds about matters of mutual interest, and that rational debate is useful in a democratic society — would seem to no longer apply in the workplace.

Two simultaneous moves by two separate government agencies are designed to burden employer speech that is critical of unionization. The first is the National Labor Relations Board’s proposed “quickie election” rules, which are now in the public comment stage. Typically when a union files a petition seeking to represent a group of employees, there is a month, maybe a month and a- half, before the board holds a secret-ballot vote to determine whether or not said union actually has worker support. During that time, the company and the union both have opportunities to make their case for or against union representation. The NLRB wants to shorten that time period down to two, maybe three weeks. (NLRB member Brian Hayes, the lone dissenter, lays out his concerns here.)

The timing is critical: One can assume that the union has already begun making its pitch to workers when the petition is filed. If nothing else, they have been gathering worker signatures; they need at least 30 percent of workers to sign a card indicating interest before they can request an election. Meanwhile the employer is quite likely to be completely unaware of what the union is doing; there is no requirement that unions notify employers that they are recruiting new members, and the law prohibits supervisors from questioning employees about union activities. A sharp-eyed supervisor might notice union buttons and flyers lying around, but there are no guarantees that employers will get any notice of what’s going on beforehand. So when the petition is filed and the company is finally notified, they are likely to be in a bit of a hole. The extra time allows management to settle on their response — sometimes they recognize the union on their own — and get their message out. The month also gives all parties time to thrash out the sometimes tricky issues of just who is and is not in the bargaining unit, or where the vote should be held.

The quickie election means that employers will have little time to present the case against unionization. Union officials may welcome the opportunities to organize workers who haven’t heard much from the other side. Actual workers might appreciate the chance to hear what their employers might have to say, and we should trust their ability to sort out the conflicting messages. But apparently this administration either has little concern for their well-being, or little trust in their judgment, or maybe both.

Employers that prefer to remain union-free might respond to the quickie-election problem by presenting their employees with a constant, low-key message in favor of remaining independent from unions. If the message is effective enough, unions may not even bother gathering signatures. But the Department of Labor is moving to close off that option as well.

Under the Labor Management Reporting and Disclosure Act, companies are required to file financial disclosures when hiring labor relations consultants who persuade employees to turn down unionization. Up to now this filing requirement has been narrow — the paperwork is only required when an outside firm is hired specifically to counter a unionization drive. But the DOL is proposing new regulations that will trigger reporting requirements any time a company calls for outside assistance in managing its workforce, even on issues that don’t directly concern unions, such as polling employee satisfaction or instituting employee meetings to find and resolve conflicts. The practical effect will be to make it harder for companies to maintain good employee relations and make them easier targets for union organizers by silencing them in advance of a union organizing drive.

In short, the DOL is creating a burden for employers who might want to take steps to prevent unionization before a petition is filed, while the NLRB is speeding up the election process, making it harder for employers to get their message out after a petition is filed.

It used to be understood that unions existed for a larger purpose: to protect employees and help them get the best deal they could from the companies they work for. If a company went out of its way to keep its workers happy without a union, that was okay too. But in the Obama administration, unions have become an end in themselves.

It’s not hard to see why the administration might push unionization for unionization’s sake: The president is likely to face a tough re-election campaign, and unions are among his most reliable supporters. Easier unionization means more union members, which means more union dues, which means more union political activism.

Both of these regulations are open for public comment. A loud enough popular response might persuade the administration to back off a bit, though given the political incentives for unions and the administration it is likely that employers will have the rules rigged against them when all is said and done.

There was a time when union workers sang songs about Solidarity: “When the union’s inspiration through the workers’ blood shall run, there can be no power greater anywhere beneath the sun.” So much for all that. Now the union establishment must rely on the federal government to muzzle employers, lest workers hear an opposing point of view — or even just be treated better — and lose their enthusiasm for the whole union concept. The administration recognizes that the union establishment has little power to inspire and can only succeed by silencing employers. The decline of unions from a workers’ movement to a government client has accelerated to a pace that should alarm anyone who has workers’ interests at heart.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.