State's Largest Teachers Union Fails to Disclose 30 Percent of Its Income

The Michigan Education Association, the state's largest teachers union, routinely submits financial reports to the federal government, as it is legally required to do. But the reports can leave outsiders wondering about the source of the roughly 30 percent of its income that is categorized under the heading of “All Other Receipts.”

That’s the only description the Michigan Education Association provides to account for more than $30 million of its annual income. Specifically, on its 2014 LM-2 disclosure form, the MEA reported over $38 million in receipts from unspecified sources under the "All Other Receipts” heading.

“This is something that isn’t commonly seen on a union disclosure report," said Nathan Paul Mehrens, president of the Americans for Limited Government Foundation. "It begs the question: Where did this money come from?”

Mehrens served in the U.S. Department of Labor under George W. Bush, where his job included designing union disclosure forms. “The LM-2 disclosure form, like most balance sheets, has various line items, such as ‘dues and fees,’ that describe the sources of the funds,” he said.

According to Mehrens, the mystery revenue raises several questions. "This line is for sources that don’t fit into any of the specified descriptions," he said. "However, a union is allowed to report money it received in the ‘All Other Receipts’ category only if it received the money in individual amounts of less than $5,000.”

“In order to reach $38 million with payments that fall below the $5,000 threshold, the sheer volume involved seems problematic,” Mehrens continued. “Even if we assume that the $38 million MEA listed under ‘All Other Receipts’ came in amounts of $4,999, that would represent 7,667 transactions.”

During February 2014 testimony before Julia C. Stern, an administrative law judge who was hearing a labor case involving members quitting the union, MEA Executive Director Gretchen Dziadosz was asked about the $33 million that MEA reported on its 2013 report under "All Other Receipts."

“I didn’t prepare on this, I couldn’t tell you without my accounting staff,” said Dziadosz, whose name appears on the LM-2 forms as the union's contact. “They are the ones who helped prepare this. I do not have personal knowledge of that.”

Michigan Capitol Confidential left a telephone voice message for MEA spokeswoman Nancy Knight requesting comment on the funds. So far, the call has not been returned.

The mystery money may be related to the union’s health insurance division, the Michigan Education Special Services Association, which long ago was described as the money machine that subsidizes the union's other work, including political activism. MESSA administers school employee health insurance benefits underwritten by Blue Cross Blue Shield.

Mehrens was asked if MESSA could be the source of the $30 million-plus figures MEA reports as “All Other Receipts.”

“That’s a possibility,” he said. “But back in 1959 when these disclosure regulations were put in place, the report of the committee that originally passed them said their purpose was to allow union members a full accounting of their union’s financial transactions.”

“At the very least, MEA should provide something that reveals the source of these millions of dollars,” Mehrens added. “With any reporting system there are weaknesses, but based on what I’ve seen, the way this union is reporting contradicts the whole notion of financial disclosure. Union members are entitled to a full accounting of MEA’s transactions.”

By contrast, other unions typically report less than one percent of their annual incomes on the “All Other Receipts” line. The United Auto Workers reported approximately $1.1 million, or less than 0.5 percent of its total income of $219 million. The Service Employees International Union reported less than $200,000, while its total income was $321 million. The Teamsters reported just over $291,000, with roughly $182 million in total income. The National Education Association, the parent organization of the MEA, reported approximately $421,000 in "All Other Receipts," with over $385 million in total income.

The MEA had the highest total receipts of all NEA state affiliates that filed LM-2s, with the Pennsylvania NEA affiliate finishing second. It had nearly $95 million in total receipts, and just over $630,000 for other receipts.
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See also:

MEA Agency Fees Far Exceed Cost of Contract Negotiations

Who's the Freeloader? MEA Spends More On Benefits than Negotiations

MEA Spends More On Salaries, Benefits Than Member Representation