News Story

How Much Less Union Politicking If Supreme Court Bans Forced Fees?

With compulsory fees coming in, teachers union spent $29.8 million on politics in 2016 cycle

The National Education Association contributed $29.8 million to political campaigns and causes during the 2016 election cycle, of which 99 percent went to Democrat or liberal causes, according to the website OpenSecrets.org.

Given the magnitude and one-sidedness of this political activity by public sector employee unions, courts have permitted workers in unionized government workplaces to opt-out of having to financially support union activities that go beyond basic employee representation, meaning political activities. But employees are still required by U.S. Supreme Court rulings to contribute financially to union administration and collective bargaining expenses by paying so-called agency fees, which are about 85 percent of the full membership dues.

In 2015, Illinois state worker Mark Janus challenged this in a case that is now before the U.S. Supreme Court, arguing that the law still violated his free speech rights. His attorneys contend that in a government workplace, even these basic union activities are inherently political. Oral arguments in the Janus case were held Monday and a ruling is expected in June.

If the Supreme Court were to rule that Mark Janus and other government employees cannot be compelled to pay agency fees it would amount to giving virtual “right to work” status to government employees nationwide.

There are 28 states that have enacted right-to-work laws that apply to private sector and most public sector employees, according to the National Right To Work Legal Defense Foundation. These laws prohibit compelling employees to pay either union dues or agency fees as a condition of employment.

This leads to the question of how much impact a favorable ruling for Janus in the case would have on union political activity.

"Very hard to say. There is no way to know," said Larry Sand, president of the California Teachers Empowerment Network. "NEA and other government unions will be hurt, but the extent will be determined by how many workers quit or choose not to join them. To be sure they will have to pick their campaigns more carefully. In brief, the gravy train will slow down, not stop."

The NEA, for example, has just under 3 million members who pay union dues and 87,764 agency-fee payers, according to its most recent filings (2017) with the U.S. Department of Labor. The revenue stream this generates gives the union political clout that is felt all across the country.

For example, in 2016 Georgia Gov. Nathan Deal proposed a constitutional amendment allowing the state to take over chronically failing schools. Over a two-month period, the NEA funneled $4.2 million to the campaign against the proposal.

And in 2013, the NEA reported giving $3.6 million to the Michigan Education Association, and a further $2.5 million to other liberal organizations to defeat ballot proposals in this state.

“The National Education Association has long made itself a political player even in right-to-work states by using the forced dues and agency fees they can collect in the 23 other states,” said Derk Wilcox, a legal analyst for the Mackinac Center for Public Policy. “If Mark Janus wins his case, the NEA won't be able to force teachers in states like New York and California to pay for politicking in states like Michigan or Florida.”

Correction: The U.S. Supreme Court allows states to mandate employees pay agency fees to unions.

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.

News Story

Firm Gets $220,000 State Subsidy Deal, Files For Bankruptcy

Records show $100,000 was spent; what happens next up to state corporate welfare officials

In April 2016, a Michigan Business Development Program that gives state subsidies to select businesses approved a $220,000 grant for a Van Buren county produce wholesaler to expand a production facility in Paw Paw. The firm produces and packages blueberries, asparagus and grapes for sale to large grocery store brands like Meijer and Kroger, and the grant was contingent on it meeting certain employment milestones by specified dates.

State records indicate that $100,000 was disbursed in 2016, but whether there will be any more is uncertain because Spiech Farms filed for Chapter 11 bankruptcy in 2017, reportedly due to crop losses experienced with Georgia blueberries and Michigan grapes. This constitutes a default on its subsidy deal, and the state officials who manage MBDP have broad discretion over what happens next.

Spiech Farms isn’t the only private company to default on conditions attached to grants from the Michigan Business Development Program, or MBDP. According to a new study by Mackinac Center fiscal analyst Michael LaFaive and Ball State economics professor Michael Hicks, more than 33 percent of MBDP subsidy agreements signed between March 2012 and September 2016 were in some degree of default, and some had been revoked. Some of these deals were later reworked under new terms.

According to LaFaive, the Spiech Farms default is one of many in this program that suggest government economic development officials are unable to effectively distinguish whether potential taxpayer subsidy recipients will be winners or losers.

“If officials could truly decide who the next real commercial success will be they would be hedge fund managers on Wall Street not state bureaucrats,” LaFaive said.

Michigan Economic Development Corporation spokesperson Otie McKinley said the agency is still confident in the program.

“I have seen the report, but we remain confident that the MBDP is an important economic development staple in the arsenal of tools that aims directly at growing the economy through private investment and job creation around the state,” McKinley said.

In 2011 Gov. Rick Snyder signed the law authorizing MBDP grants. When running for office in 2010 Snyder had promised to end a business tax break and subsidy-granting program called the Michigan Economic Growth Authority. That program was suspended in 2011.

The MBDP distributes money in the form of low-interest loans, cash subsidies and “other incentives.” Between March 2012 and September 2016, 319 MBDP deals were approved, representing subsidies worth $300 million. At the time the Mackinac Center study was released, only $157 million had been awarded to companies.

The largest single MBDP deal was a $10 million loan to what is now called the QLine in Detroit. The average subsidy awarded by the MBDP during the period studied was $950,000. Through September 2016, 55 percent of all MBDP subsidies were for projects in Kent, Oakland, Washtenaw and Wayne counties.

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.