PUBLIC EMPLOYEES IN THE CROSSHAIRS

Reminder: Still on the road; returning next week.

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From time to time it's a good idea to look at previous posts to see if what was said before is still current or needs to be updated. This time it's a lookback at the previous post, "A New Era of States Rights?"

The focus of that post was on the constitutional challenges being registered by the states on issues such as: 1) immigration and the power (or not) of a state to insert itself into legal territory that has been the exclusive domain of the federal government; 2)the right of a state to "nullify" an act of Congress by declaring that a federal law is inoperative in the nullifying state or states; and 3) state challenges to President Obama's signature piece of legislation, health care reform, and the right (or not) of the federal government to mandate that individuals carry health insurance. All of these issues are still active with 1) and 3) making their way through the court system. Number 2) is still alive, but is considered a right wing fringe idea which has yet to clear any state legislature.

What is new, if not new, at least far more prominent, is that what's going on at the state level mirrors the issue that still defies a final resolution in Washington--the budget. How to cut deficits by cutting spending and/or in some states raising revenues by new or higher taxes or boosting other revenue sources such as user fees. Wisconsin has captured the headlines on the budget issue by combining proposed state spending cuts through higher public worker contributions to their pension and health benefits with union busting by seeking to repeal for most public workers the bulk of their collective bargaining rights.

Other states such as California (Democratic governor) and Michigan (GOP governor) are also seeking to cut the cost of public employee benefits but have chosen to seek various concessions from the unions rather than try union busting. In Tennessee the target of that GOP-controlled government are the teachers who, under legislation being considered, would no longer have mandatory collective bargaining with local school boards. And in Ohio, the legislative aim is to allow collective bargaining, in altered form at the local level, but would bar strikes by public employees (police and fire are already prohibited from striking). A final note on this point is that some states do not have collective bargaining for public empoloyees.

One other rumbling, although less visible for now, at the state level is also focused on how to cut the costs for public employees. This involves states adopting the private sector's dominant retirement system--the 401(k). The 401(k) is what is called a defined contribution system; that is, the employee puts, for example, two to 10 percent of his or her pay into stocks/mutual fund purchases while the employer may or may not also contribute to the employee's retirement stock plan.

When the 401(k) plan originated, the private sector quickly abandoned the traditional defined benefits plan whereby the employer guaranteed a retiree X number of dollars based on the worker's earnings record and years of employment. But even where such a defined benefit plan existed, it wasn't necessarily guaranteed. For example, several years ago when United Airlines went into bankruptcy, it abandoned its retrement plan and turned the problem to the federal government which pays United retirees far less than they they were originally promised. Other companies have also dumped the problem on the federal government. In short, with the 401(k), the burden of putting aside retirement funds shifted from the employer to the employee, saving companies huge amounts of money.

Now the states are showing an interest in doing the same thing with their public workers. There are many obstacles in the way of making such a shift, particularly for some states, but it can be expected that as state budgets continue to show deficits in the future, some states may follow the private sector in shifting to the 401(k) solution. The idea has also been proposed that states should be allowed to declare bankruptcy as a means of dumping their retirement obligations. That idea has generally been squelched.

To conclude, as states seek to cut spending and reduce deficits, the public employees seem to be in the crosshairs. In some states the focus is on simply cutting the public cost of the workforce while in others this is combined with union busting.