The Associated Press posted an article today about the Supreme Court’s decision that government workers can’t be forced to contribute to labor unions that represent them in collective bargaining.
The article states:
A recent study by Frank Manzo of the Illinois Economic Policy Institute and Robert Bruno of the University of Illinois at Urbana-Champaign estimated that public-sector unions could lose more than 700,000 members over time as a result of the ruling and that unions also could suffer a loss of political influence that could depress wages as well.
Alito acknowledged that unions could “experience unpleasant transition costs in the short term.” But he said labor’s problems pale in comparison to “the considerable windfall that unions have received…for the past 41 years.”
Billions of dollars have been taken from workers who were not union members in that time, he said.
“Those unconstitutional exactions cannot be allowed to continue indefinitely,” Alito wrote.
Kagan, reading a summary of her dissent in the courtroom, said unions only could collect money for the costs of negotiating terms of employment. “But no part of those fees could go to any of the union’s political or ideological activities,” she said.
The court’s majority said public-sector unions aren’t entitled to any money from employees without their consent.
There are two aspects of this decision that are going to make the political left very unhappy. Obviously this will severely limit the amount of money unions can contribute to Democrat political campaigns (to check union political donations, see opensecrets.org). But there is another issue here–pension funds. The other aspect of this decision is union retirement funds.
On October 19, 2012, I posted the following (here):
In a column in the Washington Examiner in April, Mark Hemingway pointed out that the average union pension plan had only enough money to cover 62 percent of its financial obligations. Pension plans that are below 80 percent funding are considered “endangered” by the government; below 65 percent is considered “critical.” Union membership is declining, which means that less people are paying into these funds.
The Pension Benefit Guaranty Corporation (PBGC) was created by the Employee Retirement Income Security Act of 1974 (ERISA).
According to Wikipedia:
The PBGC was created to encourage the continuation and maintenance of voluntary private defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at the lowest level necessary to carry out its operations. Subject to other statutory limitations, PBGC’s insurance program pays pension benefits up to the maximum guaranteed benefit set by law to participants who retire at 65 ($60,136 a year as of 2016). The benefits payable to insured retirees who start their benefits at ages other than 65 or elect survivor coverage are adjusted to be equivalent in value.
In fiscal year 2015, PBGC paid $5.6 billion in benefits to participants of failed single-employer pension plans. That year, 69 single-employer pension plans failed. PBGC paid $103 million in financial assistance to 57 multiemployer pension plans. The agency’s deficit increased to $76 billion. It has a total of $164 billion in obligations and $88 billion in assets.
On 03/23/2010, Senator Robert Casey of Pennsylvania introduced S3157.
The summary of S3157 at congress.gov states:
Create Jobs and Save Benefits Act of 2010 – Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to: (1) permit multiemployer pension plans to merge or form alliances with other plans; (2) increase Pension Benefit Guaranty Corporation (PBGC) guarantees for insolvent plans to increase participant benefits; and (3) increase from $8.00 to $16.00 the annual premium rate payable to the PBGC for each individual who is a participant of a multiemployer plan after December 31, 2010. (The underline is mine)
The bill was referred to committee and died there. So what is my point? The danger to the unions in this Supreme Court decision is that they will not have the money to pay their union pensions. The danger to the taxpayers in this decision is that they will be asked to pay the union pensions.
Stay tuned. This is going to get interesting.