Collective bargaining rights for public employees are at the heart of the political battle raging in Wisconsin. But in economic and fiscal terms, abolishing contract negotiations between unions and management is not necessarily a panacea for state and local governments — or a nightmare for their workers. Consider Virginia, which bans collective bargaining and always has. Like pension systems in states friendlier to unions, the commonwealth’s public employee retirement system is underfunded by $17.6 billion.
The point is that, whatever happens in Wisconsin, states and local governments across the country are faced with chronic fiscal problems rooted partly in unsustainable employee compensation systems. One way or another, they will have to be addressed, and there is only so much that can be achieved through raising revenue, since many of the most troubled states — California, New York and New Jersey — are already high-tax jurisdictions. Much of the issue is rooted in health-care costs, especially benefits for public-sector retirees. States face a combined $555 billion in unfunded retiree health coverage liabilities.
Yet in 14 states, taxpayers pick up 100 percent of the premium tab for retirees, who often collect benefits for a decade or more before going on Medicare. This is not only unfair to taxpayers, for whom free health care is usually a remote dream. It also encourages overconsumption of medical goods and services, thus raising the cost for everyone. If you want to bend the curve on health-care costs, trimming unjustifiable benefits for public-sector workers and retirees is one place to start.
Public employee unions argue that this would be unfair to them, since they gave up wage increases in many cases to retain health benefits. At the same time, no group of employees has a presumptive right to across-the-board pay hikes year after year, regardless of individual performance or the employer’s ability to pay; during good times, that became the expectation in too many places.