When the skyrocketing cost of public employees salaries and benefits helped push New York City to the brink of bankruptcy in the mid-1970s, state and local officials put together a bailout that reduced pension and benefits packages for Gothams workers. But by 1987, with the city out of the crisis, New Yorks unions were again demanding better pensions and benefits. When Mayor Ed Koch balked, the union simply abandoned the bargaining process and went to Albany, where it offered state legislators its political backing in exchange for enacting generous new benefits. Its the same old story, said a frustrated Koch. Giving in to the unions will help Assembly members and senators stay in office. The mayor decided to go to Albany too and dissuade the legislators from granting the new benefitsbut they told him to stay home. They sent [labor leader] Barry Feinstein to see me, Koch told me several years ago, recalling the incident. He told me that there was nothing I could do to stop the bill. The cost to the citys taxpayers: $101 million annually.
The situation that Koch faced back then is familiar to many mayors, city council members, and even governors today. This years face-off in Wisconsin between Governor Scott Walker and unions has generated an unusual, and long overdue, debate over collective bargaining rights in the public sector. But few seem to realize that when public-sector unions cant win at the bargaining table, they have other ways of getting what they wantabove all, exerting their muscle on legislators.
In 1974, for example, New York State legislators up for reelection curried favor with unions by passing a union-backed arbitration system. When negotiations between a city or county and its public-safety workers hit an impasse, an arbitrator would now step in, but he was instructed not to consider the economic impact of his decision. Big rewards have been common. Police officers in New York counties, whose unions make heavy use of the arbitration system, saw their salaries increase by double the state rate of inflation from 1997 to 2007, a Manhattan Institute study found.
New Yorks labor-friendly arbitration rules spread to New Jersey, where an arbitration law encourages mediators to take into consideration the salaries that other towns pay public workers. This means that if the unions in just one well-off town negotiate a favorable deal, unions in other towns promptly make steep demands that they know wont be met at the bargaining tableand then go to arbitration, where theyll get a more sympathetic hearing. The head of New Jerseys League of Municipalities called the process a budget buster, and Governor Chris Christie agreed. As part of his reform package for the state, he signed new legislation in December 2010 that limited salary increases under arbitration to 2 percent a year. Municipal officials in other states, like Ohio, are now lobbying for similar changes.
When they cant win favorable new deals from state legislatures, unions are adept at persuading lawmakers to protect the old ones, including when theyve expired. In states like California, New Hampshire, and New York, government unions have won passage in the legislature of so-called evergreen clauses, which require old union contracts to remain in force until new agreements are reached. Such clauses give unions incentives to reject concessions during tough times because they can keep their old contracts active, sometimes with automatic pay increases. Last year in California, public unions used the evergreen clause of the Dills Act, which grants collective bargaining rights to state workers, to resist proposed changes to work rules. (The states Democrat-controlled legislature had the power to override the evergreen clause but sided with the unions.) New Yorks evergreen clause, known as the Triborough Amendment, lets union members drag their feet on contract negotiations while their annual seniority-pay increases keep kicking in. So even if Governor Andrew Cuomo manages to freeze state workers pay this year, as he has suggested, taxpayers will still be on the hook for $140 million in seniority-pay hikes.
A major problem with state-enacted evergreen laws is that they often tie the hands of municipalities seeking labor savings. An evergreen law passed in New Hampshire in 2008 made it difficult for towns and school districts to extract concessions from unions once the national recession began. Responding to complaints from local officials, the new Republican-controlled state legislature repealed the law earlier this year. But such end runs around local officials have become common. In many localities across the country, everything from teacher salaries to fringe benefits and teacher-evaluation systems is now determined at the state level, not by local discretion.
This development isnt confined to states with collective bargaining. A nationwide 2008 survey of teacher contracts by the National Council on Teacher Quality found that the rules governing public-education employeesincluding those stipulating teacher tenure and benefitshave been written into legislation even in states that dont have collective bargaining. These requirements force local school districts to follow state regulations that public-employee groups have lobbied for and won. Nearly half of all states, the survey foundincluding those like North Carolina, South Carolina, and Alabama, which dont allow statewide collective bargaininghave laws mandating limits to class sizes, for instance. As unions have matured, the survey observed, they have realized that it is more efficient to lobby state legislatures than to fight battles locally, town council by town council.
Keep that in mind while watching the showdowns in Wisconsin, Ohio, and elsewhere. Even when public employees cant sit across the negotiating table from political officials, theyre far from powerless.
Steven Malanga is the senior editor of City Journal and a senior fellow at the Manhattan Institute. He is the author of Shakedown: The Continuing Conspiracy Against the American Taxpayer.