The Louisiana Legislature, although tepidly, finally began to address a ticking time bomb this session. That's better than the city of Shreveport, whose elected officials from last year decided to make matters worse. Shreveporters need to understand that relationship unless they blindly want to accept considerable tax increases.
The announcement earlier this year that enough city employees had signaled affirmation for a union presence came as a consequence of the idiocy of the previous City Council to pass an ordinance allowing for unionization. Introduced by former Councilman Calvin Lester, it predictably had the support of the two other black Democrats on the Council at the time, and, inexplicably, lame duck Republican Michael Long while fellow Republican Ron Webb, who had worked for unionized General Motors, found a way to be absent for the vote.
Whether Webb, assured of reelection with no opposition, would have voted for the ordinance is speculative, but Long’s parting gift represented a big Bronx salute to the citizenry.While state law prohibits strikes or other kinds of actions to impede work by public employees and only eight city departments, about 40 percent of the workforce, were included, allowing this plays to the greed of some city employees and injures the public.
As Pres. Franklin Roosevelt recognized long ago, public unionization produces an asymmetry in power favoring employees over citizens. This is because unionized employees have a greater ability to influence policy and in their favor. Without a union, employees and non-employees are equal in that they may control policy through voting on policy-makers. But with public unionization, employees have more ammunition to facilitate the transfer of wealth from the citizenry (taxes that pay their salaries) in order to pay for political pressure to be put on policy-makers (through union dues) to suit their agenda, an option unavailable to others, in addition to voting.
And one of the consequences of increased unionization in the public sector has been pressure to create pension regimes that are unsustainable. Unions have aided and abetted in continually escalating salaries and pensions, using their superior resources gained at the taxpayers’ expense to lobby successfully for salary increases, generous cost-of-living increases, gold-plated health care and other benefits, and pensions that allow for early, often considerably, retirement at comfortable levels. Little wonder recent data show that, throwing in all benefits, on average public sector compensation nearly doubles up on the average in the private sector. Even parsing out mitigating factors, it’s hard to argue that public sector workers aren’t better compensated, and higher pensions for less work are a part of it.
As such, this has created a tremendous pension time bomb for taxpayers. Nationwide, unfunded accrued liabilities (UAL) of state and local governments top $3.5 trillion as these governments have balked at paying for their generosity with other peoples’ money and using unrealistic assumptions to foist higher burdens on taxpayers. Louisiana is one of the most egregious offenders, the sixth worst according to recent data.
There are only two ways to solve for the UAL crisis, grow out of it with investment returns and/or hit up taxpayers. Louisiana’s official statewide systems use those very optimistic projections in computing their official UAL numbers, generally at least 8 percent annual return. So do the few systems run by local governments, like Shreveport’s, using similar numbers, so they actually understate the real crisis. For example, in 2008 Shreveport’s pension funds lost a staggering $60 million, or over a quarter of their combined value, aggravating tremendously a UAL that by the end of 2009 had reached nearly $142 million that theoretically $21.5 million is to be paid off by 2015 and the remainder by 2039.
The crisis only will grow worse as the overly-optimistic returns assumed will disappoint and create even larger amounts to be paid in by the citizenry, regardless of whether a subdivision has its own system or is part of the state system (Bossier City is part of state systems; Shreveport is to a degree with its public safety personnel). At present, the funds to make up for escalating pension costs come from the general funds of both Shreveport and Bossier City, meaning the dollars can’t be used for other city services and/or must come from new revenue sources, principal of which are tax increases. The longer this drags on and the bigger the UAL becomes, the more pressure mounts for additional taxation.
In Shreveport’s case, that impetus ratchets upwards with a union now present to lobby for more transfer of wealth from the public to its members’ pockets and to fight against reforms that create more reasonable and fairer compensation regimes. Mayor Cedric Glover, who blessed the opportunity to unionize, likes to tout Shreveport as the “next great city of the South.” His and the Council’s stupidity on this issue are more likely to make Shreveport, like so many other political subdivisions nationwide crushed with pension burdens, the next flailing city in decline.
Posted by Jeff Sadow at 08:50