City Journal

Christian Schneider
It’s Working in Walker’s Wisconsin
The governor’s controversial labor reforms are already saving taxpayers millions.
Winter 2012
Public unions around the country have poured money into an effort to vote Walker out of office.
Allen Fredrickson/Icon SMI/Corbis
Public unions around the country have poured money into an effort to vote Walker out of office.

One morning last February, Wisconsin governor Scott Walker called his staff into his office. “Guys,” he warned, “it’s going to be a tough week.” Walker had recently sent a letter to state employees proposing steps—ranging from restricting collective bargaining to requiring workers to start contributing to their own pension accounts—to eliminate the state’s $3.6 billion deficit. That day in February was when Walker would announce his plan publicly.

It turned out to be a tough year. The state immediately erupted into a national spectacle, with tens of thousands of citizens, led by Wisconsin’s public-employee unions, seizing control of the capitol for weeks to protest the reforms. By early March, the crowds grew as big as 100,000, police estimated. Protesters set up encampments in the statehouse, openly drinking and engaging in drug use beneath the marble dome. Democratic state senators fled Wisconsin to prevent a vote on Walker’s plan. Eventually, the Senate did manage to pass the reforms, which survived a legal challenge and became law in July.

The unions aren’t done yet: they’re now trying to recall Walker from office. To do so, they will try to convince Wisconsin voters that Walker’s reforms have rendered the state ungovernable. But the evidence, so far, contradicts that claim—and Wisconsinites seem to realize it.

Back in 1959, Wisconsin became the first state to let public employees unionize. The unions spent the next half-century productively, generating lavish benefits for their members. By the time Walker took office in 2011, the overwhelming majority of state and local government workers paid nothing toward the annual contributions to their pension accounts, which equaled roughly 10 percent of their salaries per year. The average employee also used just 6.2 percent of his salary on his health-insurance premium. Among Walker’s reforms, therefore, was requiring employees to start paying 5.8 percent of their salaries, on average, toward their pensions and to double their health-insurance payments to 12.4 percent of their salaries. These two changes, Walker estimated, would save local governments $724 million annually, letting him cut state aid to localities and reduce Wisconsin’s $3.6 billion biennial deficit.

These measures angered unions, but Walker’s other moves were even more controversial. One was to allow government employees to bargain collectively only when negotiating wages; in other areas, collective bargaining would no longer be part of the contract-making process. The unions screamed bloody murder, decrying the loss of what they called their “right” to collective bargaining. “We are prepared to implement the financial concessions proposed to help bring our state’s budget into balance, but we will not be denied our God-given right to join a real union,” said Marty Beil, head of the Wisconsin State Employees Union, back in February. “We will not—I repeat we will not—be denied our rights to collectively bargain.”

What had the unions most up in arms, however, was a reform that ended mandatory dues for members. Wisconsin unions were collecting up to $1,100 per member per year in these obligatory payments, which they then spent on getting sympathetic politicians elected. In the last two elections, for instance, the state’s largest teachers’ union spent $3.6 million supporting candidates. Walker’s reform meant that government workers could now opt out of paying these dues—savings that could help offset those workers’ newly increased health and pension payments, the governor said. The unions knew that, given the option, many of their members would indeed choose not to write a check—and that this would strangle union election spending.

The unions’ battle against Walker’s reforms has rested on the argument that the changes would damage public services beyond repair. The truth, however, is that the reforms not only are saving money already; they’re doing so with little disruption to services. In early August, noticing the trend, the Milwaukee Journal-Sentinel reported that Milwaukee would save more in health-care and pension costs than it would lose in state aid, leaving the city $11 million ahead in 2012—despite Mayor Tom Barrett’s prediction in March that Walker’s budget “makes our structural deficit explode.”

The collective-bargaining component of Walker’s plan has yielded especially large financial dividends for school districts. Before the reform, many districts’ annual union contracts required them to buy health insurance from WEA Trust, a nonprofit affiliated with the state’s largest teachers’ union. Once the reform limited collective bargaining to wage negotiations, districts could eliminate that requirement from their contracts and start bidding for health care on the open market. When the Appleton School District put its health-insurance contract up for bid, for instance, WEA Trust suddenly lowered its rates and promised to match any competitor’s price. Appleton will save $3 million during the current school year.

Appleton isn’t alone. According to a report by the MacIver Institute, as of September 1, “at least 25 school districts in the Badger State had reported switching health care providers/plans or opening insurance bidding to outside companies.” The institute calculates that these steps will save the districts $211.45 per student. If the state’s other 250 districts currently served by WEA Trust follow suit, the savings statewide could reach hundreds of millions of dollars.

At the outset of the public-union standoff, educators had made dire predictions that Walker’s reforms would force schools to fire teachers. In February, to take one example, Madison School District Superintendent Dan Nerad predicted that 289 teachers in his district would be laid off. Walker insisted that his reforms were actually a job-retention program: by accepting small concessions in health and pension benefits, he argued, school districts would be able to spare hundreds of teachers’ jobs. The argument proved sound. So far, Nerad’s district has laid off no teachers at all, a pattern that has held in many of the state’s other large school districts. No teachers were laid off in Beloit and LaCrosse; Eau Claire saw a reduction of two teachers, while Racine and Wausau each laid off one. The Wauwatosa School District, which faced a $6.5 million shortfall, anticipated slashing 100 jobs—yet the new pension and health contributions saved them all.

The benefits to school districts aren’t just fiscal, moreover. Thanks to Walker’s collective-bargaining reforms, the Brown Deer school district in suburban Milwaukee can implement a performance-pay system for its best teachers—a step that could improve educational outcomes.

Over the summer, a sign surfaced that the public wasn’t as alarmed by the Walker agenda as the unions would have liked. In August, six Republican state senators who had supported the reforms were forced to defend their seats in recall elections. Democrats, in the minority by a 19–14 margin, needed to pick up three seats to take back the Senate. In the days before the election, Wisconsin Democratic Party chairman Mike Tate touted poll numbers showing Democrats leading in three races and in a dead heat in the rest. “Independents are moving towards the Democratic candidates in strong numbers,” he told a group of national reporters. Every race, he claimed, was “eminently winnable.”

The manner in which the public unions ran the campaigns was telling. Because they realized that public-sector collective bargaining wasn’t the wedge issue that they’d expected, not a single union-backed ad mentioned it— even though it was the reason that the unions had mobilized for the recall elections in the first place. Instead, the union ads cried that Scott Walker had “cut $800 million from the state’s schools.” This was true, but the ads neglected to mention that the governor’s increased health-care and pension-contribution requirements made up for those funds, just as Walker had planned. That the unions poured nearly $20 million into the races, by the way, validated another argument of Walker’s: that mandatory dues are a conduit through which taxpayer money gets transferred to public-sector unions, which use it to elect Democrats, who then negotiate favorable contracts with the unions. In this case, the newly strapped Wisconsin unions had to rely heavily on contributions from unions in other states.

In the end, Republicans held four of the six seats and retained control of the Senate. Democrats nevertheless bragged about defeating two incumbents, but that achievement was more modest than it appeared. One of the Republican incumbents was in a district that Barack Obama had won by 18 points in 2008. The other losing Republican had been plagued by personal problems relating to his 25-year-old mistress. Meanwhile, two of the challenged Republicans, Alberta Darling and Sheila Harsdorf, won more decisively than they had in 2008, suggesting that the reforms might be strengthening some Republican incumbents. (The other two senators who kept their seats, Luther Olsen and Rob Cowles, ran unopposed three years ago, so it’s harder to tell whether their popularity has grown.)

The unions’ cause has been hurt by some widely reported stories of public-sector mischief. The most outrageous was the saga of Warren Eschenbach, an 86-year-old former school crossing guard from Wausau. After he retired, Eschenbach, who lives two doors down from Riverview Elementary, kept helping kids cross the road every morning; it gave him a reason to get up each day, he told a local TV station. But the Wausau teachers’ union didn’t see it that way: it filed a grievance with the city to stop him, since he was no longer a unionized employee.

Such stories of union malfeasance may not be enough to save Walker. If the governor’s opponents succeed in mounting a recall election, it would take place at some point between April and June. A poll conducted in October for the Wisconsin Policy Research Institute, where I work, found that Walker had a fairly low personal approval rating of 42 percent. Further, the public opposed recalling the governor from office by a troublingly slim 49 percent to 47 percent margin.

But if Walker’s task is to convince the public that the state hasn’t devolved into unfunded anarchy, he may have an easier case to make than you’d think. According to the same poll, 71 percent of Wisconsinites believe that the state’s public schools have either stayed the same or improved over the previous half-year. More than three-quarters of Wisconsinites expect the state’s economy either to get better or to stay the same in the next year, up from 60 percent during the height of the union tumult in March. And while just 23 percent of Wisconsinites think that “things in the country are generally going in the right direction,” 38 percent of them believe that that’s the case in Wisconsin, up from 27 percent in November 2010.

At his inauguration in 1959—and shortly before he created public-sector collective bargaining—Wisconsin’s newly elected Democratic governor, Gaylord Nelson, quoted Abraham Lincoln: “The dogmas of the quiet past are inadequate to the stormy present. . . . We must think anew and act anew.” It’s a good thing Scott Walker took his advice. It’s imperative for Wisconsin’s fiscal future that voters take it, too.

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