Its Working in Walkers Wisconsin
The governors controversial labor reforms are already saving taxpayers millions.
Allen Fredrickson/Icon SMI/Corbis
One morning last February, Wisconsin governor Scott Walker called his staff into his office. Guys, he warned, its 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 states $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 Wisconsins 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 Walkers plan. Eventually, the Senate did manage to pass the reforms, which survived a legal challenge and became law in July.
The unions arent done yet: theyre now trying to recall Walker from office. To do so, they will try to convince Wisconsin voters that Walkers 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 Walkers 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 Wisconsins $3.6 billion biennial deficit.
These measures angered unions, but Walkers 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 states 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 states largest teachers union spent $3.6 million supporting candidates. Walkers 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 Walkers 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; theyre 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 Barretts prediction in March that Walkers budget makes our structural deficit explode.
The collective-bargaining component of Walkers 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 states 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 competitors price. Appleton will save $3 million during the current school year.
Appleton isnt 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 states 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 Walkers 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, Nerads district has laid off no teachers at all, a pattern that has held in many of the states 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 arent just fiscal, moreover. Thanks to Walkers 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 wasnt 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 1914 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 wasnt the wedge issue that theyd 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 states schools. This was true, but the ads neglected to mention that the governors 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 Walkers: 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 its 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 didnt 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 governors 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 Walkers task is to convince the public that the state hasnt devolved into unfunded anarchy, he may have an easier case to make than youd think. According to the same poll, 71 percent of Wisconsinites believe that the states public schools have either stayed the same or improved over the previous half-year. More than three-quarters of Wisconsinites expect the states 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 thats 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—Wisconsins 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. Its a good thing Scott Walker took his advice. Its imperative for Wisconsins fiscal future that voters take it, too.