Giving Wisconsin Taxpayers A Say On Pay

Regular readers know me as a fiscal conservative, but that’s not the crowd I run with. My small Facebook posse tends toward liberal Democrats – and they are in an uproar over the goings-on in Wisconsin.

“Today I stand with the teachers, nurses, and all public employees of Wisconsin who are fighting for their rights,” a writer friend I have known since high school posted last weekend, after that state’s Senate Democrats went on the lam. “If you do too, change this to your status for the rest of the day.” Under the tag line “Bake sales vs Billionaires clip…or why Wisconsin matters to us all,” a doctor from Maryland (my wife’s cousin) posted a video segment of MSNBC’s Rachel Maddow discussing the controversy.

My wife cringes when I talk politics with her cousins. But they, like my high school friend, seem to take me in stride. Maybe I am their token Republican. Or maybe I’m like a nattering old aunt who must be treated kindly, even though she is prone to say embarrassing things that may occasionally be true.

In any case, these friends are generally of the political persuasion that supports the “say on pay” rules that the Securities and Exchange Commission, by a party-line vote, imposed last month on publicly traded corporations. Yet they are up in arms about a proposal by Gov. Scott Walker that would, at its core, give Wisconsin taxpayers a say on the pay of most public employees other than police, firefighters and state troopers.

There are three main points in the plan that Walker and Wisconsin’s Republican-controlled Legislature say they will pass once Democrats run out of sand to throw in the machinery of government. The first, which public employee unions have said they are prepared to accept, is a requirement that workers pay 5.8 percent of their salaries toward the pensions for which they currently pay nothing, along with about 12 percent of their health insurance premiums, up from 6 percent.

The second point would end the perpetual hold on the taxpayer-funded workforce that unions gained when they first organized public workers decades ago. Unions would have to collect their own dues from workers; workers would have the right not to join unions or pay dues; and members would vote each year whether they wished to continue to be represented.

Unions see this as what President Obama described as an “assault.” It could also be described as “accountability.” Most of us can leave, or avoid joining, almost any organization. Unions are an exception. In particular, newer employees may question whether they wish to have or join a union when unions vigorously defend seniority systems that pay new workers the least and make certain that they are the first to be laid off, regardless of merit.

Whether or not they constitute an assault, Walker’s changes certainly would complicate the lives of union leaders. The question is why taxpayers who pay public employees, or legislators who theoretically work for those taxpayers rather than the unions, should care.

The third point, and I think the most important, is actually a pretty modest restriction. Unions could only bargain for wages, not other items such as work rules (along the lines of “How many sanitation workers must be on each truck?”), and wage increases that exceeded the rise in the Consumer Price Index would have to go to taxpayers for approval.

Most unions do not accept a contract until it has been ratified by members. A taxpayer vote would give taxpayers the same privilege: to accept or reject the deals their negotiators bring them. In the Wisconsin plan, taxpayers would only get this opportunity when wage increases exceeded inflation, which would give unionized public servants almost a free pass to keep up with rising costs. Many taxpayers who work in the private sector will wish they had the same opportunity.

Union contracts cover fewer than 7 percent of private sector workers today. The vast majority who work in private businesses do the things their bosses tell them, the way their bosses tell them. Private-sector workers can advise, complain or, if they are really unhappy, find other jobs. Wisconsin public employees will have the same rights under the governor’s plan.

Walker’s opponents claim his bill aims to weaken organized labor’s political clout by depriving it of members and money, which labor overwhelmingly contributes to Democrats. I think most of my Facebook friends agree. On the other hand, these same Facebook friends – and the unions – objected vehemently to the Supreme Court’s Citizens United decision last year, which affirmed the right of unions and corporations to pay for political advertisements. I and most Republicans, on the other hand, saw Citizens United as an important vindication of free speech rights, even for people who disagree with us.

If Walker is trying to undercut union strength at the polls, he picked a funny way to do it. It is safe to say that if favorable union contracts are subject to a popular vote, union members are going to turn out in force for that election. The rest of the public probably will treat the issue with the same yawn now awarded to referenda for school budgets and bond issues. Most of those get approved, and the ones that do not tend to be egregiously bad.

If Wisconsin’s union-contract elections coincide with races for public office, one might imagine Democratic candidates could benefit from the improved labor vote. Walker seems willing to let those chips fall where they may.

Fights over public employee compensation are breaking out all over the country. The details vary, but the bottom line is pretty much the same. It comes down to whether public employees will be working for the taxpayers, or vice versa.

Maddow and the unions she supports argue that if this year’s budgets can be balanced without far-reaching changes, such changes are unnecessary. The unions are perfectly happy with a system in which they provide the money and manpower to elect the local officials who then confront the unions across the bargaining table. That’s the arrangement Walker and the rest of us right-wing zealots want to change, because it sells out the taxpayers who bear the cost of whatever the chummy negotiators agree upon.

Wisconsin is the latest, but not the last, battleground in the fight to give taxpayers a say over what they pay. My friends are all for such democracy when it comes to shareholders in private companies. It puzzles me that they feel differently when it comes to public money.

Then again, I have this unwelcome Republican tendency to utter embarrassing things that may occasionally be true. It’s nice to have friends who forgive me for it.

About Larry M. Elkin 525 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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