More on the cost of reality

I love that the debate over stripping public unions of the collective bargaining rights has degenerated into an argument, essentially, about protecting union negotiated entitlements. In embracing this debate, both sides have distracted themselves from reality again–that is, the thing that is going to happen whether unions can bargain for entitlements or not.

I will focus on Ohio because I am far more familiar with its finances than I am with Wisconsin’s, but I believe the problems are similar in each state.

Various researchers, including the states own Office of Budget and Management, project that Ohio budgeted to spend somewhere between $5 and $10 billion more than it will collect in tax revenue in 2011. This reality is part of a general trend around the country that has states spending more than they tax even as they find their ability to borrow more and more limited by declining credit ratings due to the immense amount of money they have already borrowed.

This state of affairs threatens to become a crisis for Ohio because the state could have no capacity to fund the programs and services it has obligated itself to fund at the levels it promised to fund them as soon as this year. Nowhere is this potential crisis more evident than in public schools.

There is also a hard place for this state financial crisis to land: many school districts are already broke or are so close to being broke that the difference is irrelevant if funding gets cut by the state. According to the Ohio Auditor of State (.pdf), 15 districts are currently under fiscal watch or emergency, while 60 more just emerged from such a status on 1 January 2011. Around the state, districts are warning that, even if new levies pass this year, the districts will be forced to make cuts and lay off teachers.

So, while so many people seem to be focusing on the question of whether teachers–and other public workers–have the right to bargain contracts, most people seem to be ignoring the fact there may be nothing for them to bargain those contracts with.

This reality is because of the fact that Ohio is broke. It’s not just in 2011 either. Some budget estimates show Ohio running deficits of $5 to $8 billion for the next 10 years, deficits the state has no funds to cover and which it may not be able to borrow to make up for.

It is from these conditions that the anti-bargaining law originated. Republican lawmakers in Ohio–and Wisconsin, Indiana, and Tennessee–see public unions as a target of opportunity in what is going to prove to be a decade long budget battle to somehow preserve the financial sovereignty of their state. There are, in my opinion, all kinds of problems with the law and with the approach the Republicans have used, yet no one can deny that part of the problem faced by states, municipalities, and school districts right now is the cost of union negotiated compensation packages those entities simply do not have the capacity to pay.

If these entities do not have the capacity to pay, it does not matter if the unions have the right to collectively bargain or not. I suspect that, within the next few years, entire school districts and smaller municipalities are simply going to fold–disincorporate, which is essentially bankruptcy–because they no longer have the capacity to maintain even a fundamental level of the services they are supposed to provide. At that point, even if teachers, police, and firefighters have contracts, it will not matter because the entity they have a contract with has ceased to exist.

From my point of view, if legislators and unions alike want to prove they have their constituents best interests in mind, it is a resolution to this disastrous state of affairs that they would be debating instead of whether unions can collectively bargain contracts with failing entities. Yet, instead they debate about the fringes while the core is collapsing, and when it is done, all of their effort will have been expended for nothing.


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2 Responses to More on the cost of reality

  1. Jason says:

    Capitalism works only because both parties (employers and employees) are looking to grab the best outcome for their side. Unions provide a balance against the inherent power of the employeer.

    From what I’ve been reading, the different unions are willing to pay more towards their pension & health care, while even taking a pay cut. This appears to be the big concessions needed to help balance the budget. How does going after the collective bargaining power of the unions reduce the deficit?

    Why is there still no discussion of raising taxes? We can only cut so much “waste” out of the budgets before we begin to rob our future (and our children).

    The greatness of America is in how it treats its weakest members: the elderly, the infirm, the handicapped, the underprivileged, the unborn. ~Bill Federer

    • dlhitzeman says:

      I may be wrong, but you seem to have missed my point completely.

      It’s interesting that it seems to some people that it is easier to raise taxes than it is to make cuts when only 53 percent of working Americans pay taxes in the first place. The cuts that will be inevitable are going to affect people who could have made other arrangements for themselves but decided to let the government do it for them, not the people you list. Heck, we don’t even protect the unborn at all.

      If one factors in all the taxes I pay–from sales and excise taxes to income taxes–I am already paying more than 40 percent of my income in taxes, of that money, 65 cents of every dollar goes directly into someone else’s pocket, and something like 40 cents of that 65 cents goes to people who do not pay federal income taxes because the law arbitrarily exempts them.

      The bottom line is that this is not, nor has it ever been in my book, a matter of unions versus no unions, collective bargaining, versus no collective bargaining. It is a matter that that cities, states, and our federal government are broke. Even if every level of government raised taxes by 50 percent from what they are collecting now, most of those governments would still be running deficits and would still be headed toward bankruptcy.

      It doesn’t matter if the unions have collective bargaining rights or not, because if we keep doing what we’re doing, they’re not even going to have jobs.

      The bottom line is that we, as a nation, can no longer afford to pay for what we have committed ourselves to.

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