Wisconsin, Budgets and Unions of the State: Myths, Facts and Diatribe

As you have heard by now: My beer-drinking cheese-eating home state is getting national media attention that for once has nothing to do with the Green Bay Packers.   Newly-elected Governor Scott Walker is attempting to strip state government employees of their collective bargaining rights for benefits while mandating pay cuts and mandating more contributions from a state government’s employee’s paycheck into their pension plans.

The bill would be in part to cover a $3 billion shortfall in the state’s budget.

Full disclosure, I did not vote for Scott Walker in the election, and if the election were to be tomorrow I still would not vote for him; he is a Republican, not a Libertarian; I want legalized drugs, legalized competing currencies, legalized gay marriage as well as no tax-funded health care amongst a few things.  But I do support Scott Walker on some of this bill, albeit I also think he is handling this badly, plus I also do not think many of the protesters are completely wrong.  Walker seems to not want this bill up for any debate and just wants to ram-rod it through.  It’s just bad form and makes him look like a dick.  For that reason alone, I applaud the protesters.

However, after enough discourse with many of my fellow Wisconsin friends, co-workers and associates, I have come to find there is a great misinformation machine out there that needs to be debunked.

Myth #1: Scott Walker raised spending and subsidized his corporate constituents.  OneWisconsinNow, a 501c4 advocacy group stated this in a January 28, 2011 news release. This was also pushed by various liberal pundits like Rachel Maddow (which will be talked about later in this post).

Fact: Politifact exposes this as an outright lie:

…the bill doesn’t result in any spending, but the state would take in less tax money.

See a pattern here?

The bills in question don’t create any expenditures — those are done in budget bills, which Walker has yet to introduce. But they do mean the state will take in less money.

One Wisconsin Now says they apply to “special interests.” They may be targeted for specific purposes, but they also hit a wide range of people, including small business owners and any working person who has an HSA.

We asked Scot Ross, One Wisconsin Now’s executive director, how his organization could say the state would be spending $140 million when the effect of the three bills would be that the state would have $140 million less to spend.

His reply: “When money would otherwise be in the treasury which is no longer going to be there as a result of legislative action, that is the definition of spending.”

Actually, it’s just the Legislature making the treasury smaller. But we decided to ask the question again.

Ross: “If no action had been taken, this money would have been in the treasury. It will now no longer be in the treasury. We feel that is a form of spending.”


…One Wisconsin Now called $140 million in state tax breaks “spending.” It’s estimated that the three bills in question would bring in $140 million less to state coffers. But that’s not spending. You can’t spend what you don’t have.

We rate the statement Pants on Fire.

It’s an intellectually dishonest assessment.  The bills Scott Walker signed for would not effect major corporate conglomerates, it would positively affect people like me, who work in a small business with no benefits but has a personal Health Savings Account.  That part of his tax cuts puts this state more in line with most other states in the nation.  Now, if these tax cuts are met with actual spending increases I will sit corrected, but Governor Walker is thus far only cutting spending.

Myth #2: Wisconsin had a budget surplus until Walker got elected.

Fact: Wisconsin mandates a balanced budget, something that separates it from almost any state in the union.  However this does not tell the whole story.  New expenditures must be either met with cuts elsewhere, tax increases or a raise in user fees.  And the Center on Budget and Policy Priorities states there was at least $1.8 billion dollars in the hole when Doyle left not counting federal money that may or may not come, with a more-likely shortfall of $3 billion using Wisconsin’s Legislative Fiscal Bureau.  Politifact also supports this conclusion:

Even Department of Administration Secretary Daniel Schooff, who signed the deficit report, says $2.2 billion — not $1.5 billion — is the best starting point because the Medicaid and patient fund monies likely will fall to the state to cover.

…With less than two months left in the term, Gov. Jim Doyle’s administration department released a report showing a $1.5 billion deficit for the next two-year budget cycle. Although that number is official, the agency’s chief — noting caveats included in the report — almost immediately began portraying the actual deficit as closer to $2.2 billion.

In constructing the official number, the report makes an $800 million assumption — it counts as continued savings cuts that are really decisions for the new governor. It also counts on an iffy $500 million in federal cash and skates over $200 million the courts say the state owes to one of its funds.

Here’s our official rating: False.

Myth #3: State government employees earn very little.

Fact: It is true that a worker for the state will never be rich; and many live middle class lives throughout their entire career, however it is also true that a full-time worker for the state will have many of the luxuries the private sector does not – namely, job security and ridiculously wonderful benefits.  The Sunshine Review in 2009 lists the latest data on state worker pay and the benefits offered, two years before Scott Walker became Governor.

State employees, by salary and/or overtime alone, make enough money to live a full and comfortable life with little to worry about “scraping by.”  Then one looks at the benefits, and cannot help but be a little jealous.  Employees upon their first year get mandatory two weeks of paid vacation, and employees more than five years can get up to almost a month.

Then you look at the pension plan.  It’s a pension plan that was ranked at 28th largest IN THE WORLD.  Most private-sector pension plans do not cover their employees this well.  What Scott Walker is requesting is something that STILL would be better than most private-sector benefits.  The Chicago Tribune notes:

Scott Walker has demanded that state workers contribute roughly 5.8 percent of their wages toward their retirement. He wants them to pay for 12 percent of their health-care premiums. Those modest employee contributions would be the envy of many workers in the private sector.

I don’t think Walker is asking too much here.  He is still being reasonable.

Myth #4: Scott Walker’s bill would strip state workers of their collective bargaining rights.

Fact: Governor Walker’s bill would strip them of their collective bargaining rights for benefits, not hourly wages.  Unions for state employees would still exist, their power would be severely limited though.

Now, I work at a small pipe and tubing company in a quiet river Wisconsin town.   Our employee count is five, with only three us full-time, two of them part-time.  I get paid by the hour, do not get over-time, have no benefits.  Because I work in the sheet metal business, I do business with many union shops and companies.  One of the union-based shops we do business with was a company I worked for when I was 19, and I was forced to join that union so I could work there.  I was desperate for a quick summer job so I joined, and paid the union dues.

One day at my current job, I requested a couple shops to give me a price quote to do a few services for us.  One gave me a quote for $1200 – Company A,  the other gave me a quote for $4800 – Company B.

I emailed Company B and said “Wow, you quoted us with a price that is literally more than four times more than the other shops we deal with.  We will have to decline for now.”  Not more than two hours later, I get a call from the Representative of Company B, and he asks me frankly “Are you working with a non-union shop or something?  Because there is no way we can honor that price.”

That editorial I linked from the Chicago Tribune states something here that connects my personal experience with what is happening in Wisconsin now:

Private-sector union membership has declined over the years, while public-sector unions have thrived. One reason: In the private sector, unions and management may argue but they have a common cause. They understand that if their company cannot compete, it will fold and no one will have a job. Look what happened to the U.S. auto industry.

Governments don’t operate under the constraints of market forces. They operate under political forces.

It is worth asking: “Do all of our state employees exist because they are truly needed, or are they there because a politician put them there?”  You notice how teachers are the ones being put in front of the camera and the ones being the loudest.  But what about the state Arts board?  If these positions were eliminated entirely, would the economy sink even more than it already is for the state of Wisconsin, or would we start seeing a balanced budget without needing to raise taxes more (more than Doyle already has in his two terms)?

Myth #4: Wisconsin’s collective bargaining for teachers has led to its great student performance.

Fact: There is no empirical evidence that can directly correlate teacher collective bargaining and student performance.  I am not sure who is the source behind this myth but I have seen this pop up in various debates as well as various sites like this one.  However it is nothing more than cherry-picking.   The National Center for Education Statistics issued the latest elementary school education performance rankings for reading in grades 4 and 8, and Wisconsin’s ratings are middle-of-the-road overall in terms of student reading performance, with grade 8 resulting in a lower-than-average result.  A similar report in 2007 for Math also shows Wisconsin’s student performance being overwhelmingly average – not bad, not great either.  Wisconsin currently spends $10,791 per pupil in tax dollars, averaged out.  Compare that to the average tuition costs for a private school in Wisconsin – at Mount Olive Lutheran nearby the tuition is literally half that much, and Fox Valley Lutheran High School’s tuition is also thousands of dollars less than a government school.

The difference, of course, is everybody pays for a government school through taxes while private schools must be paid for out-of-pocket, thus parents of private-school students are basically double-funding the education industry, and while the private schools may or may not have students that perform better in testing, the private school certainly seems to get more education bang out of the buck though.  Wisconsin likes to take pride into our education system, and we have incredibly smart students here, however the facts I just listed shows there is a bigger picture to be seen:  Despite a massive increase in per-pupil tax spending on education, our state rankings in student performance does not reflect any impact whatsoever, and little evidence can support any claim of teacher collective bargaining directly connecting to student performance.

Government school teachers around here have a motto: “Every kid deserves a good school.”  Bullshit – every kid deserves a good EDUCATION.  There is a difference.  There is no superior method of schooling for every child, which is why every parent deserves to have a choice between government, private or home schooling.  The system is set up to where most folks have to bring their child to a government school unless one is filthy rich or has lots of time on one’s hands.  That needs to change.

Now, to be fair, Walker and his camp has been spinning their own misinformation machine too.  Here are a few:

Myth #1: The bill would solve Wisconsin’s budget woes.

Fact: Megan McArdle at the Atlantic points out:

Even if Walker wins his assault on public sector unions, and forces state workers to contribute to their pensions, the savings from that will only add up to about $150 million a year, or less than ten percent of the annual expected deficit.

It will not be the be-all end-all to make this state’s budget better.  The state can still bloat the budget and increase the debt or increase taxes.  But we are only two months into Scott Walker’s term as Governor, it is too early to conclude yet.

Myth #2: Kicking children off of Medicare will resolve the budget deficit in place of government worker pay cuts and tax-funded benefits.

Fact: This was a claim Scott Walker quickly back-pedaled on because he knew it was bullshit.  Medicare is a federally-funded program, given to states for them to manage and dole-out.  It’s not directly funded by state income taxes and fees, plus how Scott Walker tried to connect these dots shows just how much out of his authority/league he’s in, perhaps also providing evidence he’s a bad idealogue.  Not good.

Myth #3: Democrat Senators left the state to stall Democracy and therefore are not being Democratic.

Fact: They left the state because you gave them no other choice, you fucking douchebag Republican!  They know the moment a single one showed up to the floor the Republicans would motion to vote it through without a debate on it.  They left the state because they want a debate or a negotiation.  The brash reluctance for such a thought makes the Republicans look like they don’t care about what the opposition has to say.  Give them a floor debate, if only because it’s important to have this be a public debate.  I think in the end Walker will still get most of his wish, and it will work in his favor anyway.

Rachel Maddow covers our current political struggle recently on her show. As pundits usually do in order to create their message, she gets some things right and other things wrong.  One of them I already pointed out in this post – tax cuts are not spending increases.  It’s a conclusion that makes no sense.

The fact that there are so many towns in WI named “Union” is not for the labor unions but for the larger “union” (remember we are in the North).

She said that Republicans have corporate America so it is fair that the Democrats have the labor unions.  But all of corporate American is not on the side of the Republicans, and not all of the unions are on the side of the Democrats either.  STATE unions, however, are almost exclusively on the side of the Democrats.  Virtually all of them write them a blank check on their benefits, and if they don’t, it becomes a lengthy struggle for the Governor to fit their benefits into the budget while moving the money around to make that budget space for them.  And the amount of time unions spend campaigning, calling, spreading literature, are just as bad as Corporate America’s lobbying/campaigning tactics.

Rachel states an objection to using public policy to restructure society — yes it is done all the time and I completely agree with her.  But isn’t that an argument AGAINST state worker unions?  It begs the question, what happens when a tax-funded union uses public policy to restructure society as well?

Unions in general have a good side and bad side.  They train their new hires very well, and help relocate people that moved to another place to work so employees won’t freak out if they will find a job in their new residing city or not.  And they stick up for their members when the company is being an asshat.  However, they make it virtually impossible to fire the bad workers, or at least keep the incompetent ones of having a job the worker would perform awful in.  Plus they still can put seniority over competence.  Government unions, however, envelope those traits while shaping public policy, and not necessarily for the better.

A change is taking place here in Wisconsin.  It’s a strong-union state, but look at how the unions are working out for us.  Our manufacturing and assembling sectors are attempting to leave for other states that have lower tax structures.  See Mercury Marine and Harley Davidson.  With Mercury Marine, it took a $50 million county loan and over $3 million in city subsidies in order to keep jobs in their Fond Du Lac plant, otherwise they would have moved to Oklahoma and have their employees be non-union and work for lesser pay.  Harley-Davidson almost lost their Milwaukee headquarters to Kansas City because of labor costs.

And after eight years of living under former Democrat Governor Doyle, Wisconsin is now one of the worst states to retire in according to TopRetirements.com, thanks to the many tax rises that occurred over his two terms – including a hefty tax rise on the beds in nursing homes.  So the folks with money who retire go to Florida, Arizona or other places with lower taxes, while the poorer remain wallowing here in a glut.  If this trend continues, who will be left here to pay the taxes for the overly-generous benefits of the public sector?

In Wisconsin most negotiations for new public union contracts are intentially dragged out by the unions because there is a law in Wisconsin that says when a municipality makes an offer to a union and the union counter-offers and a compromise can’t be reached, the issue goes to arbitration.  The arbitrator has a choice — choose which one and that’s it.  But the system has been gamed.  Most of the decisions made by arbitrators go to the unions because the arbitrators have been appointed by Doyle and previous Democratic Governors (which we have had our share).  So the unions hold out knowing that their probability of success is very high.

Our government unions (nine of them) here in my county, Outagamie County, have had a three-year contract (they all are) that expired this fall.  During the economic downturn many Americans suffered from, our government union employees were all comfortably enconsed in jobs they could not be laid-off from and they were paid 3.8% annual wage increases and also received step increases, and more money for their retirement pension, etc.  We are still in negotiations with the nine unions here in Outagamie County and probably won’t reach a deal until later this year.  By stalling they achieve two things:  1.)  Their old wages continue; and 2.)  The probability is good that the economy will be better later so they can ask for more money instead of less now when the economy is down.

I am mixed on Walker’s stance on state unions.  I think private workers should be allowed to organize and collectively bargain.  I think that is a civil right.  But the problem right now is not from private sector unions.  These are employees of the state. As the op-ed from the Chicago Tribune I cited earlier says, private sector unions have the element of competition, state bureaus do not.  State workers get their money not from voluntary exchanges and a motive for profit through good service and quality products, they mostly get it from taxes and mandatory user fees.  So we are not necessarily talking about the same animal.  And state unions have altered this economy for sure, they have used it to game the system for their benefit and kept out solutions that would allow for freer competition and better results.

It begs the question: When is the line crossed when state worker collective bargaining become abusive and detrimental to an economy and make the state poorer?

While the protestors shout loud, there seems to also be a silent majority supporting Governor Walker.   Just a year ago the Senate, Assembly, and Governor’s Office were in the hand of the Democrats and it was that way for the last eight years.  Before that, the Democrats held sway for a long time by controlling two out of three houses.  We have, for decades, figured that tax increases will take care of the budget, along with growth in our economy that will generate more income to the State.  Well, in light of Illinois raising taxes by 66 percent in the eleventh hour to fill their budget gap, our Governor decided differently this time.   This is the first time in my memory that all bicameral levels of state legislature are in the hands of the Republicans.  That means the people put them there.  Perhaps the people decided differently too and sided with Walker.

I remain mixed on the idea of shutting down collective bargaining rights for state workers.  But what we are seeing in this state illustrates both the great benefits and the tragic abuse unions can make on America.  The difference between a private sector union is that a company folds if the company cannot afford the benefits of its labor (or in this day and age, they get a bailout), while with state workers, you and I will find a way to pay for it, whether we like it or not.

About briandefferding

Brian works at a small pipe and tubing company by day, and freelance illustrates at night. He is the creator and self-publisher of the critically acclaimed independent horror comic book series "School: A Ghost Story." Brian currently resides in his birth town of Appleton, WI, enjoys whiskey and John Lee Hooker.
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4 Responses to Wisconsin, Budgets and Unions of the State: Myths, Facts and Diatribe

  1. Scot Ross says:

    Just a note, One Wisconsin Now is not a political action committee. We are 501c4 advocacy organization. If you’re going enter the tax debate and label our belief that it is the essence of spending when you change the law to reduce revenue in the state coffers as “an outright lie,” you do not bolster your argument not doing enough research to know the tax classification of the organization you are attacking.

    just saying…

  2. briandefferding says:

    Thnks for correction Scot, I made the edit.

  3. Peter R. Cross says:

    What is Wisconsin’s tax structure, overall, in terms of how progressive it is on personal incomes, and where corporate taxes stand in comparison to other states? If a very high-income individual skillfully uses the means typically available to such people generally, what tax rate do they pay in Wisconsin, vs. what tax rate a family in the $40,000 level pays? What are good sources to consult on such issues?

    By the way, I am in strong disagreement with Libertarian points of view when it comes to the individual’s responsibility toward the Commonweal. Aggressive and perhaps peculiarly talented individuals, in what I understand to be the Libertarian view, believe that what they have “Won” is due to their own strengths, and that they should therefore keep, as private money and property, such winnings. This ignores the high probability that if their “clone” were dropped into an entirely different society, with far less in the way of shared societal resources available, they might not be able to leverage that different pattern of resources to an equivalent level of success. We stand on the shoulders of many, many others, and if we progressively lower those shoulders, the next generation of talented individuals will have less to leverage. This is an issue that deserves broad debate, as well as does its cognate issue, what levels of inequality make for a good society.

    • TW says:

      Perhaps the missing interpretation is that a strong individual is smart enough to recognize a successful path and then strategize and take that path to thier own advantage. To say that a society with less resources to leverage would mean that same person wouldn’t be successful would not be an apples to apples comparison. If we looked at the relative success compared to the resources available, that would suggest that same person would be able to again find a strategy and path forward in order to leverage the resources available to thier own advantage…just saying.

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