"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." — Thomas Jefferson
Welcome to the reckoning. We have met the fiscal apocalypse, and it is smack dab in the middle of the heartland. As Wisconsin goes, so goes the nation. Let us pray it does not go the way of the decrepit welfare states of the European Union.
The lowdown: State government workers in the Badger State pay piddling amounts for generous taxpayer-subsidized health benefits. Faced with a $3.6 billion budget hole and a state constitutional ban on running a deficit, new GOP Gov. Scott Walker wants public unions to pony up a little more. He has proposed raising the public employee share of health insurance premiums from less than 5 percent to 12.4 percent. He is also pushing for state workers to cover half of their pension contributions. To spare taxpayers the soaring costs of Byzantine union-negotiated work rules, he would rein in Big Labor's collective bargaining power to cover only wages unless approved at the ballot box.
As the free-market MacIver Institute in Wisconsin points out, the benefits concessions Walker is asking public union workers to make would still maintain their health insurance contribution rates at the second-lowest among Midwest states for family coverage. Moreover, a new analysis by benefits think tank HCTrends shows that the new rate "would also be less than the employee contributions required at 85 percent of large Milwaukee-area employers."
This modest call for shared sacrifice has triggered the wrath of the White House-Big Labor-Michael Moore axis. On Thursday, President Obama lamented the "assault on unions." AFL-CIO and Service Employees International Union bosses dubbed Walker the "Mubarak of the Midwest" while their minions toted posters of Walker's face superimposed on Hitler's. Moore goaded thousands of striking union protesters to "shut down" the "new Cairo" while the state's Democratic legislators bailed on floor debate over the union reform package.
Clearly the Mob in Madison sees themselves as a reincarnation of the Crowd in Cairo. Not the reporter-raping part of the Egyptian protesters of course, but rather the dedicated, Jeffersonian, small 'd' democrats that we all hope (but aren't really sure) exist in Egypt. The public employees' desire to align themselves with the angels notwithstanding, their protest is more Greece than Egypt.
It wasn't very long ago that Greece's streets were filled with government employees running amok over the EU-forced austerity measures. Many conservatives predicted that the unrest was a look at America's future in ten years. As it turns out, it only took ten months.
This time Wisconsin is set to pass "austerity" measures. Fiscal necessity has forced the governor and state lawmakers to do what politics has prevented for decades — stand up to public sector unions. As in Greece, the Badger state's employees aren't about to cede the ground. Once you give a child a basket of candy it is very difficult to take it away from him, but it is necessary if you wish to insure his health.
Education Secretary Arne Duncan spurned the opportunity to condemn thousands of Wisconsin public school teachers for lying about being "sick" and shutting down at least eight school districts across the state to attend capitol protests (many of whom dragged their students on a social justice field trip with them). Instead, Duncan defended teachers for "doing probably the most important work in society." Only striking government teachers could win federal praise for NOT doing their jobs.
Yes, the so-called progressives truly believe that bringing American union workers into the 21st century in line with the rest of the workforce is tantamount to dictatorship.
Yes, the so-called progressives truly believe that by walking off their jobs and out of their classrooms, they are "putting children first."
If ever there were proof that public unions no longer work in the public interest, this is it. Big Labor dragoons workers into exclusive representation agreements, forces them to pay compulsory dues that fatten Democratic political coffers and then has the chutzpah to cast itself as an Egyptian-style "freedom" and "human rights" movement.
While federal labor law governs the rights of workers in private workplaces, Wisconsin law governs the labor law applicable to its government workers.
The governor's reform proposal would repeal collective bargaining rights for state workers except as to wages, and then restrict any wage increase to a maximum of the real cost of living. Walker also proposes to limit labor contracts to one year. Only safety service employees (police and fire) would continue to have collective bargaining rights. Public employers would no longer collect union dues from public employees.
Currently, 175,000 public employees in Wisconsin (teachers and state and local government workers) enjoy high salaries, "free" guaranteed pension benefits, and "free" health care while working and in retirement.
To balance the budget, Walker does not want to lay off employees. To avoid firing 6,000 state employees to help balance the budget, he wants the employees to start paying 5.8% of their salaries toward their pensions and 12.6% toward their health care plans.
Last December, the Wisconsin Senate failed by one vote to pass a new labor agreement for state workers in the waning days of Democratic Gov. Jim Doyle's administration. State workers are working without a contract. Walker seized the opportunity to challenge the unions.
Last December, the Wisconsin Senate failed by one vote to pass a new labor agreement for state workers in the waning days of Democratic Gov. Jim Doyle's administration. State workers are working without a contract. Walker seized the opportunity to challenge the unions.
Will he succeed? Teachers have called in sick and demonstrated at the state capitol. The governor has indicated he will call out the Wisconsin National Guard if state prison guards walk off the job, as they have threatened to do. The stakes couldn't be higher.
The state legislature will have to approve Walker's proposals. Republicans control the Assembly 60-38-1 and the Senate 19-14. Will the majority act to approve Walker's reform?
They should. The public supports the governor. Wisconsin has been a liberal state. No longer — the price of liberalism is unaffordable.
As a former negotiator of contracts with government agencies I can attest with absolute certainty that government employees don’t know a damn thing about the true costs of their services. It is reported that he average pay for a Wisconsin school teacher is $66,000 per year with $33,000 in fringe benefits tacked on. That is a direct labor ratio of 50%. This would calculate out to a base pay (Direct Labor of DL) of $31.73 per hour using a working year of 2,080 hours. I have made no adjustments for holidays, vacation and sick days as they would be factored into direct labor (DLO) overhead figure.
Applying the DLO multiplier we get an actual wage of $47.60 per hour. This is where most government employees stop computing their true costs to the public. To calculate the real cost to the tax payer we have to add something called indirect overhead (IDO) to the equation. Indirect overhead consists of all costs needed to run a business or organization. It consists of rent, utilities transportation, supplies, training and non-productive employee costs (secretaries IT staff, etc.) needed for the business. I have analyzed this IDO figure in the United States, Europe and Latin America and found the average to be 35% to 40%.
Using the 35% figure we now get a DL multiplier for the productive or in this case the actual class room teachers of [(1x1.5)+(1x1.35)]=2.85. This is called the direct labor multiplier. If you want to achieve a 10% profit you would multiply this figure by 1.1 arriving at a total multiplier of 3.15. It is the profit that is negotiated in the private sector. As example Caltrans would only allow a 7% profit so the total multiplier for an engineer would be 3.05. Since there is no profit to be considered for the teachers their multiplier would be 2.85 or $135.99 per hour. Thus the total cost to the Wisconsin tax payer for a school teacher would be $282,172 per year. This is the real cost. If Wisconsin has 6,000 teachers the cost is now $1.69 billion per year to the tax payers.
One more cost that needs to be considered is something called utilization costs. When you have a teacher, engineer, attorney or any other person providing a service you assume that all of their time (2080 hours per year) will be devoted to providing the service they are hired for. In many service businesses this is called billable time. It is impossible for any employee to have a utilization rate of 100%. Every time they go to a meeting or training seminar this time is reduced. Each business needs to set a utilization target for each employee. In the civil engineering business this target ranges between 80 to 90%. In government they have no idea what their utilization rates are. I have had this discussion with numerous public sector employees around the world and they can never give me an answer. Every time a teacher goes to a meeting or a seminar on paid time they are diminishing their utilization rate. With all of these numbers I have not touched on productivity or results. That’s a topic for another blog.
Wisconsin was the first state (in 1959) to allow public employee collective bargaining. The result has been the creation of a privileged class of workers who are paid more than comparable positions in the private economy, whose benefits are guaranteed by the private workers who make less doing similar work, and who can never be fired or demoted no matter the quality of their work.
How did this happen? Politics. The unions used member dues to support candidates friendly to the union and oppose those who weren't. The result at contract negotiation time was that the union leaders sitting down to "bargain" with elected officials beholden to the unions for their reelection cash. The unions won the "bargain." The taxpaying public got the bill.
Now the public employee unions are fighting mad. "He is not trying to balance a budget, he is trying to destroy unions in this state," said Bryan Kennedy, president of AFT-Wisconsin. "He is trying to turn Wisconsin into a right-to-work state. Or a right-to-work-for-less state."
What Walker is trying to do is roll back decades of special privilege and trending toward insolvency. Other governors are challenging the power of the public employee unions (and getting reams of publicity for their efforts), but no governor has gone as far to return fiscal sanity to his state as Walker.
The problem isn't collective bargaining itself, but how we define "collective." A union is really nothing more than a corporation that provides labor. Governor Walker and other conservatives certainly have no problem with corporations, except when that corporation operates a monopoly. Therein lies the problem with unions — not that they exist, or even that they are essentially liberal political organizations that do some employee representation on the side. What makes unions so dangerous and often harmful is that the law allows them to wield monopoly power.
The most hazardous monopoly of all is one that receives taxpayer support. When the United Auto Workers union successfully pushed member compensation up to and astronomical $73.20 per hour, consumers had the recourse of buying from less costly foreign automakers (Toyota: $48.00 per hour). When a government union, such as the National Education Association, makes state services more expensive than their market value, there are no competitors to expose how wasteful and impractical it actually is. Moreover, even if expensive UAW cars were the only cars available, as we could at least ride a bike instead of driving. Not so with government workers. Between property, sales, income, vehicle, and a seemingly endless array of other taxes, we can't stop paying state employee unions. We are forced consumers of state services.
Story after story in local and national news asserts that Governor Walker is trying to take away union rights. But do unions have the right to operate a monopoly whose product, by law, cannot be refused? It is the rights of non-union tax-payers that are under far greater threat under the current collective bargaining rules. Walker's proposal is a simple check on a monopolistic organization than is bankrupting his state.
And so the Democrats are dependent on Big Labor and Big Labor is dependent on the Democrats. Such dependency has consequences. Unions rally in Madison in hopes to avoid a world without the scales heavily tipped in their favor. It is a behavior that says without an unfair advantage, granted by the state, the union-ites cannot function. President Grover Cleveland said such "paternal care on the part of the government weakens our national character." So it was with Greece, so it is in Wisconsin and around the country.
That weakening of character could not be better exemplified than by the 14 Democrat state senators who fled the state before the budget vote. If there is an example of prolonged adolescence and a disconnect between what we want to be real and what is real, it is 14 elected officials running to an out-of-state resort instead of making their case before the senate like adults.
Outside the partially empty senate chamber, one protester held up a sign that declared, "Egypt showed us the way." No. Greece showed us the way — the way we should avoid. America still has time to choose. Which path will we take?
Welcome to the reckoning. We have met the fiscal apocalypse, and it is smack dab in the middle of the heartland. As Wisconsin goes, so goes the nation. Let us pray it does not go the way of the decrepit welfare states of the European Union.
The lowdown: State government workers in the Badger State pay piddling amounts for generous taxpayer-subsidized health benefits. Faced with a $3.6 billion budget hole and a state constitutional ban on running a deficit, new GOP Gov. Scott Walker wants public unions to pony up a little more. He has proposed raising the public employee share of health insurance premiums from less than 5 percent to 12.4 percent. He is also pushing for state workers to cover half of their pension contributions. To spare taxpayers the soaring costs of Byzantine union-negotiated work rules, he would rein in Big Labor's collective bargaining power to cover only wages unless approved at the ballot box.
As the free-market MacIver Institute in Wisconsin points out, the benefits concessions Walker is asking public union workers to make would still maintain their health insurance contribution rates at the second-lowest among Midwest states for family coverage. Moreover, a new analysis by benefits think tank HCTrends shows that the new rate "would also be less than the employee contributions required at 85 percent of large Milwaukee-area employers."
This modest call for shared sacrifice has triggered the wrath of the White House-Big Labor-Michael Moore axis. On Thursday, President Obama lamented the "assault on unions." AFL-CIO and Service Employees International Union bosses dubbed Walker the "Mubarak of the Midwest" while their minions toted posters of Walker's face superimposed on Hitler's. Moore goaded thousands of striking union protesters to "shut down" the "new Cairo" while the state's Democratic legislators bailed on floor debate over the union reform package.
Clearly the Mob in Madison sees themselves as a reincarnation of the Crowd in Cairo. Not the reporter-raping part of the Egyptian protesters of course, but rather the dedicated, Jeffersonian, small 'd' democrats that we all hope (but aren't really sure) exist in Egypt. The public employees' desire to align themselves with the angels notwithstanding, their protest is more Greece than Egypt.
It wasn't very long ago that Greece's streets were filled with government employees running amok over the EU-forced austerity measures. Many conservatives predicted that the unrest was a look at America's future in ten years. As it turns out, it only took ten months.
This time Wisconsin is set to pass "austerity" measures. Fiscal necessity has forced the governor and state lawmakers to do what politics has prevented for decades — stand up to public sector unions. As in Greece, the Badger state's employees aren't about to cede the ground. Once you give a child a basket of candy it is very difficult to take it away from him, but it is necessary if you wish to insure his health.
Education Secretary Arne Duncan spurned the opportunity to condemn thousands of Wisconsin public school teachers for lying about being "sick" and shutting down at least eight school districts across the state to attend capitol protests (many of whom dragged their students on a social justice field trip with them). Instead, Duncan defended teachers for "doing probably the most important work in society." Only striking government teachers could win federal praise for NOT doing their jobs.
Yes, the so-called progressives truly believe that bringing American union workers into the 21st century in line with the rest of the workforce is tantamount to dictatorship.
Yes, the so-called progressives truly believe that by walking off their jobs and out of their classrooms, they are "putting children first."
If ever there were proof that public unions no longer work in the public interest, this is it. Big Labor dragoons workers into exclusive representation agreements, forces them to pay compulsory dues that fatten Democratic political coffers and then has the chutzpah to cast itself as an Egyptian-style "freedom" and "human rights" movement.
While federal labor law governs the rights of workers in private workplaces, Wisconsin law governs the labor law applicable to its government workers.
The governor's reform proposal would repeal collective bargaining rights for state workers except as to wages, and then restrict any wage increase to a maximum of the real cost of living. Walker also proposes to limit labor contracts to one year. Only safety service employees (police and fire) would continue to have collective bargaining rights. Public employers would no longer collect union dues from public employees.
Currently, 175,000 public employees in Wisconsin (teachers and state and local government workers) enjoy high salaries, "free" guaranteed pension benefits, and "free" health care while working and in retirement.
To balance the budget, Walker does not want to lay off employees. To avoid firing 6,000 state employees to help balance the budget, he wants the employees to start paying 5.8% of their salaries toward their pensions and 12.6% toward their health care plans.
Last December, the Wisconsin Senate failed by one vote to pass a new labor agreement for state workers in the waning days of Democratic Gov. Jim Doyle's administration. State workers are working without a contract. Walker seized the opportunity to challenge the unions.
Last December, the Wisconsin Senate failed by one vote to pass a new labor agreement for state workers in the waning days of Democratic Gov. Jim Doyle's administration. State workers are working without a contract. Walker seized the opportunity to challenge the unions.
Will he succeed? Teachers have called in sick and demonstrated at the state capitol. The governor has indicated he will call out the Wisconsin National Guard if state prison guards walk off the job, as they have threatened to do. The stakes couldn't be higher.
The state legislature will have to approve Walker's proposals. Republicans control the Assembly 60-38-1 and the Senate 19-14. Will the majority act to approve Walker's reform?
They should. The public supports the governor. Wisconsin has been a liberal state. No longer — the price of liberalism is unaffordable.
As a former negotiator of contracts with government agencies I can attest with absolute certainty that government employees don’t know a damn thing about the true costs of their services. It is reported that he average pay for a Wisconsin school teacher is $66,000 per year with $33,000 in fringe benefits tacked on. That is a direct labor ratio of 50%. This would calculate out to a base pay (Direct Labor of DL) of $31.73 per hour using a working year of 2,080 hours. I have made no adjustments for holidays, vacation and sick days as they would be factored into direct labor (DLO) overhead figure.
Applying the DLO multiplier we get an actual wage of $47.60 per hour. This is where most government employees stop computing their true costs to the public. To calculate the real cost to the tax payer we have to add something called indirect overhead (IDO) to the equation. Indirect overhead consists of all costs needed to run a business or organization. It consists of rent, utilities transportation, supplies, training and non-productive employee costs (secretaries IT staff, etc.) needed for the business. I have analyzed this IDO figure in the United States, Europe and Latin America and found the average to be 35% to 40%.
Using the 35% figure we now get a DL multiplier for the productive or in this case the actual class room teachers of [(1x1.5)+(1x1.35)]=2.85. This is called the direct labor multiplier. If you want to achieve a 10% profit you would multiply this figure by 1.1 arriving at a total multiplier of 3.15. It is the profit that is negotiated in the private sector. As example Caltrans would only allow a 7% profit so the total multiplier for an engineer would be 3.05. Since there is no profit to be considered for the teachers their multiplier would be 2.85 or $135.99 per hour. Thus the total cost to the Wisconsin tax payer for a school teacher would be $282,172 per year. This is the real cost. If Wisconsin has 6,000 teachers the cost is now $1.69 billion per year to the tax payers.
One more cost that needs to be considered is something called utilization costs. When you have a teacher, engineer, attorney or any other person providing a service you assume that all of their time (2080 hours per year) will be devoted to providing the service they are hired for. In many service businesses this is called billable time. It is impossible for any employee to have a utilization rate of 100%. Every time they go to a meeting or training seminar this time is reduced. Each business needs to set a utilization target for each employee. In the civil engineering business this target ranges between 80 to 90%. In government they have no idea what their utilization rates are. I have had this discussion with numerous public sector employees around the world and they can never give me an answer. Every time a teacher goes to a meeting or a seminar on paid time they are diminishing their utilization rate. With all of these numbers I have not touched on productivity or results. That’s a topic for another blog.
Wisconsin was the first state (in 1959) to allow public employee collective bargaining. The result has been the creation of a privileged class of workers who are paid more than comparable positions in the private economy, whose benefits are guaranteed by the private workers who make less doing similar work, and who can never be fired or demoted no matter the quality of their work.
How did this happen? Politics. The unions used member dues to support candidates friendly to the union and oppose those who weren't. The result at contract negotiation time was that the union leaders sitting down to "bargain" with elected officials beholden to the unions for their reelection cash. The unions won the "bargain." The taxpaying public got the bill.
Now the public employee unions are fighting mad. "He is not trying to balance a budget, he is trying to destroy unions in this state," said Bryan Kennedy, president of AFT-Wisconsin. "He is trying to turn Wisconsin into a right-to-work state. Or a right-to-work-for-less state."
What Walker is trying to do is roll back decades of special privilege and trending toward insolvency. Other governors are challenging the power of the public employee unions (and getting reams of publicity for their efforts), but no governor has gone as far to return fiscal sanity to his state as Walker.
The problem isn't collective bargaining itself, but how we define "collective." A union is really nothing more than a corporation that provides labor. Governor Walker and other conservatives certainly have no problem with corporations, except when that corporation operates a monopoly. Therein lies the problem with unions — not that they exist, or even that they are essentially liberal political organizations that do some employee representation on the side. What makes unions so dangerous and often harmful is that the law allows them to wield monopoly power.
The most hazardous monopoly of all is one that receives taxpayer support. When the United Auto Workers union successfully pushed member compensation up to and astronomical $73.20 per hour, consumers had the recourse of buying from less costly foreign automakers (Toyota: $48.00 per hour). When a government union, such as the National Education Association, makes state services more expensive than their market value, there are no competitors to expose how wasteful and impractical it actually is. Moreover, even if expensive UAW cars were the only cars available, as we could at least ride a bike instead of driving. Not so with government workers. Between property, sales, income, vehicle, and a seemingly endless array of other taxes, we can't stop paying state employee unions. We are forced consumers of state services.
Story after story in local and national news asserts that Governor Walker is trying to take away union rights. But do unions have the right to operate a monopoly whose product, by law, cannot be refused? It is the rights of non-union tax-payers that are under far greater threat under the current collective bargaining rules. Walker's proposal is a simple check on a monopolistic organization than is bankrupting his state.
And so the Democrats are dependent on Big Labor and Big Labor is dependent on the Democrats. Such dependency has consequences. Unions rally in Madison in hopes to avoid a world without the scales heavily tipped in their favor. It is a behavior that says without an unfair advantage, granted by the state, the union-ites cannot function. President Grover Cleveland said such "paternal care on the part of the government weakens our national character." So it was with Greece, so it is in Wisconsin and around the country.
That weakening of character could not be better exemplified than by the 14 Democrat state senators who fled the state before the budget vote. If there is an example of prolonged adolescence and a disconnect between what we want to be real and what is real, it is 14 elected officials running to an out-of-state resort instead of making their case before the senate like adults.
Outside the partially empty senate chamber, one protester held up a sign that declared, "Egypt showed us the way." No. Greece showed us the way — the way we should avoid. America still has time to choose. Which path will we take?
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