The Milwaukee Wisconsin Journal Sentinal brings us encouraging news from our neighboring state. The Governor-elect is focusing on the ability of collective bargaining by public employee unions to drive the state’s budget out of control. “Governor-elect Scott Walker raised the possibility of essentially abolishing state employee unions on Tuesday as one option to control rising employee benefits costs and eliminate the state’s budget deficit.”

The problem, which has surfaced in Minnesota and around the nation, is that public employee unions have the states painted into a corner with inflexible work rules, step increases in pay, and expensive pensions and health benefits. The cost of public employees and the attendant rate of growth is largely unresponsive to hard times even as individual taxpayers and businesses are forced to trim costs. Not only do taxpayers have less to give, but they’ll get fewer government services at a higher price as the percentage of budgets dedicated to employee costs go up.

“As a short-term measure, Walker wants to require workers to make a 5% contribution to their pensions. State union workers have traditionally not contributed to their plans. (Emphasis added) He also wants to increase employees’ share of health costs to 12% – up from 4% to 6%, depending on the bargaining unit. Those changes would save $154 million from January to June 30 alone.”

This problem points to the unfunded liabilities for public employee pensions and post-retirement health benefits. Nationally, the number is estimated to be as high as $3 Trillion. In Minnesota, we are looking at $24 Billion just for pensions if you use market valuation. We are not California or Illinois– but we have a big problem to solve. If state employees could not bargain collectively, the state as an employer would have much greater flexibility in delivering state services with a modern work force.

Public employees are the growth industry for unions–and responsible for much of the schlerotic nature of state and local government’s response to the Great Recession, and we think part of the reason we continue to suffer from low growth. The Wall Street Journal reported on the cost to our democracy last winter. “The problem for democracy is that this creates a self-reinforcing cycle of higher spending and taxes. The unions help elect politicians, who repay the unions with more pay and benefits and dues-paying members, who in turn help to re-elect those politicians.”

Is that who want to be? You can read more at our Pension Reform Project website.