As a former state treasurer of Michigan, I oversaw the finances
of a state whose economic problems are even worse than those of our
next-door neighbor,Wisconsin. Yet last year, we were able to enact
legislation to reduce pension benefits for school employees and
require employee contributions for retiree health care, without
threatening to take away collective bargaining rights.
In 2010, budget problems brought on by the recession forced us
to ask for concessions from state and school workers. Specifically,
we needed to reduce our future liabilities for retiree health care
and school employee pensions. At the beginning of the decade,
the pension system had been over 100 percent funded. After ten
years of reversals in the stock market, it was down to 80
percent.
Our governor, Jennifer Granholm, told the teachers union the
state could no longer afford a pure defined benefit plan for new
school hires, in which the state is responsible for an employee's
entire retirement fund. Nor could we afford to allow teachers to
retire at age 55 with a pension based on the average of their last
three years' salary.
The teachers recognized that Michigan was in financial straits
and that changes had to be made. We were willing to compromise,
too. After discussions with the union, the legislature passed a
plan for new hires that raised the retirement age to 60 (we'd
wanted 65), based pensions on the last five years' salary (we'd
wanted nine), and required teachers to contribute 3 percent of
their pay to retiree health benefits. In exchange, the state is
contributing 1 percent of teachers' salaries to a 401(k) each
year.
In the end, we got a fair deal that saved Michigan millions of
dollars, with potential savings of billions if the 3 percent
contribution for retiree health benefits is ruled constitutional.
One thing we never considered was ending teachers' collective
bargaining rights. Michigan is a strong union state. If we had
tried that tactic, Lansing would have been just as chaotic as
Madison has been these past few weeks. Beyond that, it's good
policy to allow teachers, police officers and firefighters to sit
down at the table and work out agreements with their employers. If
you treat public employees well, you get good public service in
return.
Governor Granholm is a Democrat, so she wasn't going to attack
union rights. But in 1997, Republican Governor John Engler and an
all-Republican legislature made similar changes to the pension
system for state employees, without trying to take away collective
bargaining. Our new governor, Rick Snyder, is also a Republican.
He's asking state employees for $180 million in concessions, but
he's a practical businessman who understands that stripping workers
of their rights will ruin labor relations in Michigan.
We didn't need to take an adversarial stance toward unions to
strike a pension reform deal. If Governor Walker had followed
Michigan's strategy, he would have an agreement with Wisconsin's
public employees by now. Public employee unions realize the states
are in financial trouble. In Wisconsin, they've already agreed to
most of Walker's financial demands. And yet, Walker is intent on
taking advantage of the economic downturn to do away with labor
rights and repeal 100 years of legislation enacted to help workers
and low-income individuals. It might be a good ploy to get
concessions for the unions, and it may help him in the short run,
but it's going to ruin him in the long run.
If Scott Walker were a goog leader, he could figure out a way to
negotiate with his employees and save Wisconsin money without
eliminating collective bargaining. The fact that he would rather
dictate his own terms shows he doesn't know how to run a state.
Good government depends on good relationships with workers. If
Walker wins his struggle with the unions, he'll inevitably end up
complaining that government is inefficient and state employees are
lazy, even though he will have caused those problems by destroying
the morale of his workforce.
I believe Governor Walker has poisoned labor relations for years
to come, ensuring the failure of his administration. Compromise is
not a dirty word. It is an integral part of politics and the
collective bargaining process. Anyone who thinks otherwise should
not be in politics or in a leadership position. As Edmund
Burke said, "All government, indeed every human benefit and
enjoyment, and every prudent act, is founded on compromise and
barter."
Over the past two years, I have given several speeches warning
about the threat of income inequality to our democracy. Michigan
has lost 850,000 jobs in the last decade, almost all due to the
decline in the domestic auto industry. Our state has slid from the
top 10 in per capita income to 37th. The auto industry and the
unions helped create the middle class in Michigan. Now, that's
pretty much gone. Real incomes for the average American have not
risen in 30 years. Almost all the economic gains are going to the
top 1 percent.
Ironically, some economists believe that income inequality
contributed to the financial collapse that's causing Governor
Walker to claim his state can no longer afford public employee
unions. Since middle class incomes were stagnant, the only way the
average American could spend was through borrowing. People used
their houses as ATMs, and became overextended financially. As the
super-wealthy began looking to stash their swelling incomes in more
lucrative investments, financiers created mortgage-backed
securities and collateral debt obligations. The whole system fell
apart, and now Governor Walker is exploiting the crisis to reduce
government spending and take away benefits from public workers,
which will further erode the middle class.
The phrase "class warfare" means you can't complain if the rich
get everything. As Supreme Court Justice Louis Brandeis once said,
"We can either have democracy in this country, or we can have great
wealth concentrated in the hands of the few, but we can't have
both." Governor Walker's misguided proposal to balance his state's
budget is pitting middle-class workers against the government,
against public sector workers, and even against each other. If
Governor Walker and his Tea Party allies have their way, they'll
destroy America's social safety net. We're seeing in Wisconsin how
this has the potential to tear the country apart.
Robert J. Kleine was Treasurer of Michigan from 2006 to 2010
