Whether one sees New Jersey Governor Chris Christie as confronting or punting, it’s hard to deny he knows a crisis when he sees one. The State Supreme Court sees one as well. On June 9, the Court ruled 5-2 that Christie was within bounds in delaying two years of contributions, nearly $2.5 billion, to the state’s chronically underfunded public-employee pension system. The ruling, a clear blow to the unions who brought forth the suit, for now averts a fiscal calamity. Critics claim that Christie, expected shortly to enter the Republican presidential race, broke a law he signed in 2011, passing the buck to his successors. Supporters counter that the ruling gives the legislature breathing room to fix a condition resulting from years of excessive union contract demands. The latter is a familiar story in other states, too.
If any one state stands out in the race to the bottom of public employee pension insolvency, Illinois would be it. And GOP Governor Bruce Rauner is steeling himself to prevent a collapse. Rauner, a former private equity fund manager, was elected last November over Democratic incumbent Pat Quinn. He faces $111 billion in unfunded pension liabilities, or about $8,500 per resident. The years of greed, corruption and bad luck having taken a toll, the governor and his top fiscal policy adviser, Donna Arduin, have proposed tough measures to reverse course. So far, they haven’t won any friends among public-sector unions - or the Illinois Supreme Court, which on May 8 sided with the unions in invalidating reforms enacted in late 2013.
In the construction industry, nothing exemplifies union monopoly, and its costs, quite like a Project Labor Agreement. A new proposal before Congress, the Government Neutrality in Contracting Act, would protect contractors from intrusion by organized labor upon contractual liberty. Sponsored by Rep. Mick Mulvaney, R-S.C., and Sen. David Vitter, R-La. (H.R. 1671, S. 71), the measure would bar the use of these agreements on federally-sponsored or subsidized public works. In promoting open competition in bidding, hiring and other aspects of project labor, it effectively would overturn President Obama’s Executive Order 13502. Issued in February 2009, that order “encouraged” federal agencies to require such pacts on a case-by-case basis on projects of $25 million or more.
Nobody doubts for an instant that rebuilding the New Jersey coastline in the wake of Hurricane Sandy will be costly. But a little over two weeks ago Republican Governor Chris Christie took a step that should make it a good deal less so. On April 15, Christie vetoed a union-backed bill passed this winter by the legislature to expand the range of state-contracted construction requiring Project Labor Agreement (PLAs). Such agreements, drawn up between state/local governments and unions, require contractors to pay union-scale wages and benefits on large-scale public works projects. Unions love them because they effectively remove nonunion companies from competitive bidding. The general public doesn't make out as well.
Hurricane Sandy did about $30 billion of property damage to New Jersey communities late last October. And construction unions and their political supporters aren't about to let a good crisis go to waste. In mid-January the New Jersey Senate approved, by a 23-13 vote, fast-track legislation (S.2425/A.3679) to expand the range of projects eligible for inclusion under Project Labor Agreements (PLAs). Such agreements are pre-hire contracts that commit building contractors to hire union labor on large-scale projects. Increasingly common over the past two decades, the main achievement of PLAs has been to raise labor costs.
President Obama said in his State of the Union speech last month that he would not “walk away from the promise of clean energy,” and according to a Politico report, he “doubled-down” on the promise by highlighting (more) commitments to federal grants and incentives for wind energy, solar power and natural gas vehicles in quasi-campaign speeches out West.
Government in Wisconsin, one probably has heard by now, is paralyzed. And the ultimate losers may be future generations of taxpayers. Last Thursday, February 17, up to 25,000 protestors, led by public-sector union officials, rallied in the state capital of Madison to intimidate legislators out of voting in favor of new Republican Governor Scott Walker's budget austerity plan, which includes major concessions from unions.
The New York Times reported last week that policy makers are working behind the scenes on ways to allow states to declare bankruptcy. States are currently banned from seeking protection in federal bankruptcy court.
One has to wonder if General Motors' bankruptcy outcome will embolden lawmakers to pursue a similar course for states that are overburdened with pension obligations and municipal bond debt. In the case of the GM outcome, union pension obligations were given precedence over creditor claims. The precedents set by the Obama Administration's manipulation of GM's bankruptcy will continue to have far-reaching, negative implications.