Revised LM-2 Form Provides Public Window to Union Spending

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The age of transparency for labor unions has arrived, as the real effects of the Department of Labor’s new financial reporting requirements begin to kick in.  Over the course of the next few weeks, most unions should have their financial books open for public review on the Web.  Rank-and-file members, contractors, state and local officials – for that matter, anyone with a working computer and Internet access will be able to go over any labor organization’s fundraising and spending patterns.  Late last spring a U.S. Appeals Court had given DOL the green light for issuing its revised LM-2 form, which imposes greater detail than before on larger unions (smaller unions use the shorter LM-3 or LM-4 forms).  “This initiative is about giving union members meaningful information about their own union’s finances, so that they can exercise their democratic rights,” said Labor Secretary Elaine Chao.    

 

The LM-2 form, authorized by the 1959 Labor-Management Reporting and Disclosure (Landrum-Griffin) Act and put into place in 1963, had been virtually unchanged for four decades.  Many unions, if they even filed reports, did so late and/or with inaccurate and misleading information.  “For a long time,” said a Bush administration appointee, “this wasn’t the Department of Labor.  It was the Department of Labor Unions.  We set out to change that.”  Much of the problem, concluded a good many observers, was due to the insufficient level of detail in revenue and (especially) spending categories.  Without reform, embezzlement and other criminal acts could continue undetected.  A better way, DOL officials believe, is to make theft less attractive in the first place.  Congress during the Clinton years took a key step in the right direction, passing legislation mandating completed LM-2 forms be available online.  But compliance proved far from satisfactory. As recently as 2002, 43 percent of unions turned in their LM-2 forms late or not at all. 

 

It was up to the current labor secretary, Elaine Chao, to take the lead.  Not only did she announce stepped-up enforcement of the online filing requirement, she also proposed an expansion of the LM-2 form itself.  In the fall of 2003 Chao and other top department officials unveiled the revised version, set to apply to roughly 4,500 international, district and local unions with annual receipts of at least $250,000.  Unions would have to itemize all expenses of $5,000 or more.  The AFL-CIO, predictably, was unhappy.  In a 218-page document, the federation projected compliance on average would run more than $1.2 million for international and national unions, and more than $200,000 for local affiliates.  The federation challenged the new rule in federal court, arguing that Secretary Chao had acted outside the scope of her authority and that the new requirements would impose an undue burden on unions.  Not only Congressional Democrats, but also a group of 28 union-friendly House Republicans asked her to back off.   But last May a U.S. Circuit Court ruled in favor of DOL, effectively paving the way for the new rules.  Somehow the federation survived, spending $54,150 to upgrade its data collection software.

 

Unions have three months to file their LM-2 form after the close of the fiscal year.  The AFL-CIO was among the first scheduled, with its revised form due last September 30.  Another, larger wave of reports came in by the end of December.  Still more – an estimated 80 percent of all unions, in fact – had reports due at the end of March (i.e., based on a fiscal year ending December 31).  While details are hardly conclusive, initial data suggest a disturbing pattern of funds steered toward partisan politics.  The AFL-CIO’s LM-2 form reveals, for example, that it paid a Washington, D.C. political consultant nearly $3 million to produce flyers and mailings in support of John Kerry’s presidential bid in 2004 and various election issues.  The federation also paid a telecommunications vendor $143,340 for election-related phone calls, and $30,264 for a satellite hookup for a pro-Kerry rally in Ohio.  In all, the AFL-CIO in its most recent completed 12-month budget cycle spent $49.3 million on political activities and lobbying, $28.6 million on general overhead and administration, and $29.9 million on representational activities.  The National Education Association, meanwhile, spent $24 million on political activities in 2005.

 

The new reporting requirements won’t put an end to union corruption or excessive political contributions, but they will make officials and employees alike think twice before contemplating illegal or unethical behavior.  Completed reports are available on DOL’s public-disclosure Web page (www.union-reports.dol.gov) and the Web site of the new Washington, D.C.-based research group, the Center for Union Facts. (www.unionfacts.org). (Wall Street Journal, 3/27/06; Weekly Standard, 3/27/06; National Review, 3/27/06).