Teamsters

Political Bailouts for Underfunded Union Pensions

by Ivan Osorio on April 28, 2011

in Bailout Watch, Economy, Employment, Labor

While the nation’s attention has focused on government employee unions’ fight to retain their collective bargaining privileges, unions in the private sector are in an even bigger fight for their own survival.

Many major private sector unions’ pension funds are severely underfunded to the the extent that they threaten the unions’ own solvency, as well as their biggest selling point for attracting new members: a stable and secure retirement. At The Weekly Standard, Mark Hemingway explains just how bad things could get.

[T]he problem of bankrupt union pension plans is not going away. It’s more than likely a number of big union pension plans will go bankrupt. All of a sudden, union employees who were expecting generous pension plans will be dumped onto the Pension Benefit Guaranty Corporation, the government-sponsored enterprise that backstops pension plans. The maximum payout is just under $13,000 a year, or “dog-food money,” notes McMahon.

That’s when things are likely to get really ugly. Multi-employer pension plans are by law governed by boards equally divided between employer and union representatives. There’s already no love lost between rank-and-file union members and the class of political consultants and executives that has come to dominate union leadership. Both of the SEIU’s national pension plans issued “critical status letters” to their members in 2009?—?the Pension Protection Act requires such letters to be issued when funds can cover less than 65 percent of their obligations. The SEIU, however, maintains a separate pension plan for its national officers that was funded at 98.3 percent, according to the latest data.

Expect waves of class action lawsuits over pension mismanagement aimed at recouping money from the employers and unions responsible. This could well bankrupt unions. And when union pension plans begin failing, unions will be deprived of perhaps their biggest selling point — job stability with unrivaled retirement benefits.

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Killed by Pension Accounting

by Ivan Osorio on October 18, 2010

in Bailout Watch, Deregulate to Stimulate, Economy, Employment, Labor, Regulation

Think accounting rules are a boring topic? You wouldn’t if the fate of your business rested on it. Indeed, a rule change may be coming soon that may expose the huge liabilities many companies face as a result of their participating in some grossly underfunded union pension funds. In a straightforward, non-boring manner, Washington Examiner columnist Mark Hemingway breaks it down.

On Nov. 1, the Financial Accounting Standards Board (FASB) ceases to take public comment on a new rule requiring that companies more accurately report liabilities they have from participation in multiemployer pension plans. Unless FASB is persuaded otherwise, the rule takes effect Dec. 15.

There are some 1,500 multiemployer pension plans in the United States, which are unique to unions. In these plans, multiple companies pay into the pension plan, but each company assumes the total liability.

Under “last man standing” accounting rules, if five companies are in a plan and four go bankrupt, the fifth company is responsible for meeting the pension obligations for the employees of the other four companies.

What this means is that companies with union labor often have pension liabilities that are several multiples higher than the pension expenditures they report — the Kroger grocery store chain shocked analysts last year when it disclosed its multiemployer pension liabilities more than doubled in a year to $1.2 billion.

Ratings agencies such as Moody’s and Standard and Poor’s have been highlighting the lack of transparency in union pension plans. Now Wall Street wants union businesses to be upfront about their liabilities.

FASB’s new rule could effectively wipe out the paper worth of many companies, especially in the trucking and construction industries. Once banks and creditors are aware of these staggering pension liabilities, it will make it nearly impossible for union businesses to get loans, credit lines or bonding.

If forced to report their true liabilities, hundreds — perhaps thousands — of companies will scramble to get out from under their union obligations.

UPS did precisely that three years ago, opting to pay $6.1 billion to withdraw from the Teamsters Central States Fund. That’s right, UPS decided that $6.1 billion was less costly than the Central States Fund’s liabilities! The last-man standing rule made the situation especially bad. As Bloomberg reported at the time, “The Central States Fund has suffered as several unionized trucking companies have failed or been acquired during the past decade, leaving UPS and other remaining employers to bear greater liability for retirees covered.”

As Hemingway notes, it is largely to shore up such failing pension funds that organized labor worked so hard for passage of the so-called Employee Free Choice Act — its card-check provision would enable unions to organize new members without the hindrance of a secret ballot election, while its binding arbitration provision would make it easier to impose pension liabilities on employers. He also rightly notes that the fight over EFCA isn’t quite over yet, and Republicans need to be on guard during the upcoming lame duck session of Congress.

Businesses should be even more on guard. As Brett McMahon of Miller & Long Construction (whom Hemingway also cites) described it, for a business, facing millions in new multi-employer pension liabilities would be “a good time to start liquidating.”

For more on union pensions, see here.

Driving the Bus all the Way to the Bank

by Ivan Osorio on February 10, 2010

in Economy, Employment, Labor

Investment bankers and lawyers, move aside. If you want a truly high-powered salary, try driving a bus. Last year, the Madison, Wisconsin’s highest paid city employee was…a bus driver. The Wisconsin State-Journal reports:

Madison’s highest paid city government employee last year wasn’t the mayor. It wasn’t the police chief. It wasn’t even the head of Metro Transit.

It was bus driver John E. Nelson.

Nelson earned $159,258 in 2009, including $109,892 in overtime and other pay.

He and his colleague, driver Greg Tatman, who earned $125,598, were among the city’s top 20 earners for 2009, city records show.

They’re among the seven bus drivers who made more than $100,000 last year thanks to a union contract that lets the most senior drivers who have the highest base salaries get first crack at overtime.

Unfortunately, this isn’t a freak occurrence, but an egregious example of a nationwide problem. During the 1990s boom years, many state and local governments spent the additional tax revenues from increased economic activity nearly as fast as they came in. As a result, many state and local governments face severe budget problems today.

As the State-Journal notes, Madison has taken some steps to curtail overtime, but such baby steps will be hardly enough for cities that hope to avoid the fate of Vallejo, California, which declared bankruptcy in 2008. The salary escalator contract provisions that led to outlandish salaries in Madison and Vallejo — far beyond anything comparable in the private sector — have been codified in government employee unions’ collective bargaining agreements across the country.

For more on public sector unions, see here and here.

If at First You Don’t Succeed, Change the Rules.

by Ivan Osorio on November 2, 2009

in Deregulate to Stimulate, Economy, Employment, Labor, Regulation

From attempting to manipulate the definition of “supervisor” to changing the way in which workers are organized, the above seems to be a guiding principle in organized labor’s bold new approach to increasing union membership. Consistent with that, some union friendly government officials are trying to change the way in which votes for some workers are counted.

Today, as The Wall Street Journal reports, National Mediation Board chair Elizabeth Dougherty wrote to more than a dozen Republican senators, protesting her colleagues’ proposed rule change (sent to the Federal Register on October 29) that would change the way in which votes are counted in organizing elections under the Railway Labor Act (RLA).

Under a 75-year-old interpretation of the Railway Labor Act, any employees who don’t vote on whether to create a union are counted as “no” votes. That means a union can’t be approved without a full majority of all employees voting in favor of it.

Under the National Labor Relations Act governing other industries, a union can be created as long as a majority of all votes cast are in favor of collective bargaining. In such elections, nonvotes don’t count either way.

Earlier this year, the White House named Linda Puchala, a former leader of a flight-attendant union, to the NMB to succeed Read Van de Water, a former lobbyist for Northwest Airlines. Harry Hoglander, a board member since 2002, is a former union leader for pilots.

Ms. Dougherty joined the NMB’s board in 2006. A registered Republican, she served as a labor adviser to Mr. Bush earlier this decade.

In September, the AFL-CIO union formally asked the NMB to adopt the same voting rules as the National Labor Relations Act, arguing that the unionization-election process under the Railway Labor Act is undemocratic.

In its proposal published Monday, the NMB agreed, saying that “few if any” democratic elections treat nonvotes as “no votes.” Allowing a contrary policy, as under the current NMB union-voting rules, “could allow those lacking the interest or will to vote to supersede the wishes of those who do take the time and trouble to cast ballots,” the agency added.

Opponents of the overhaul say the higher bar for unionization was set up to protect interstate commerce from disruption. They also argue the law hasn’t hindered unionization: Roughly two-thirds of airline employees and more than three-quarters of railroad workers are organized, according to industry estimates, far higher than the 12% rate across the entire U.S. economy.

That’s a major change, but the unions are not about to stop there in their efforts in this area. The Teamsters, in cooperation with UPS, are trying to move employees of FedEx — UPS’ competitor and a Teamsters organizing target — out from being regulated under the RLA to jurisdiction under the National Labor Relations Act (NLRA).

Unlike the NLRA, the Railway Labor Act requires unionization to be carried out company-wide. This prevents the creation of balkanized work rules that could result from piecemeal unionization at individual facilities. UPS began as a ground transport company, so most of its employees are covered under the NLRA.

However, the Teamsters are UPS have pursued that change through the legislative process. Now some union allies are pursuing a similar change through the regulatory process. When it comes to changing the organizing rules, Big Labor seems more likely to keep persisting.

For more on the RLA, see here.

Union Bosses Say the Darndest Things

by Marc Scribner on August 4, 2009

in Economy, Employment, Labor, Legal, Regulation, Trade

As described in an OpenMarket post by CEI’s Ivan Osorio a couple weeks ago, the Teamsters union and UPS are currently lobbying Congress to change FedEx’s labor law status, thereby making it easier for the Teamsters to organize FedEx drivers.

Today, the Washington Times ran an article on the ongoing battle, which included a you-can’t-make-this-up quote from Teamsters boss James P. Hoffa:

FedEx has built much of its empire on low-cost business models and other unsavory tactics, some of which are now coming back to haunt it.

This quote, which the Times pulled from a Teamsters-run anti-FedEx website, typifies the backward thinking of the organized labor movement: Business cost-savings should be thought of as “unsavory.” Labor, for those of this mindset, is not seen as a production input; rather, work is viewed as an end in itself. Consumer welfare, let alone shareholder welfare, is rarely considered at all.

This should appear ridiculous to anyone with even a cursory understanding of economics–you work in order to consume the things you want. Unfortunately for consumers, Big Labor is now driving U.S. economic policy.

Teamsters’ Pension Fund Panic

by Ivan Osorio on June 3, 2009 · 2 comments

in Economy, Labor

The Teamsters union is threatening a strike that could cripple the Minneapolis Star-Tribune. Reports AP:

The Teamsters union is threatening a strike it says would likely shut down the Star Tribune if the newspaper, which is in bankruptcy protection, is allowed to scrap its contract with unionized drivers.

Teamsters Local 638 filed its opposition Monday to the newspaper’s proposal to reject the contract.

The newspaper wants to pull out of what it calls a “critically unfunded” multi-employer pension plan that was costing it more than $1 million a year in plan contributions.

It’s no wonder the Teamsters are desperate. The pension plan in questions, the Teamsters Central States Pension Fund, has been in critical financial condition for a long time, and cannot afford to lose any payments. Rank-and-file union members should be asking how the fund got so underfunded in the first place. Union chiefs have been using pension funds as political weapons to advance agendas that add nothing to shareholder value.

For more on the politicization of pension funds, see here.

Can he terminate protectionism?

by Fran Smith on March 26, 2009

in Economy, Trade

It seemed like California Gov. Arnold Schwarzenegger didn’t have guts, despite his super-macho screen image.  Yesterday, however, he wrote to  members of the California Congressional Delegation, the country’s most powerful delegation in terms of the key leadership positions they hold, where he urged them to restore the pilot Mexican trucking program to avert trade retaliation.

Schwarzenegger pointed out how Congress’ termination of the program will hurt the economy and jobs, particularly in California:

. . . we must not allow safety to serve as a smokescreen for protectionist measures that cause more economic harm at a time when this country already has serious challenges to overcome. . . .  The termination of the pilot program has not made U.S. roads safer, but it has hurt the economy of California and the nation as a whole.

Beyond my concerns related to this particular episode, I am troubled by the disturbing signals it sends to our most valued trading partners.  In times of economic distress, the one sure way to worsen the plight of American workers is to retreat behind arbitrary and disingenuous protectionist walls.  Now is precisely the time for Congress to further open markets to American products rather than raising additional barriers to trade.

See earlier posts on Mexican trucking here, here, and here.  Will Democratic leaders stand up to the Teamsters on this issue?  Don’t count on it — too many are indebted to the unions for their 2008 win.

LibertyWeek 34: Michelle Minton Conquers the World

by Richard Morrison on March 17, 2009

in CEI Projects, Podcast

Your regular hosts Richard Morrison and Cord Blomquist are joined by special guest co-host Michelle Minton for Episode 34 of the LibertyWeek podcast. We begin by finding that Twitter has conquered every aspect of society, the White House is waging war on the economy and New Yorkers are defending themselves against beer taxes. We next investigate the questionable management of the AIG bailout in Scandal Watch and handicap Chicago’s chances for snagging the 2016 summer games in Olympic News.

Congratulations to FreeStateNH (The Free State Project) for winning the honor of Tweet of the Week™!

The Socialism that Dare not Speak its Name

by Ivan Osorio on March 13, 2009 · 2 comments

in Economy, Labor, Personal Liberty, Zeitgeist

“Socialism” is dead, according to Matthew Dallek, writing in the Politico. I put the term in quotes, because what Dallek defines as socialism is so very narrow, that most gradients of socialistic policies are bound to escape his definition.

Even amid the current economic emergency, there is no viable Socialist Party in the United States, nor is there a serious socialist movement, as there was when Socialist candidate Eugene V. Debs won nearly 1 million votes in both the 1912 and 1920 presidential elections and when Socialists won more than 1,000 state and local elected offices nationwide a century ago. Most socialists and communists were expelled from America’s labor unions during the early Cold War.

Moreover, millions of voters under 35 have no direct experience with socialism as adults. Thus, it’s hard for them to see how socialism poses any kind of a threat to democratic capitalism. In their adult lifetimes, the Berlin Wall was a historic site, and détente lacked all meaning in foreign affairs. But the pseudo-controversy about Obama’s allegedly socialistic tendencies is particularly surreal because even CPAC heroes William F. Buckley Jr. and Ronald Reagan muted, and mostly abandoned, the liberal-as-socialist trope in the early-to-mid-’60s.

Dallek seems fairly passionate over what is essentially a semantic point, one which he seems to argue is crucial for Republicans to understand if they are to regain political viability. Call me a stickler for words, but policies that would nationalize entire industries — from airport screening to health care — or socialize risk — from corporate bailouts to subsidized insurance — are socialistic by any sensible definition. You don’t need to embrace an ideology in toto to move in the direction of its vision of society.

Furthermore, you don’t need to define an ideology by its most vicious manifestation to recognize elements of it when they appear. There are other strands of socialism beside Soviet-style communism.

Ultimately, Dallek’s argument seems to rest on the notion that if you just don’t label somethign as “socialist,” then it isn’t.

Which would be great comfort to Teamsters President James Hoffa, who, in the Detroit News, offers an unusual definition of democracy.

Sen. Robert Wagner of New York sponsored the law in 1935 that bears his name. The Wagner Act recognized the right of workers to form unions. Wagner understood that the difference between despotism and democracy is not the secret ballot, but whether workers have the right to bargain collectively.

Not free elections, not a free press, not private property, but the ability to form and join unions. By that definition, PRI-era Mexico and Peron-era Argentina would qualify as exemplars of democracy. I’ll give Hoffa the benefit of the doubt as to whether he’s making a sloppy omission here, but taking his statement at face value, such a definition of democracy rests on redistribution as a core value and is therefore socialistic, at least in part.

In his article, Hoffa argues in favor of the Employee Free Choice Act (EFCA), which, contrary to his protestations, would make secret ballot elections in union organizing a dead letter. Also part of EFCA is a provision that carries a socialistic trait: loss of control over one’s private property.

As former National Labor Relations Board members Peter Hurtgen and John Irving note in The Wall Street Journal, EFCA’s binding arbitration provision would empower a federally appointed arbitrating panel to impose a contract if a newly organized company and the union are unable to reach a contract after 120 days to an enormous extent.

An arbitration panel’s power to dictate terms is virtually limitless. Such panels could impose uncompetitive wage rates and unworkable work rules. Arbitrators could also impose mandatory union dues and discharge for failure to pay.

Arbitration panels are by definition a stranger to the work place. Yet real, private agreements are products of the needs, desires, capabilities and resources of the negotiating parties who are anything but.

In effect, this would mean that a business owner would lose an enormous amount of control over an important area of his own business, which would erode his right to dispose of his property, at least to some extent.

This may all seem over the top to some, but I don’t see any need to mince words, and neither did F.A. Hayek.

Fore more on EFCA, see here.