Category Archives: Unions

Blue State Taxes?

Like it or not, this may be one of the best results of the tax re-write… for everyone!
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WSJ 1/2/2018

The great American migration out of high-tax states like New York and Illinois may be about to accelerate. The tax reform enacted last month caps the deduction for state and local taxes, known as SALT, at $10,000. This means millions of people will finally feel the full tax burden imposed by state and local politicians. When the SALT shield shrinks, so may people’s willingness to put up with these high taxes.

Such states already are losing population, and new Census Bureau data—released the same day tax reform passed the House and Senate—shows the continued migration. Of the seven states that grew the fastest between July 1, 2016, and July 1, 2017, four (Nevada, Washington, Florida and Texas) have no income tax, and the other three (Idaho, Utah and Arizona) have low taxes.

On the flip side, high-tax states like New York, New Jersey, Connecticut, Illinois and Rhode Island either lost residents or stagnated. Pennsylvania quietly became the fifthmost- populous state in the nation, displacing Illinois.

When people move, they take their money with them. The five high-tax states listed above have lost more than $200 billion of combined adjusted gross income since 1992, according to the website How-MoneyWalks.com, which aggregates IRS data. In contrast, Nevada, Washington, Florida and Texas gained roughly the same amount.

If politicians in high-tax states want to prevent this migration from becoming a stampede, they will have to deliver fiscal discipline. At least a few seem to realize this. New Jersey’s Gov.-elect Phil Murphy campaigned on a promise to impose a “millionaires’ tax.” But the Democratic president of the state Senate, Steve Sweeney, said in November that New Jersey needs to “hit the pause button” because “we can’t afford to lose thousands of people.” His next words could have come from a Republican: “You know, 1% of the people in the state of New Jersey pay about 42% of its tax base. And you know, they can leave.”

New York City Mayor Bill de Blasio may need to rethink his proposed millionaires’ tax. George Sweeting, deputy director of the city’s Independent Budget Office, told Politico in November that eliminating the SALT deduction would “make it a tougher challenge if the city or the state wanted to raise their taxes.” New York state Comptroller Thomas DiNapoli added: “If you lose that deductibility, I worry about more middle-class families leaving.”

In October, 36 California Democrats in Congress wrote to GOP leaders: “The elimination of SALT would pressure state and local governments to make cuts and take in less revenue.” But this fiscal day of reckoning will be a good thing for the beleaguered residents of high-tax states and cities.

If tax reform was Congress’s Christmas present to the American people, the limit on the SALT deduction is a gift that will keep on giving. In the years to come it will spur additional tax cuts and forestall tax increases at the state and local level.

Democrats want to use the SALT limitation as a wedge to pick up House seats in 2018. They should be more concerned about losing control of state capitals and city councils once voters at last feel the full effects of their tax-and-spend agendas. Some residents will vote with their feet, but the rest will just vote.

Mr. Ortiz is president and CEO of the Job Creators Network.

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Jerry Brown has and Epiphany!

Well, well, well. What do you know?
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WSJ 12/8/2017

Republican plans to slash the state-andlocal tax deduction are already reaping benefits in high-tax states. Democrats in the Northeast say they’re having second thoughts about raising taxes. And lo and behold, California Gov. Jerry Brown is arguing that public pensions aren’t ironclad.

Last month the Governor intervened in a state Supreme Court case regarding the constitutionality of his modest 2012 pension reforms. Several unions have challenged the reform’s limitations on pension “spiking,” including a provision that prevents workers from buying pension credit—known as “airtime”— at up to 40% below cost for years they haven’t worked. The perk, which Democrats granted unions in 2003, has allowed workers to retire early with handsome pensions.

Unions claim that workers are entitled to keep buying airtime because the U.S. Constitution forbids states from impairing contracts. They also point to a California Supreme Court ruling half a century ago holding that pensions once vested cannot be modified unless workers are given a comparable, offsetting benefit.

But two state appellate courts have recently upheld the reform’s limitations and cast doubt on this radical interpretation of contract law. The state’s First District Court of Appeal held last August that “short of actual abolition, a radical reduction of benefits, or a fiscally unjustifiable increase in employee contributions,” public worker pensions may be modified.

Another panel ruled last December that “while plaintiffs may believe they have been disadvantaged by these amendments, the [2012] law is quite clear that they are entitled only to a ‘reasonable’ pension, not one providing fixed or definite benefits immune from modification.” In other words, benefits for current workers may be trimmed.

Gov. Brown barged into the debate with a 56page brief. His usurpation of the state Attorney General Xavier Becerra, whose job is to defend state laws in court, is notable. Since Mr. Becerra is up for re-election next year, he may have faced pressure from unions to deliver a less than vigorous defense. “Treating laws as contracts creates knotty constitutional problem,” Mr. Brown’s brief notes, since “policies are ‘inherently subject to revision and repeal’ and one Legislature ‘may not bind future Legislatures.’ Yet finding that a law creates a contractual commitment does just that.” What’s more, “even a law substantially impairing a contract will generally stand if it was reasonable and necessary to serve an important public purpose,” in which case offering a comparative advantage is not necessary.

“The Union’s attempt to radically expand the scope of the vested rights doctrine should be rejected,” he asserts, since such a rule “would introduce an inflexible hardening of the traditional formula for public employee pension modifications,’ rendering pension systems incapable of adapting to changed fiscal or factual circumstances.”

Mr. Brown’s argument is particularly noteworthy because unions in other states have cited the “California Rule” that says pensions can’t be modified under any circumstance unless workers are offered a comparable benefit in exchange. This would make it difficult to realize substantial savings from reform.

Republicans in high-tax states say that abolishing the state-and-local tax deduction is unfair since lawmakers are legally barred from reducing government pensions and thus have no choice but to raise taxes to pay for them. But nearly every state court faced with the issue has upheld modifications.

The real problem is political, not legal. Democrats don’t want to renege on promises to their union friends and financiers. Mr. Brown isn’t running for re-election, so he may feel liberated. But perhaps other Democrats will be more motivated if their wealthy denizens raise a ruckus and leave their states.

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Sweet Deal for the Unions

I understand that unions might be necessary, but this kind of strategy does not help them at all.
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WSJ 5/31/2017 By Alex Cortes And Jarrett Skorup

The year was 1993. Bill Clinton had recently been elected president. A gallon of gas cost $1.16, and the Chicago Bulls won the first of three consecutive National Basketball Association championships. Over in Lansing, Mich., a teaching assistant’s dreams were about to come true as well.

This public employee, Steve Cook, was making a relatively low hourly wage at Lansing Public School District. But he had an opportunity to enter the private economy, where his new employer would pay him a lot more. Even better, he would be allowed to continue accruing taxpayerfunded pension benefits.

Why? This was no ordinary private employer. Mr. Cook was going to work for the Michigan Education Association, the state’s largest teachers union. His new employer worked out a deal with the school district that made Mr. Cook an “educator on loan,” a scheme that allows public employees to be paid by a government entity while being “loaned out” to another organization. Under the arrangement, the district technically pays Mr. Cook’s salary and the union reimburses the district. This allows him to accrue a much higher pension, by basing it on a far higher salary and many more years of service.

Richard Halik, the district’s superintendent at the time, agreed to the request. “You want a positive relationship with the MEA,” Mr. Halik said in a 2016 interview, explaining why he agreed to the deal that he expected to last only one year. “You pick the hill you die on. . . . We were going to be cooperative.”

Nearly 25 years later the scheme is still going. And this is not unique. Michigan’s largest teachers union has these types of agreements with its past three presidents, most of their current executives and even some low-level union employees. Dozens of people working full time for the private union are technically getting paid by a public school district.

It’s not hard to see why union employees go for such a setup. The lucky ones get to boost their taxpayer- funded pensions by pretending that they are still public employees. Since they are technically being paid by school districts—even though they work exclusively for a private union—union officials accrue benefits and stay eligible for Michigan’s school-employee pension system. That system is $29 billion underfunded, thanks in part to arrangements like this. Mr. Cook became president of the MEA in 2011. He is set to retire later this year. His current salary is more than $200,000. While his pay was determined by the union, his paychecks still came from the Lansing school district. Had Mr. Cook stayed on as a teacher’s assistant in 1993, his annual pension benefit in retirement would be around $10,000, according to estimates by the Mackinac Center for Public Policy (which uncovered the scheme). Instead, Mr. Cook is in line to receive an annual pension of at least $105,000 for the rest of his life, at taxpayer expense.

The school district says it didn’t intend for this to happen. But three words in Mr. Cook’s “educator on loan” contract prohibit the district from terminating the arrangement. The contract, according to language contained in it, “shall be renewed.” Since there is no end date specified, the union claims the arrangement renews in perpetuity—and it has.

Union officials in Michigan and throughout the country benefit from these and other schemes. “Release time” arrangements enable public employees such as teachers to work full time for their unions, while still receiving their full school salaries and benefits. In Michigan, at least 70 school districts spend millions offering this benefit to union officials.

Last year, the Arizona Supreme Court upheld one such arrangement after the Goldwater Institute challenged it under the state’s constitutional “gift clause” provision. In California everyone from janitors to schoolteachers to college professors takes union release time, paid for by taxpayers, and the California Legislature actually expanded the practice in 2013.

The Office of Personnel Management tracks release time for federal employees. Its most recent report in 2014 showed that union employees logged 3.4 million hours of release time, at a cost of more than $162 million. In the Veterans Affairs Department alone, employees took more than a million hours of leave time.

Using taxpayer money to pay for union activities and private pensions should outrage anyone interested in efficient and effective public services. Taxpayers are on the hook twice— once to pay for the released worker and again to pay for a replacement employee. There’s no legitimate reason why governments should provide these types of extra benefits to unions and their officials. States and the federal government should end these schemes.

Mr. Cortes is vice president of content development at the radio program “Our American Stories.” Mr. Skorup is a policy analyst at the Mackinac Center for Public Policy.

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The Real Democratic Party

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WSJ 2/8/2017

The Senate made history Tuesday when Mike Pence became the first Vice President to cast the deciding vote for a cabinet nominee.

The nominee is now Secretary of Education Betsy DeVos. The vote came after an allnight Senate debate in a futile effort by Democrats to turn the third Republican vote they needed to scuttle the nomination on claims that the long-time education reformer isn’t qualified. Republicans Lisa Murkowski and Susan Collins had already caved, so Mr. Pence had to cast the 51st vote to confirm Mrs. DeVos.

She can now get on with her work, but this episode shouldn’t pass without noting what it says about the modern Democratic Party. Why would the entire party apparatus devote weeks of phone calls, emails and advocacy to defeating an education secretary? This isn’t Treasury or Defense. It’s not even a federal department that controls all that much education money, most of which is spent by states and local school districts. Why is Betsy DeVos the one nominee Democrats go all out to defeat?

The answer is the coldblooded reality of union power and money. The National Education Association and the American Federation of Teachers are, along with environmentalists, the most powerful forces in today’s Democratic Party. They elect Democrats, who provide them more jobs and money, which they spend to elect more Democrats, and so on. To keep this political machine going, they need to maintain their monopoly control over public education.
Mrs. DeVos isn’t a product of that monopoly system. Instead she looked at this system’s results— its student failures and lives doomed to underachievement—and has tried to change it by offering all parents the choice of charter schools and vouchers. Above all, she has exposed that unions and Democrats don’t really believe in their high-minded rhetoric about equal opportunity. They believe in lifetime tenure and getting paid.

This sorry politics means that no Democrat could dare support Mrs. DeVos, even if it meant a humiliating about-face like the one performed by New Jersey Senator Cory Booker. As the mayor of Newark, Mr. Booker supported more school choice and he even sat on the board of an organization that would become the American Federation for Children (AFC), the school reform outfit chaired by Mrs. DeVos. As recently as May 2016, Mr. Booker delivered an impassioned speech at the AFC’s annual policy summit in Washington. He boasted about how Newark had been named by the Brookings Institution “the number four city in the country for offering parents real school choice.”

He described the school-choice cause this way: “We are the last generation, fighting the last big battle to make true on that—that a child born anywhere in America, from any parents, a child no matter what their race or religion or socio-economic status should have that pathway, should have that equal opportunity, and there is nothing more fundamental to that than education. That is the great liberation.”

Some liberator. On Tuesday Mr. Booker voted no on Mrs. DeVos.

His calculation is simple. Mr. Booker is angling to run for President in 2020, and to have any chance at the Democratic nomination he needs the unions’ blessing. He knows that a large chunk of both the party’s delegates and campaign funding comes from the teachers unions, and so he had to repent his schoolchoice apostasy.

The unions can’t even tolerate a debate on the subject lest their monopoly power be threatened. All that chatter about “the children” is so much moral humbug.

Mrs. DeVos is a wealthy woman who could do almost anything with her time and money. She has devoted it to philanthropy for the public good, in particular working to ensure that children born without her advantages can still have an equal shot at the American dream. She knows education should be about learning for children and not jobs for adults.

All you need to know about today’s Democratic Party is that this is precisely the reason the party went to such extraordinary lengths to destroy her. We trust she realizes that her best revenge will be to use every resource of her new job to press the campaign for charter schools and vouchers from coast to coast. That is one reason not a single Senate Democrat voted for Betsy DeVos.

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Sen. Cory Booker, who voted Tuesday against confirming Betsy DeVos as education secretary, speaking in 2012 at a conference of the American Federation for Children, the advocacy group chaired at the time by Mrs. DeVos:
I cannot ever stand up and stand against a parent having options, because I benefited from my parents having options. And when people tell me they’re against school choice, whether it’s the Opportunity Scholarship Act or charter schools, I look at them and say: “As soon as you’re telling me you’re willing to send your kid to a failing school in my city [Newark, N.J.], or in Camden or Trenton, then I’ll be with you.” . . .

I’m going to be out there fighting for my president, but he does not send his kids to Washington, D.C., public schools. I got a governor in the statehouse, he does not send his kids to Trenton public schools. I could go all the way down to city council people in Newark, that do not send their kids—so what have we created? A system that if you’re connected, elected, have wealth and privilege, you get freedom in this country? And now you want to deny that to my community?

No. I am going to fight for the freedom and the liberty and the choice and the options of my people, in the same way you will defend that right for yourself.

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