The following article appeared in the July 8, 2003 Edition of Investors Business Daily as written by   

George Schiele, a board member of the Yankee Institute for Public Policy in Hartford, Conn.

Public Employee Unions Sap States of Essential Resources

Looking back just a generation, federal spending in 2002 constant dollars has climbed from $11,000 per taxpayer in 1970 to $14,700 per taxpayer in 2002, a near 30% increase in absolute terms. Total state and local spending has in that same period climbed even faster, from about $6,100 per taxpayer to almost $9,100.

Although the activities of union lobbyists in the halls of congress are regularly documented in the national media, their successful effort to influence legislation at the state and local levels too often goes under-reported. With the decline of the stock market and the resulting fall in capital gains income, most pundits have blamed the explosion in state budget deficits on tax receipt shortfalls.

But a closer examination of the facts suggests the problem lies elsewhere, particularly in those states in which lagging population growth is combined with a strong union presence. Connecticut offers a particularly egregious example of how political forces paint the taxpayers into a budget corner from which escape becomes improbable.

On The Edge

The Nutmeg State, driven by the actions of its General Assembly and an assortment of Democrat, Republican and Independent governors, has reached the budgetary equivalent of an automotive redline, roaring for breakdown. The cumulative effect of a near static population, a chronically lagging business base and the relentless growth of state spending compounded over decades has brought it to the edge.

As always, raising taxes and imposing new ones, like the income tax created in 1991 by then-Gov. Lowell Weicker, have not made the budget easier to balance, just bigger. For those who still accept the bright-eyed optimism of politicians as they pile on spending and debt, a look at the Nutmeg numbers trend should induce sober reflection. In 1970, Connecticut had just over 3,000,000 people; by 2002, it had grown only 13%, a span in which the U.S. population grew by nearly 40%. Not surprisingly, many of the state’s historically important industries also grew too slowly or just packed up and left for warmer tax climes. What grew most vigorously during those decades was political spending on public employees.

In 2003 dollars, Connecticut’s 1970 budget was just over $3 billion. Today the cost of state government has grown to more than $14 billion, a startling increase relative to population growth that is clearly unsustainable. Beginning with an inflation adjusted $1,000 per capita in 1970, the state today spends more than $4,200 per capita. In just over a generation the state has more than quadrupled its real spending.

This contrasts with Colorado, a state of over 4,400,000 whose budget is hundreds of millions less than Connecticut’s and just $3,136 per capita. Frugal Nevada holds per capita spending to $883, actually down from the $1,223 of 1970.

Heaping On Debt

The growth rate of states with right-to-work laws routinely outstrips those without. In such states citizens benefit from adequate public services while enjoying the superior job opportunities that typically accompany a friendly business climate. Spending restraint is possible, just not common.

In addition to spending all the money that it takes in, Connecticut’s generous government also spends money that future governments and taxpayers will be obliged to repay with interest. Its inflation-adjusted 1970 bonded indebtedness of $973 per capita was by 2002 almost $3,700 per capita, another painful near quadrupling. Connecticut residents now have the dubious distinction of carrying reportedly the highest per capita debt load in the 50 states.

What are those once frugal Yankee taxpayers getting for quadrupled taxes and a record debt load? How did they reach this sorry state? Public payrolls offer the best clue: In 1975 the state employed 45,000 workers. By 2000, there were 92,000 employees to serve a near static population.

In contrast, Florida - population 16,400,000 - has grown at triple the national rate and carries all the special burdens of rapid infrastructure growth and large elderly, immigrant and minority populations, still has only 171,000 state employees, including state university staffs.

How is it that just 10 public employees per thousand suffice in Florida and the national average is only 15, but 27 can’t seem to keep up with the work of Connecticut?

Taxpayers Pay

Moreover, with the cost of state employee pensions scheduled to increase 18% and medical coverage to increase 25% in the next fiscal year, the liens against taxpayers’ paychecks grow more threatening.

Connecticut also pays its public employees even more than New York and Massachusetts, its famously high-tax/big-spending/strong-union neighbors. The central role of public employee unions in state budget growth is widespread and inescapable. Education spending, paid for by a combination of local property taxes and state subsidies to poorer towns, also mirrors a disproportionate growth in wages and staffing which, in turn, reflects the unions’ influence on labor laws in Hartford. Binding arbitration laws create inflated labor costs and unproductive work rules in all municipal school districts, while the “highest prevailing wage” rule requires town and cities to bond new school construction at twice the necessary cost.

At a recent press briefing where the Yankee Institute - a free-market oriented think tank - released its latest study of the state budget, the presence of public employee union members and supporters outnumbered the media. And when a coalition of non-profits began earlier this year to seek legislative support for private-school scholarships for learning-disabled children similar to Florida’s highly successful McKay scholarship bill, they found the doors of the House Education Committee chairman consistently manned by a representative of the teachers union who kept tabs on all visitors.

This suggests a union presence in the political process that is reminiscent of the “minders” Saddam Hussein assigned United Nations inspectors and clearly skirts the Orwellian.

Example Of Excess

Connecticut has ballooned itself into the unenviable position of being the national poster child for out-of-control-government. But it is not the only state on a spending joy ride. California and New York draw the most attention on the sheer size of their deficits, but Ohio, Illinois and such smaller states as Montana and Nebraska are also in the forefront of those appearing out of touch and at risk.

What happens next for states with free-spending ways? In spite of the supposed bailout for states in the recent tax bill, there is relatively little the federal government can or will do. The $200 million Connecticut is scheduled to receive has already been spent by the legislature’s approval of a plan to integrate Hartford schools with bussing and new school construction (another sop to the unions) that experts believe could cost the state as much as $1.5 billion over the next two years.

The market forces that rule even governments will ultimately restore equilibrium to such unbalanced situations. Ideally this would take the form of a prompt and substantial reduction in the public payrolls, rather than bankruptcy.

However, such a positive outcome is contingent upon the taxpayers first understanding the problem and then recapturing control of the political process from the interest groups that now rule.

George Schiele is a board member of the Yankee Institute for Public Policy in Hartford, Conn.