Total Debt as a Share of Annual Personal Income 50% Higher Than in Right to Work States

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As many observers of Organized Labor have noted, there has been an enormous shift of power within union officialdom over the past few decades.  As recently as 1980, the year Ronald Reagan was elected to his first term as U.S. President, fewer than one in three unionized employees nationwide worked for the government.  By 2011, more than half of America’s unionized workers were public employees.  From 1983 through 2011, even as the total number of American employees subject to “exclusive” union representation in the workplace fell by 20.7%, the total number of state and local public employees under union monopoly control increased by 22.6%.[1]

The vast majority of that 22.6% increase is a consequence of the rapid rise in overall state and local government employment during the past three decades, rather than Big Labor’s tightening grip over the public sector.  Union officials as a group depend to an ever-increasing extent on the growth of government payrolls to expand the amount of forced union dues and fees they collect and the political clout they wield.

Therefore, it isn’t surprising that since the 1980’s the union hierarchy has become the most formidable lobby for more taxes and higher government spending in Washington D.C., and especially in state capitals.  Union officials know more than half of all state and local tax expenditures go directly into state and local government employee payrolls, which are 5.5 times as likely to be unionized as private-sector payrolls.

Of course, Big Labor is most effective in pushing for higher taxes and more government spending in states where employees face dismissal if they refuse to pay dues or fees to their union monopoly-bargaining agent, even if they don’t want the union and would never join it voluntarily.

In 2009, there were 28 states lacking a Right to Work statute to protect employees from forced-union dues exactions.  The 183 million residents of forced-unionism states that year had to fork over an average of 10.4% of their income in state and local taxes.  But the 123 million residents of the 22 states that had Right to Work laws at that time had an aggregate state-and-local tax burden of just 8.7%.[2]  (In February 2012,Indiana became the 23rd Right to Work state.)

Not one of the 13 states with the heaviest 2009 state-and-local tax burdens as a share of income has a Right to Work law.  But seven of the nine states with the lightest tax burdens are Right to Work states.

Unfortunately for citizens of forced-unionism states, a state-and-local tax burden that is on average nearly 20% greater than that of Right to Work states is still insufficient to cover the vast amount of government spending Big Labor successfully lobbies for in the capitals where it is strongest.  Consequently, forced-unionism states suffer from more onerous debt as well as higher taxes relative to Right to Work states.

None of the Nine States With the Greatest Total Public Debt Burdens Has a Right to Work Law

Just before Labor Day, the nonpartisan taxpayer watchdog group State Budget Solutions (SBS) issued its third annual report on state public debt, which calculates “the total amount of debt each state faces.”[3]

The SBS report compiled data on every state’s “regular debt, the fiscal 2013 budget gap, unfunded other post-employment benefit liabilities, and . . . unfunded pension liabilities.”

Author Cory Eucalitto pointed out that all of the states with the highest absolute total debt are large-population states, whereas all those with the least absolute debt are low-population states.  But this fact is not particularly significant.  High-population states have greater absolute resources to cover their debts than do smaller states.

A far superior, though still imperfect, measure of any state’s fiscal soundness is total debt as a percentage of annual personal income.  That’s why the National Institute for Labor Relations Research has divided the total debt for each state as calculated by the SBS, using market-valued pension liabilities, by its aggregate 2011 personal income as reported by the Bureau of Economic Analysis.[4]

The 50 states combined have a public debt of $4.175 trillion, or 32.4% of their total 2011 personal income.  But debt levels vary sharply from state to state.  And there is a strong negative correlation between a state’s indebtedness relative to its personal income and its having a Right to Work law on the books.

The 27 states without a Right to Work law today have an average total state debt equal to 37.4% of their combined annual personal income.  In contrast, the 22 states with Right to Work laws as of 2011 have an average debt load amounting to just 25.0% of their annual personal income.  That means forced-unionism states’ total debt as a share of their personal income is 50% higher than Right to Work states’. (Indiana, a forced-unionism state until it adopted a Right to Work law this February, is not included in either group in these calculations.)

All of the nine states with the most debt relative to personal income (Alaska,Connecticut,Hawaii,Illinois,Kentucky,New Jersey,New Mexico,Ohio, and Rhode Island) lack Right to Work laws.  But all of the eight states with the lowest percentage debt-to-income burdens (Florida,Idaho,Iowa,Nebraska,North Dakota,South Dakota,Tennessee and Virginia) have Right to Work laws on the books.

Even Incremental Pro-Right to Work Reforms Can Make a Huge Impact

The experience of Wisconsin since the spring of 2011, when it adopted legislation protecting the Right to Work of teachers and most other public employees, shows that even incremental rollbacks of compulsory unionism can make a big difference in helping states and localities reassert control over public spending.

The Badger State’s Act 10, which as this is written is in jeopardy due to a Big Labor-sponsored court challenge, limits the scope of most government union officials’ monopoly-bargaining privileges in addition to denying them forced-dues power.  But no private-sector employees at all are protected by this statute.

Nevertheless, Act 10, assuming it is ultimately upheld in court, stands to dramatically reduce the clout of the Tax-and-Spend lobby in Wisconsin.  One startling example was cited by Wall Street Journal opinion writer Allysia Finley in the September 19 edition of the Journal’s “Political Diary.”  Ms. Finley wrote:

A new actuarial report presented at a Milwaukee school board meeting this week shows that the district’s post-retirement benefit liability (not including pensions) has dropped by $1.4 billion, or about 50%, thanks to changes made possible by [Act 10].  The district estimates that raising eligibility for retiree health benefits and redesigning health plans will save $117 million this year alone.

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Nothing here is to be construed as an attempt to aid or hinder the passage of any bill before Congress or any state legislature.



[1] See http://unionstats.com — The Union Membership and Coverage Database, maintained by Drs. Barry Hirsch and David Macpherson.

[2] Average tax burdens for forced-unionism and Right to Work states were calculated using U.S. Census Bureau 2009 state population data, U.S. Bureau of Economic Analysis personal income data, and tax data from the nonpartisan, Washington, D.C.-based Tax Foundation.  See the Tax Foundation’s February 2011 special report, “State-Local Tax Burdens Fall in 2009 as Tax Revenues Shrink Faster Than Income.”

[3] “State Budget Solutions’ Third Annual State Debt Report Shows Total State Debt Over $4 Trillion,” by Cory Eucalitto, was published August 28.

[4] See http://bea.gov/iTable/iTable.cfm?ReqID=70&step=1&isuri=1&acrdn=4  — the Annual State Personal Income & Employment page on the BEA web site.

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