The Supreme Court is to hear arguments Monday in Janus v. AFSCME, a case in which the justices will decide whether public-sector workers who do not belong to unions must still pay union fees. The court deadlocked 4 to 4 on a similar case in 2016. With Justice Neil M. Gorsuch now on the bench, many expect the court to declare that mandatory union fees for workers who are not union members violate the First Amendment because they compel such workers to underwrite speech with which they might disagree.
Unfunded retiree benefits for state workers are a time bomb for state budgets.
Such a ruling would weaken unions by reducing their revenue and limiting their bargaining power. But here is what has been going on under the radar. Janus could affect an important state government obligation: paying post-employment benefits other than pensions — primarily health-care coverage — to retired public workers.
As of 2016, these unfunded state government liabilities totaled $1.1 trillion nationwide. Stronger unions tend to push back when states try to reduce such benefits to balance their books. Weaker unions could enable states to relieve some fiscal stress.
How did we get here?
Compared with private industry, public employment tends to backload compensation into retirement. This arrangement is meant to compensate for the fact that many public-sector jobs offer lower salaries than their private-sector counterparts. As a result, public employees tend to have far more stable and secure retirements than similarly situated private-sector workers.
Yet before 2008, no one knew what state and local governments’ retiree health-care liabilities were — because reporting them was not required. In some states, post-retirement benefits were determined through collective bargaining, negotiations that take place behind closed doors. In other states, policy was made by obscure legislative committees. Either way, the promises of future benefits were then hidden in arcane footnotes in lengthy state budget reports. As a result, such liabilities ballooned. Legislators could satisfy unions by promising benefits sometime in the future, long after the next election cycle — without arousing any opposition.
Daniel DiSalvo is a senior fellow at the Manhattan Institute, an associate professor of political science at the City College Of New York (CUNY), and author of Government Against Itself: Public Union Power and Its Consequences (2015). Follow him on Twitter here.
Jeffrey Kucik is an assistant professor of political science at the University of Arizona.