Eight of the Nine States With the Highest Government Debt-to-Income Ratios Lack Right to Work Protections

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By Stan Greer

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 1981, the first year of Ronald Reagan’s presidency, barely more than one in four employed union members nationwide worked for a federal, state or local government agency.  But last year 49.6% of union members worked for the government.  From 1983 through 2013, even as the total number of American employees subject to “exclusive†union representation in the workplace fell by 22.0%, the total number of state and local public employees under union monopoly control increased by 17.0%.[i]

That 17.0% increase is a consequence largely of increased employment in government institutions such as K-12 public schools, which from FY 2002 to FY 2009 saw the number of non-teaching personnel on their payrolls increase by 46% nationwide, even as the number of students grew by just 17%.[ii]

Union Bosses Have Become Increasingly Dependent on Growing Government Payrolls

What all this means is that Big Labor 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 that well over half of all state and local government expenditures go directly into state and local government employee payrolls,[iii] which are five times as likely to be unionized as private-sector payrolls.^[iv]

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 2011, there were 28 states lacking a Right to Work statute and/or constitutional amendment to protect employees from forced-union-dues exactions.  The 185 million residents of forced-unionism states that year had to fork over an average of 10.7% of their income in state and local taxes. But the 126 million residents of states that had Right to Work laws at that time had an aggregate state-and-local tax burden of just 8.6%.^[v]  (In 2012, Indiana and Michigan adopted laws making them the 23rd and 24th Right to Work states, respectively.)

Fifteen of the 16 states with the heaviest state-and-local tax burdens, measured as a share of income, in 2011 do not prohibit compulsory unionism.  But 10 of the 12 states with the lightest tax burdens are Right to Work states.

Unfortunately for residents of forced-unionism states, a state-and-local tax burden that is on average nearly 25% greater than that of Right to Work states is still insufficient to cover the vast amount of government spending for which Big Labor successfully lobbies in the capitals where its coercion-derived power is greatest.  Consequently, forced-unionism states suffer from more onerous debt as well as higher taxes relative to Right to Work states.

In Forced-Unionism States, Total Public Debt as a Share of Income 41% Higher Than in Right to Work State

Early this year, the nonpartisan taxpayer watchdog group State Budget Solutions (SBS) issued its fourth annual report on state debt, whose “comprehensive approach†to calculating public debt includes four separate components: “market-valued unfunded public pension liabilities, outstanding government debt, unfunded other post-employment benefit (OPEB) liabilities, and outstanding unemployment trust fund loans.â€[vi]

Not surprisingly, all of the states with the highest absolute total debt are high-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 2013 personal income as reported by the Bureau of Economic Analysis.[vii]

The 50 states combined have a public debt of $5.068 trillion, or 36.0% of their total 2013 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 26 states without a Right to Work law today have an average total state debt equal to 41.2% of their combined annual personal income.  In contrast, the 24 Right to Work states have an average debt load amounting to 29.2% of their annual personal income.  That means forced-unionism states’ total debt as a share of personal income is 41% higher than Right to Work states’.

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

Of the nine states with the most debt relative to personal income, eight (Alaska, Connecticut, Hawaii, Illinois, New Mexico, Ohio and Oregon) lack Right to Work laws.  Mississippi is the only Right to Work state among the nine most indebted.   In stark contrast, of the 11 states with the lowest percentage debt-to-income burdens, 10 (Arizona, Florida, Georgia, Idaho, Iowa, Nebraska, North Dakota, South Dakota, Tennessee and Virginia) have Right to Work laws on the books.  Only one (Wisconsin) does not.

Although Wisconsin is a forced-unionism state, its recent experience actually highlights the fact that even incremental rollbacks of compulsory unionism can make a big difference in helping states and localities reassert control over public spending.

In the spring of 2011, Wisconsin adopted a wide-ranging labor-policy and budgetary reform known as Act 10.  Key provisions restored Right to Work protections for most public employees, including teachers and other K-12 school employees, and limited the scope of most government union officials’ monopoly-bargaining privileges.

When SBS’s third annual report on state public debt was issued in August 2012,[viii] Act 10’s impact was only beginning to be felt.  At that time, according to SBS’s analysis, Wisconsin’s total state debt was $79.6 billion, equivalent to 34.8% of 2011 personal income as reported by the BEA.

But by the time of SBS’s 2014 report, issued just 16 months later, the Badger State’s total debt had fallen to $45.0 billion, or 18.2% of 2013 personal income.  This sharp drop occurred even as most states’ indebtedness increased.  Over the same period, for example, neighboring forced-unionism Illinois’ debt as a share of annual personal income soared from 47.7% to 71.9%!

Act 10’s impact is limited by the fact that it does not protect any private-sector employees from forced unionism.  Nevertheless, the contrast between the SBS August 2012 and January 2014 analyses of Wisconsin’s fiscal outlook is powerful evidence (and far from the only evidence) that this law has already dramatically reduced the clout of the state’s Tax-and-Spend lobby.

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Stan Greer is the National Institute for Labor Relations Research’s senior research associate.  He may reached by e-mail at stg@nrtw.org or by phone at 703-321-9606.   Nothing here is to be construed as an attempt to aid or hinder the passage of any bill before Congress or any state legislature.

[i] See the “Union Membership and Coverage Database†(http://unionstats.com/), maintained by Drs. Barry Hirsch and David Macpherson.

[ii] Benjamin Scafidi, “The School Staffing Surge: Decades of Employment Growth in America’s Public Schools†(http://www.edchoice.org/Research/Reports/The-School-Staffing-Surge–Decades-of-Employment-Growth-in-Americas-Public-Schools.aspx), an October 2012 research report for the Friedman Foundation for Educational Choice.

[iii] See the National Income and Product Accounts (NIPA) data base, Table 3.3, “State and Local Government Current Receipts and Expenditures  (http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1), and Table 6.2D, “Compensation of Employees by Industry†(http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1).

[iv] See Footnote 1.

[v] Average tax burdens for forced-unionism and Right to Work states were calculated using U.S. Census Bureau 2011 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 April 2014 special report, “Annual State/Local Tas Burden Ranking FY 2011,†by Liz Malm and Gerald Plante (http://taxfoundation.org/article/annual-state-local-tax-burden-ranking-fy-2011).

[vi] Cory Eucalitto, “State Budget Solutions’ Fourth Annual State Debt Report†(http://www.statebudgetsolutions.org/publications/detail/state-budget-solutions-fourth-annual-state-debt-report), published January 8, 2014.

[vii] See the Annual State Personal Income & Employment page (http://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=4#reqid=70&step=1&isuri=1) on the BEA web site.

[viii] Cory Eucalitto, “State Budget Solutions’ Third  Annual Debt Report Shows Total State Debt Over $4 Trillion†(http://www.statebudgetsolutions.org/publications/detail/state-budget-solutions-third-annual-state-debt-report-shows-total-state-debt-over-4-trillion).