Vallejo Con Dios

Rates of unionization in the United Statestoday are at historic lows and are unlikely to re-bound. However, there is one sector in which orga-nized labor is growing in strength: government.This has severe implications for the future of pub-lic finances for state and local governments acrossthe nation, and for the nature of organized laboritself. High rates of unionization in the public sec-

tor have led to very high labor costs in the formof generous collective bargaining contracts. Nowstate and local governments are under increasingfinancial pressure, as a worsening national econ-omy has led to decreased revenues for states andmunicipalities—many of which remain lockedinto the generous contracts negotiated in moreflush times. Thus, as businesses retrench, gov-ernments find themselves in a financial strait-jacket. In addition, as government unions growstronger relative to private-sector unions, theirprevalence erodes the moderating influence ofthe market on the demands that unions make ofemployers. Now, as an economic downturn threatens state

and local government revenues, officials who

want to keep their fiscal situations under controlwould do well to look skeptically at public-sectorbargaining—especially since the existing politicalchecks on it have proven ineffective. Public offi-cials should eschew public-sector bargainingwhen possible, or at the very least, seek to limit itsscope. As keepers of the public purse, legislators and

local council members have an obligation to pro-tect taxpayers’ interests. By granting monopolypower to labor unions over the supply of govern-ment labor, elected officials undermine theirduty to taxpayers, because this puts unions in aprivileged position to extract political goods inthe form of high pay and benefits that are muchhigher than anything comparable in the privatesector. This paper shows how the unionization of

government employees creates a powerful, per-manent constituency for bigger government—one that is motivated, well-funded, and orga-nized. It also makes some recommendations asto how to check this constituency’s growingpower—an effort that promises to be an uphillstruggle.

Vallejo Con DiosWhy Public Sector Unionism Is a Bad Deal for Taxpayers and Representative Governmentby Don Bellante, David Denholm, and Ivan Osorio

_____________________________________________________________________________________________________

Don Bellante is professor of economics at the University of South Florida. David Denholm is the president of thePublic Service Research Foundation, a nonprofit organization that studies unions and union influence on publicpolicy. Ivan Osorio is editorial director and a labor policy researcher at the Competitive Enterprise Institute.

Executive Summary

No. 645 September 28, 2009

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Introduction

Rates of unionization in the United Statestoday are at historic lows, and unlikely torebound. According to the federal Bureau ofLabor Statistics, union membership stood at12.4 percent of the nation’s workforce as of theend of 2008.1 However, there is one sector inwhich organized labor is growing in strength:government. This has severe implications forthe future of public finances for state and localgovernments across the nation, and for thenature of organized labor itself. High rates of unionization in the public

sector have led to very high labor costs in theform of generous collective bargaining con-tracts. Now state and local governments areunder increasing financial pressure, as a wors-ening national economy has led to decreasedrevenues for states and municipalities—manyof which remain locked into the generous con-tracts negotiated in more flush times. Thus, asbusinesses retrench, governments find them-selves in a financial straitjacket. In addition, asgovernment unions grow stronger relative toprivate-sector unions, their prevalence erodesthe moderating influence of the market on thedemands that unions make of employers—throughout all of organized labor. Unlike businesses, governments face little

incentive to hold down labor costs. Politiciansand bureaucrats, however, do have an incen-tive to gain public approval in order to securetheir positions. Many public-sector employeesare employed as police, firefighters, and para-medics—public services that people genuinelywant and need, while many others are admin-istrative bureaucrats whose work is not as visi-ble to the public. Thus, when the workers whoprovide those services are unionized, govern-ment officials have a strong incentive to giveunions what they want, rather than risk incur-ring the public’s wrath through the disruptionof those services because of strikes. As long aspublic services continue to function, the pub-lic has little incentive to pay attention to thecost. This means that public-sector unionsend up getting most of what they ask for,

while taxpayers foot the bill. In time, of course,such profligacy catches up to local govern-ments—but by the time they seek to curb costsit is often too late to avert financial disaster. Financial disaster visited the city of Vallejo,

California, last year. Vallejo, about 30 milesnortheast of San Francisco, declared bank-ruptcy in May 2008. The city governmentcould not pay the lavish salary commitmentsit had made to public safety workers undersome extremely generous union contracts.Vallejo is an egregious case, but the trends thatbrought it to financial ruin are present in pub-lic sector union negotiations and contractseverywhere. Some states and municipalitiesare especially squeezed by the fact that, duringthe 1990s boom years, they had even lessincentive than usual to control their own laborcosts because they collected increased tax rev-enues. Now that those boom times have cometo an end, those years of profligacy threaten tocreate severe problems for state and local gov-ernment finances—and for the taxpayers whofoot the bill.This paper shows how the unionization of

government employees creates a powerful,permanent constituency for bigger govern-ment—one that is motivated, well funded,and organized. Now, as an economic down-turn threatens state and local governmentrevenues, officials who want to keep their fis-cal situations under control would do well tolook skeptically at public-sector bargaining.They should eschew public-sector bargainingwhen possible, or at the very least, seek tolimit its scope.

Shift from Private to Public

Unionism grew in the private sector as aresult of government support through the pas-sage of laws and the establishment of regulato-ry bodies intended to encourage the expansionof unionism and collective bargaining through-out the workforce. America’s first nationallabor law was the Railway Labor Act of 1926,which was limited to a single industry.2 TheNational Labor Relations Act, also known as

2

High rates ofunionization inthe public sectorhave led to veryhigh labor costs

in the form of generous collective

bargaining contracts.


the Wagner Act, enacted in 1935, extended gov-ernment support of unionism and collectivebargaining to private employers. And thencame war. During World War II and the KoreanWar, war labor boards imposed union relation-ships, including union shops, on many employ-ers in order to ensure continued productivity. The years following World War II were the

golden era of American organized labor. WithEurope and Japan devastated, American man-ufacturers faced little foreign competition.That enabled large industrial firms to providegenerous contracts to their unionized employ-ees while passing the costs of those contractson to consumers with little difficulty. Yet, likethe economic prostration of Europe andJapan, this would not last.The 1948 Taft-Hartley Act, passed in the

wake of a public backlash against aggressiveunion strikes, repealed the Wagner Act’s“closed shop” provision. Taft-Hartley gavestates the option of enacting right-to-worklaws, which bar union membership frombeing a precondition for employment.3 In the28 states that do not have right-to-work laws,

unions may still require individual workersto pay “agency fees” allegedly to avoid “freeriders”—that is, to cover the costs of repre-sentation, which the unions argue benefitsboth union and nonunion workers at a givenworkplace.In the late 1950s, union membership as a

percentage of the private-sector workforcebegan to decline; the shift from private- topublic-sector unionism had begun. In 1959,Wisconsin became the first state to enact com-pulsory public-sector bargaining legislation.Since then, the federal government and moststates have instituted compulsory public-sec-tor bargaining schemes. In 1958, when theBureau of Labor Statistics first began keepingtrack of public sector union membership as adistinct category, there were only 1,035,000government-employee union members, or 12percent of a workforce of about 8.5 million.4

Between 1958 and 2008, public employmentgrew by almost 250 percent and government-employee union membership increased bymore than 750 percent to 7.8 million. In 2008,36.8 percent of the government workforce was

3

Between 1958 and 2008, publicemployment grew by almost250 percent and government-employee unionmembershipincreased bymore than 750 percent, to 7.8 million.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

Private sector unionized workers

Public sector unionized workers

Figure 1

Changing Composition of U.S. Organized Labor, 1983–2008 (public, private, and total)

Source: Barry T. Hirsch and David A. Macpherson, “Union Membership and Earnings Data Book,” Bureau of National

Affairs, chart prepared by the Public Service Research Foundation.

Work

ers

(thousa

nds)


unionized.5 That is nearly five times the rate ofunion membership in the private sector—7.6percent—down from a high of almost 36 per-cent in 1954.6

Public-sector unionization is greatest at thelocal level, where the unionization rate was 42.2percent in 2008. “This group,” notes the BLS,“includes many workers in several heavilyunionized occupations, such as teachers, policeofficers, and firefighters.” Of course, while these“heroic” public servants are the ones who aremost visible in public disputes over collectivebargaining, a large number of unionized stateand local employees fall into more mundanecategories such as secretaries, middle managers,engineers, administrative law judges, schoolcustodians, and cafeteria workers. According toBLS data, there were 17.8 million state and localgovernment employees, both full-time andpart-time, in the United States in 2008 (6.2 mil-lion state and 11.6 million local employees).7

Federal nonpostal employees can unionizeunder the supervision of the Federal LaborRelations Authority, set up under Title VII ofthe Civil Service Reform Act of 1978.8

As Figure 1 shows, union density in thepublic sector has been fairly constant since1983, even as private sector union member-ship has continued to decline steeply. Thislowers the total union density despite the highmembership numbers in government employ-ment. This transformation is impacting theinternal structure of organized labor inAmerica. Despite the fact that only one in sixjobs is in government, more than 48 percent ofall union members are government employ-ees. In fact, in many states the majority of allunion members are public employees. Andnow, even some unions that have traditionallyfocused on organizing private-sector workersare turning their attention to public employ-ees—the Teamsters union, for example, hassought to organize police officers.9

These changes have stoked organizedlabor’s already great interest in politicalactivism—and public-sector unions are espe-cially motivated. They are, after all, helping toelect their bosses. In addition to organizingexisting jobs in the public sector, these unions

are dedicated to increasing the number of jobsin government. That means that they lobbyfor more government programs and work toelect candidates who will vote for higher taxesto pay for them. Therefore, politically, public-sector unions constitute a permanent activistconstituency that works to expand the sizeand scope of government. And bosses behold-en to their employees are not likely to beaccountable to the taxpayers, for reasons dis-cussed in later sections.

Agency Theory andUnions in the Public and

Private Sectors—Why the Difference?

There is an institutional dysfunction thatmakes public-sector unionism very costly,beyond the costs that unionization imposesin the private sector. This is due to the eco-nomic phenomena explained below.10

Both large-scale corporations and govern-ment agencies are controlled by managersrather than directly by their respective own-ers—stockholders in the case of corporationsand citizens/voters in the case of governmentagencies. Many decades ago, the view of someeconomists was that this separation of owner-ship and control in private corporationswould work to the significant detriment ofnot only stockholders, but of all of society.This is known as the principal-agency prob-lem. Massive economic inefficiencies wouldresult from a misalignment of managers’ andowners’ objectives, combined with and exacer-bated by the bureaucratization of the corpora-tion.11 In short, the firm would not be able tosustain the level of innovation and entrepre-neurship that characterized the more typicalowner-managed firms of an earlier era.12

However, these theories have exhibited verylittle predictive power in the corporate world.What organization theorists refer to as the con-trol problem has been mitigated by institutingpractices that limit the extent of agency-relatedshirking. These practices include the transfer-

4

Bosses beholden to their

employees are not likely to beaccountable tothe taxpayers.


ability of ownership through the stock market;boards of directors with outside members withconcentrated stock ownership; proxy battles;hostile mergers; and other well-establishedbusiness practices.13 In regard to labor negotia-tions between the union and management,mitigation of the control problem results in alessening of what might otherwise be a tenden-cy toward managerial shirking in collective bar-gaining. In short, while a union as the bargain-ing agent for a given number of employeesseeks the best terms for them, the firm’s man-agement seeks the terms most profitable tostockholders. By contrast, citizen control through elect-

ed officials of the bureaucrats who hire andmanage employees, and who negotiate withunion officials, is made difficult by theabsence of control mechanisms that are char-acteristic of the private sector. Among these,the transferability of stock provides a mecha-nism for shifting control away from man-agers who are ineffective in representingstockholders, including in the area of laborrelations. Further, the concentration of own-ership that is characteristic of most publiclytraded corporations gives at least some stock-holders sufficient incentive to monitor thebehavior of management, and thus providesubstance to the notion that the transferabil-ity of ownership gives managers an incentiveto act on behalf of stockholders. The absence of similar controls in the

public sector is aggravated by the fact thatcitizens lack a high degree of control overelected officials, who, in turn, lack a highdegree of control over bureaucrats. This doesnot by itself suggest that public-sector man-agers will be considerably less resistant tounion pressures than their private-sectorcounterparts. The reasons for less resistancestem additionally from the so-called rationalignorance of voters (and to some degree fromvoter apathy for any other reason), whichgives disproportionate political power andinfluence to groups that are organized andpolitically active. One of those groups will bepublic employees, particularly if they areunionized.

The Weak Checks on PublicEmployee Unions’ InfluenceThe powers of public sector unions are not

unlimited, of course. Two limiting forces thatoften are discussed in public policy analysisare the “median-voter effect” and the “Tiebouteffect.”14 However, they have proven insuffi-cient to check the unions’ influence.The median-voter model posits that elect-

ed officials interested in reelection will tend tovote on specific issues in the way that would bepreferred by the median voter in each of theirconstituencies. The Tiebout effect posits thatcitizens can exercise control over public-sectoractions by choosing to reside in the jurisdic-tion that comes closest to their preferred com-bination of services and taxes. Citizens can, ineffect, “vote with their feet.” However, as disci-plining devices in collective bargaining, bothare of extremely limited effectiveness andarguably irrelevant.

The Median-Voter ModelThe hypothetical median voter is the vot-

er whose position on a particular issue placeshim “in the middle” of a spectrum of voterpreferences. For example, if all voters wereplaced on a spectrum indicating the amountthey would wish to spend for public safety,the median voter would be the one whosepreference is such that half of the voters pre-fer less spending, and half prefer more, thanhe does. The median-voter hypothesis pre-dicts that the political process would tend toproduce the amount of spending preferredby the median voter. The median-voter mod-el, although not directly provable, is at leastconsistent with some outcomes on highlyvisible single issues—for example, congres-sional votes on such issues seem to be pre-dictable on the basis of the predominant eco-nomic interests of the constituency of aparticular member of Congress. However, the conditions under which the

median voter serves as a strong check on mat-ters such as excessive pay are not likely to bemet. The effect at its strongest would require

5

Citizen controlthrough electedofficials of thebureaucrats whohire and manageemployees, andwho negotiatewith union officials, is made difficult by the absence of control mechanisms thatare characteristicof the private sector.


symmetric—as between voters and officials—and perfect information. In the real world, thepresence of imperfect, asymmetric informationdramatically reduces the effectiveness of anysuch effect and leaves no reason to believe thatthe median voter will be strongly influenced bythe presence of any rents received by publicemployees.15 The term “rents” as applied tolabor markets includes any excessive pay orfringe benefits beyond what is competitivelynecessary to obtain the desired quantity andquality of labor.

The Tiebout EffectThe Tiebout effect is of less consequence

than the median-voter model because itsassumptions are more restrictive, and thusmore at variance, than real-world conditions.The Tiebout effect hypothesizes that the abil-ity of citizens to leave serves as a discipliningdevice on public officials. The contention ofcitizens voting with their feet, and an associ-ated disciplining effect, are likely to bestrongest under conditions of perfect infor-mation and of perfect and costless mobility.Even if information were perfect, the simplereal-estate transaction costs of selling onehome and buying another provides plenty ofroom for successful rent-seeking by publicsector union members—in the form of over-payments benefiting them. In some instances, these may not be the

most significant mobility costs. Variation inlocal fiscal conditions would have to be quiteconsiderable to overwhelm not only transac-tion costs, but all other factors that affect anindividual’s choice of residential location.University of Texas at Dallas economist GeraldScully has demonstrated—both theoreticallyand empirically—the practical irrelevance (or atleast severe limitation) of the Tiebout effect inthe presence of the degrees of spatial conver-gence of average incomes and income distribu-tions that have occurred across the UnitedStates. Further, he also demonstrates that suchconvergence does not limit the excessivegrowth of government budgets.16

The importance of “rational ignorance” inpermitting overpayment of public employees—

especially in the presence of relatively impotentmedian-voter and Tiebout effects—is illustrat-ed in the public choice approach to public sec-tor behavior. Voters are said to be rationallyignorant in the sense that the time and moneycosts of being fully informed of proposed leg-islative and bureau actions are prohibitive. Forexample, it is not unusual for the number ofbills proposed in a year before a state legislatureto number in the thousands. That would makeit impossible for a voter to be fully informed,since being informed about even a small frac-tion of such matters would require the voter tospend most of his or her waking hours acquir-ing information. Indeed, one cannot reason-ably expect legislators themselves to be fullyinformed of all bills proposed by their col-leagues.

Visible Benefits, Dispersed CostsThe public choice literature contains

many arguments to the effect that a politi-cian’s chances of reelection are enhanced bythe provision of “political goods.” The recipi-ents of the political goods will be inclined toreward the politician providing those goodswith their votes, while the bearers of the cor-responding tax burden—unless they are alsobeneficiaries—will be more inclined to rewardhis opponent. Thus, it is in the interest of apolitician seeking office or reelection to offera package of programs or policies that is suf-ficient to build a majority coalition—by mak-ing the benefits highly concentrated and vis-ible to its beneficiaries while making thecosts vague and widely dispersed—and thus,veiled from the taxpayers. To the extent thatthe median-voter effect operates to anyextent, both political opponents will tendtoward the same strategy. One likely and persistent element in the

package will be higher-than-necessary wages topublic employees.17 These rents will be clearlyunderstood by the recipients, and as long asthe costs are borne out of general revenues,they will be largely unknown to the rationallyignorant public despite the best efforts of jour-nalists, public policy think tanks, and otherpropagators of information. Even if public-sec-

6

It is in the interestof a politician tooffer a programwhose benefits

are highly concentrated

and visible to its beneficiarieswhile making the costs vague

and widely dispersed—and

thus, veiled fromthe taxpayers.


tor wages and salaries were known, the rentcomponent would not be evident; and even ifthat component were well known, its impacton any one taxpayer might seem sufficientlysmall so as to not be a deciding factor in deter-mining voter choice, and even less so in foster-ing a Tiebout-type reaction. Politicians can further shield themselves

from public scrutiny by back-loading the rentspaid to their union supporters, so that theycome due at a later time, when they will be some-body else’s problem. One common way of doingthis is through highly generous pension pack-ages. University of Chicago law professorRichard Epstein describes public sector collec-tive bargaining negotiations as “an unfairmatch” between taxpayers on one side and pub-lic officials and unions on the other. “The state,county, and local government officials don’tface the certain wrath of shareholders,” saysEpstein. “Rather, they operate in uncertain polit-ical waters that allow them to escape voter wrathby granting public employees highly favorable,but less visible, pension packages that becomepayable only down the road.”18 The conse-quences of this can be dire. Epstein goes on:

So what happens in bad times? First,no public employee loses either a job ora dollar in pension benefits. Ordinarycitizens lose two ways: jobs are cut—unemployment in California just hit10%—and taxes are raised. What makesthis pill all the more bitter is thatunions happily wave the libertarianbanner of freedom of contract to lockin the status quo. Public unions pointto court cases that require the state tohonor its employment contracts justlike other agreements. Translation: thedownturn is everyone else’s problem.19

Public Sector Unions’Ratchet Effect onLabor Costs

While it is true that in both the private andpublic sectors unions raise wages above what

they otherwise would be through collectivenegotiations, such negotiations in the publicsector proceed in a different environmentfrom those in the private sector. Bureaucratstend to know more about the demands ofelected officials for the output of a govern-ment agency than the legislators know aboutthat same agency’s cost structure. This infor-mational asymmetry weakens elected officials’control of the agency, and again, citizen con-trol of elected officials is in turn weakened bythe same asymmetry of information. The underlying incentive of the bureau-

crat is normally the growth of wages andemployment.20With public employees consti-tuting a significant interest group in anycommunity, there tends to develop a symbi-otic relationship among elected officials,bureaucrats, and public employees. Publicemployees have been found in a number ofstudies to be upward of 40 percent more like-ly to vote than private-sector employees.21

Public employees do not have to be unionizedin order to influence elected officials.However, if they are unionized, it will be easi-er for bureaucrats and elected officials tocommunicate with them, and as a group theywill have significantly greater political clout.Thus, public employers should not be expect-ed to be as antagonistic toward the formationof unions as their private-sector counterparts.In the public sector, government managersand union negotiators are in effect doubleagents of government bureaus and of theirunionized employees.22 Government employ-ees are likely to be interested in the growth ofpublic-sector employment because suchgrowth enhances their political clout.23

There is abundant evidence of a tendencyin a unionized setting for growth in employ-ment to compound the tendency to createrents in negotiated pay levels.24 Existingresearch also indicates that there is a tendencyfor state and local employment to ratchetupward with each business cycle. Interestingly,the ratio of state and local employment to pri-vate-sector employment tends to change littleoutside of a recession. While cuts in state andlocal government employment are highly pub-

7

There tends to develop a symbiotic relationshipamong electedofficials, bureaucrats, andpublic employees.


licized during an economic downturn, the factis that they are small relative to cuts in the pri-vate sector. But once recovery is underway,employment growth in state and local govern-ments is just about the same as in the privatesector.25 This evidence is consistent with thedouble-agent relationship as suggested above.

Public Sector Rents

Empirical studies on differences in publicand private wages are numerous, beginningwith economist Sharon Smith.26 However,few of these have distinguished between stateand local levels of government; separatelyexamined union and nonunion members; ortaken into account fringe benefits differencesand the financial value of sectoral differencesin job security. Apparently, none have doneall three.27 Virtually all of the studies thatexamine wages conclude that public-sectoremployees obtain higher wages than theirprivate-sector counterparts, with the degreeof rent-containing wages generally beinghighest at the federal level and lowest at thelocal level. “Counterparts” means workerswith comparable levels of education, experi-ence, and other characteristics commonlyexamined in human capital studies. Studiesthat do not control for human capital andother productivity-related characteristics arepotentially misleading and thus, inappropri-ate in public-private comparisons. Of those that do control for them, one of

the earliest studies (using 1975 data) to takefringe benefits and the incidence of unemploy-ment into account is by Don Bellante andJames Long, although their study does not dis-tinguish between union and nonunion em-ployees.28 The study found that on the basis ofhourly pay alone, there was not a significantdifference between local-government employ-ees and comparable workers in the private sec-tor. However, adding in the significantly high-er value of fringe benefits received at that timeby local-government workers gave a slightadvantage to local public employees. Further,adding in the effect of differential probability

of unemployment spells on expected annualearnings raised the rent element in local gov-ernment pay levels to over 10 percent. This adjustment for unemployment prob-

ability did not take into account the fact thatindividuals tend to be risk-averse, in the sensethat even at the same expected wage—that is,the wage discounted by the probability ofbecoming unemployed—they would put amonetary value on the lower probability ofbecoming unemployed. Such risk-averse indi-viduals are thus receiving a nonmonetaryform of compensation that nonetheless has amonetary equivalent (a so-called equalizingdifference) in addition to actual earnings. Inthe private sector, employees in industries andoccupations that have lower unemploymentincidence receive lower wages, all other thingsbeing equal. On average, an increase of 5 per-cent in the probability of becoming unem-ployed is associated with a wage increase of 1percent.29 If the commonly held perceptionthat public employees are far less likely thanprivate sector workers to become involuntarilyunemployed is correct, then their wages wouldbe lower if they were actually determined bymarket forces so as to reflect this value.Instead, there is considerable evidence of per-sistent excess supply to the public sector.30

There is also some evidence that more risk-averse individuals disproportionately tend toseek out and obtain public-sector employ-ment.31 This study did not attempt to takeinto account the additional equalizing differ-ence associated with what have been found tobe generally more favorable working condi-tions in the public sector.32 While this studydid not distinguish between union andnonunion employees, many other studies havedemonstrated that the rent element is largerfor unionized than for nonunion public-sec-tor employees, including at the local level.33 Inshort, job security has market value.More recent studies of public-private wage

differentials use more sophisticated econo-metric techniques than earlier studies, such ascorrection for selection bias. One such study,unlike some earlier ones, provides evidence ofa significant wage premium for public-sector

8

Virtually all of the studies thatexamine wagesconclude thatpublic-sector

employees obtainhigher wages

than their private-sectorcounterparts.


employees at all levels, including at the locallevel.34 At the local level, the differential in payalone is estimated in a number of model spec-ifications with results ranging from 2 percentto 18 percent. As with most other such studies,no attempt was made to include the value offringe-benefit differentials, although there isample evidence that these are far more avail-able at the local government level than in theprivate sector. These include defined benefitpensions, employer-provided health and otherinsurance, paid leave, and other benefits. For example, one study finds that, in gener-

al, local government employees, compared toprivate sector workers, enjoy greater fringe ben-efits—more paid vacation days, holidays, per-sonal days, and sick time off; shorter workweeks; and earlier retirement.35 The percentageof workers in local government receiving retire-ment benefits exceeds that of private sectorworkers by 27 percentage points—88 percent vs.61 percent.36 Most of the data available onfringe-benefit costs do not separate state fromlocal government employees. With that inmind, it is worth noting that in 2008 the cost offringe benefits to state and local governmentemployers was $5.48 more per hour than forprivate sector employers—$13.41 per hourworked vs. $7.93. That difference amounts to anadditional fringe benefit cost of approximately$11,000 per year that is borne by taxpayers.37

The observation that much of the localgovernment rent or overpayment is in theform of fringe benefits is not surprising inlight of the “double agent” explanation dis-cussed above. Such rents are less likely to beobservable to the taxpayers. In the absence ofany check on this double-agent relationship, abloated public sector is the possible, even like-ly, outcome, in terms of both total compensa-tion and employment levels. Today, it is actu-ally observable. As Forbes reporter StephaneFitch noted recently:

In public-sector America things just getbetter and better. The common pre-sumption is that public servants forgohigh wages in exchange for safe jobs andbenefits. The reality is they get all three.

State and local government workers getpaid an average of $25.30 an hour, whichis 33% higher than the private sector’s$19, according to Bureau of Labor Sta-tistics data. Throw in pensions and otherbenefits and the gap widens to 42%.For New York City’s 281,000 employ-

ees, average compensation has risen 63%since 2000 to $107,000 a year. New Jerseyteaching veterans receive $80,000 to$100,000 for ten months’ work. InCalifornia prison guards can sock away$300,000 a year with overtime pay.38

Even in states that prohibit compulsoryunionism through right-to-work laws, com-pulsory bargaining for public employersgives public-sector unions disproportionateinfluence on public policy. Now some unions are trying to expand the

definition of “public” by trying to organize gov-ernment contractors. Washington state pro-vides a good example of this. There, the trendbegan in 2001, when voters approved a ballotmeasure, Initiative 775, to allow independentlong-term health care providers to unionize andbargain collectively over hours, compensation,and working conditions.39 Then in 2007, Wash-ington state authorized collective bargaining foradult-home-care providers who receive Medic-aid and other state aid.40 Stretching the defini-tion of “public employee” to any home-careprovider who may contract with the state cangive a public employee union a foothold in theprivate sector. Further, under such an arrange-ment, union fees can be deducted from statecompensation checks before the recipients eversee them, so the care providers never miss mon-ey they never see. Even worse, pro-union members of Con-

gress are seeking to get in on unionizing stateand local government employees. In the currentCongress, the Public Safety Employer-Employ-ee Cooperation Act,41 sponsored by Rep. DaleKildee (D-MI), seeks to mandate unionism andcollective bargaining in state and local publicsafety departments—that is, police, fire, and res-cue personnel. Specifically, the bill instructs theFederal Labor Relations Authority, which over-

9

In 2008 the costof fringe benefitsto state and localgovernmentemployers was$5.48 more perhour than for private sectoremployers—$13.41 per hourworked vs. $7.93.


sees collective bargaining among nonpostalfederal employees, to promulgate regulationsfor unionism and collective bargaining in stateand local police and fire departments in statesthat have not enacted laws giving unions thosepowers and privileges. For union-friendly feder-al politicians, this is a sweet deal—they scorepoints with their union backers while othergovernment entities pick up the tab. Consider-ing that federal legislation that forces state andlocal governments to unionize their workforceswould significantly increase those govern-ments’ labor costs, such legislation wouldamount to unfunded mandates upon states,counties, and cities.

Employee Rights vs.Union Privileges

While public-sector unions seek to benefittheir members at the expense of the public, theagency problem between union leadershipand rank-and-file members described abovecan manifest itself most starkly in the area ofpolitical activity. Almost without exception,such laws require that the union be the sole orexclusive representative of all the employees ina unit. This denies employees the right tonegotiate individually with employers or to berepresented by another organization of theirown choosing. Unions commonly exploittheir monopoly bargaining power by insistingthat because they are “forced” to represent allemployees, that all employees, having lost theright of representation to the union, should beforced to join or support the union as a condi-tion of employment. This violates individualemployees’ right to freedom of association.Unions are major contributors to political

candidates, yet union political contributions aredetermined by the preferences of union leaders,not the rank-and-file members whose duesfinance these contributions. Union members,like all large groups, may be a diverse lot, butunion political contributions flow almost uni-formly to one narrow band of the political spec-trum. That may also be true of other large,diverse groups, but in other cases group leaders’

ability to act without regard to individual mem-bers’ interests is held in check by members’ abil-ity to leave any one group. By contrast, individ-ual workers—with the exception of private-sector workers in right-to-work states—face anenormous, and usually unaffordable, cost forexiting the union: loss of a job. According to theCenter for Responsive Politics, the AmericanFederation of State, County and MunicipalEmployees has been the nation’s biggest cam-paign donor from 1989 until the present, givingnearly $40 million during that period, with 98percent of that going to Democratic candidates.The National Education Association is in sev-enth place, at $28.4 million, with 93 percentgoing to Democrats, and the American Federa-tion of Teachers comes in 14th, at nearly $25million, with 98 percent going to Democrats.42

A prospect for reform in this area is the appli-cation of the U.S. Supreme Court’s decisions ina series of cases beginning with Abood (1976)and culminating in Lehnert (1991). These deci-sions provide that a public employee can only berequired to pay a union representative for theactual cost of representation and also giveemployees due process rights in the determina-tion of the size of the fee the union can charge. After the Abood decision, which provided

that nonmembers—agency-fee payers—couldnot be charged for nonrepresentation costs,the unions were left in control of the deter-mination of the amount that goes toward“representation.” Generally, they said that 5percent of dues were spent for nonrepresen-tation purposes.43 For most employees whowere not union sympathizers, 5 percent wasnot sufficient incentive to invite the wrath ofunion officials by switching from member-ship to a fee-payer status.44

The 1986 Hudson decision gave nonmem-bers due process rights in the determinationof the amount of the fee. Due process in-cludes notice of the amount to be chargedwith sufficient information on the determi-nation, an independently audited statementof the union’s finances, and the right to reso-lution of challenges to the size of the fee by aneutral party. Teacher union dues are quitehigh by most standards.

10

Unions are majorcontributors to political

candidates, yetunion political

contributions aredetermined by the

preferences ofunion leaders, notthe rank-and-file

members.


Public employers are liable for damagesunder Hudson for agreeing to a fee that doesnot comply with its standards. Often unioncontracts provide that the public employerwill be indemnified by the union for any dam-ages arising from the implementation of anagency-shop clause in a contract. These con-tract provisions may give employers a falsesense of security. Several recent court decisionshave held that a union may not indemnify anemployer for a violation of the due processrights of an employee.45

In 1991, in Lehnert v. Ferris Faculty Association,the U.S. Supreme Court established a three-part standard for determining whether a unioncan charge non-members for an expense with-out impinging upon the nonmembers’ FirstAmendment rights:

Abood and other of the Court’s decisionsin this area set forth guidelines for deter-mining which activities a union constitu-tionally may charge to dissenting employ-ees. Specifically, chargeable activitiesmust (1) be “germane” to collective bar-gaining activity; (2) be justified by the gov-ernment’s vital policy interest in laborpeace and avoiding “free riders” [500 U.S.507, 508] who benefit from union effortswithout paying for union services; and (3)not significantly add to the burdening offree speech that is inherent in theallowance of an agency or union shop.46

As significant as these Court decisions arein relieving public employees of the obligationto support union spending not related to rep-resentation, they fall short of achieving fullfreedom of association. They do not protectthe public from the consequences of grantingpublic-sector unions monopoly bargainingprivileges.

Government Unions’Privileged Tactics

Private-sector unions have to reckon withthe discipline of the market in that they can-

not seek demands so onerous that theywould put their employers out of business,which would result in the loss of a union’smembers at a given company. Government-employee unions face no such deterrent.Public-sector unions are also different in

that their employer—government—enjoys amonopoly on the use of force within a certainjurisdiction. Because of this, it can bestowconsiderable power, on any scale, to any spe-cial-interest group it favors. By enjoining gov-ernments to negotiate with unions, compul-sory public-sector bargaining laws empowerunions to participate in public-policy deci-sions to an extent greater than that of othercitizen interest groups. This point wasemphasized in a U.S. District Court opinionthat upheld the constitutionality of a NorthCarolina law that declared public-sectorunion contracts to be void. The court said:

[T]o the extent that public employeesgain power through recognition and col-lective bargaining, other interest groupswith a right to a voice in the running ofthe government may be left out of vitalpolitical decisions. Thus, the granting ofcollective bargaining rights to publicemployees involves important mattersfundamental to our democratic form ofgovernment. The setting of goals andmaking policy decisions are rights inur-ing to each citizen. All citizens have theright to associate in groups to advocatetheir special interests to the government.It is something entirely different to grantany one interest group special status andaccess to the decision-making process.47

For these reasons, public-sector unionshave an incentive to be more radical in theirdemands and tactics. Consider strikes. In the private sector the

strike is an economic weapon. The employerfaces economic losses through loss of busi-ness, and the employee faces economic lossesthrough loss of wages. If there is a strike at oneprovider of a good or service, consumers—thepublic—can shift to another provider, or not

11

Compulsory public-sector bargaining lawsempower unionsto participate inpublic-policydecisions to anextent greaterthan that of othercitizen interestgroups.


purchase at all. In the public sector the strike isa political weapon. The employer—govern-ment—does not suffer an economic loss, sinceit cannot lose “customers”—it keeps collectingtaxes no matter what it does. And, as noted,the Tiebout effect and median-voter model areof little use in moderating this. In many cases,the employees do not lose, either, especially ineducation, where most public-sector strikesoccur—teachers can make up classes into thesummer, and they get paid for a full schoolyear, strike or not. Public-sector strikes are disruptive of the

normal political process. Under normal cir-cumstances, divergent interest groups with aninterest in public policy exert pressure fromvarious directions on elected representatives.Of these groups, a union of public workers isthe only group that has the power—whetherby law or not—to unilaterally deprive the restof society of a service provided by governmentmonopoly. When this occurs, the general pub-

lic will tend to demand restoration of that ser-vice. In most instances, the only way to restorethe service is to give in to union demands.Thus the union, by using a strike or the threatof a strike, can dominate the political processand push for increasing the size, cost, andscope of government—to its own benefit.48

A study of Bureau of Labor Statistics data,which covers all strikes against governmentsfrom 1958 to 1980, shows that in most statesthat had adopted compulsory public-sectorbargaining laws, there was a tremendousincrease in the number of strikes—legal orillegal. In 1958, before the passage of the firstpublic-sector collective bargaining law, therewere 15 strikes against government. By 1980,after 37 states had enacted compulsory pub-lic-sector bargaining legislation that coveredone or more groups of public employees,there were 536 strikes (see Figure 2).In some states, public-sector unions enjoy

another privilege in the form of compulsory

12

0

100

200

300

400

500

600

700

1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 19800

5

10

15

20

25

30

35

40

Strikes

Collective bargaining states

Figure 2

Public Employee Strikes and Collective Bargaining 1958–1980

Source: Bureau of Labor Statistics.

Num

ber

of

Str

ikes

Num

ber o

f States w

ith C

ollectiv

e Barg

ainin

g L

egislatio

n


binding arbitration, which is intended toresolve public-sector labor disputes withoutdisruption of public services—yet its resultsoften hit the public purse even worse thanstrikes. For the unions, it is a “can’t lose”proposition, because an arbitrator will neveraward a settlement that is anything less thanmanagement’s final offer, so the union isguaranteed to obtain at least some of itsdemands and will never come out worse thanthe status quo ante.49 There is one check onunion demands in arbitration—a union’s finaloffer must be acceptable to the arbitrator for itto be incorporated into a new contract, butthat relies on the discretion of the arbitrator,whose incentive to hold down costs is unlikelyto be very strong due to his or her lack of avested interest in the labor dispute’s outcome.The city of San Luis Obispo, California,

shows how bad things can get under bindingarbitration. In June 2008, an arbitrator award-ed hefty salary increases to unionized policeofficers in San Luis Obispo. Police officersreceived immediate raises of 22.28 percent,while dispatchers and technicians got raises of27.82 percent. For the average police officer’ssalary, this represents an increase from$71,000 to $93,000 a year, with salaries includ-ing overtime expected to top $100,000,according to city officials. City administrativeofficer Ken Hampian said the increases costthe city $1.8 million above what it planned topay.50 While this may be an egregious case, themere possibility of such a scenario shouldmake state and local governments wary ofbinding arbitration.

Bloated Public Sector:The Case of Vallejo

The dynamics described in the above sec-tions can wreak havoc on state and local gov-ernment budgets—and the taxpayers who fundthem. Essential public services have to competefor limited funds with lower-priority govern-ment functions, which are defended by theirdirect beneficiary constituencies. Some munici-palities are now feeling the pain. During the

1990s boom, many state and local governmentsspent their increased tax revenues as fast as theycame in, setting up a situation that was unsus-tainable into the future.51 Across the nation,state tax collections rose by 86 percent—about$250 billion—from 1990 to 2001, and localproperty-tax collections rose by 86 percent,while inflation increased by 30 percent. AsSteven Malanga of the Manhattan Institutenotes, “Rather than give surpluses back to tax-payers, government went on a spree, lavishingopulent pensions on employees and expandingpopular health and education programs.”52

The consequences of such spendthrift poli-cies were seen last year in the city of Vallejo,California. On May 23, 2008, Vallejo’s city gov-ernment declared bankruptcy, facing a $16.6million budget shortfall due in large part tosoaring public-employee payroll costs, alongwith declining tax revenue. Solano County,where Vallejo is located, has been hard-hit bythe mortgage crisis—it had one of the nation’shighest foreclosure rates in 2008,53 whichalone accounted for a $5-million drop in thecity’s revenue projections between June 2007and February 2008.54 Vallejo, with a popula-tion of 117,000, is the largest California city todeclare bankruptcy—and the first to do sobecause it could not cover basic expenses.“We’ve exhausted all avenues at this point, andthis is all we had left,” said Vallejo Mayor OsbyDavis after the city announced bankruptcy.“It’s something we can’t avoid. It just doesn’twork. We can’t pay our bills.”55

Public-employee unions immediately de-cried the decision, saying that the city’s financeswere not as dire as city officials claimed. Thepolice and firefighter unions announced plansto file legal challenges. Yet it was months ofunsuccessful negotiations with those unionsthat had led the seven-member city council tovote unanimously on May 6 to authorize the citymanager to file bankruptcy.56

The city had been negotiating with thepolice and firefighter unions for about twoyears. City officials asked for salary, benefit, andstaff cuts, but the unions retorted that thosewould endanger public safety and the safety ofthe police and firefighters. Police and firefight-

13

Vallejo, with apopulation of117,000, is thelargest Californiacity to declarebankruptcy—andthe first to do sobecause it couldnot cover basicexpenses.


er salaries, pensions, and overtime accountedfor 74 percent of Vallejo’s $80-million generalbudget, significantly higher than the state aver-age of 60 percent.57 Contracts include mini-mum staffing requirements, which significant-ly increased overtime pay. And how generouscould contracts get? A police captain, for exam-ple, could receive $306,000 a year in pay andbenefits, a lieutenant $247,644, with the aver-age for firefighters at $171,000 (with 21 earningover $200,000, including overtime). Police andfirefighters become eligible for lifetime healthbenefits. In 2007, 292 city employees made over$100,000.58

In March, seeking to avoid bankruptcy,the city cut several million dollars from pay-roll, museums, public works, senior centers,and other programs, but needed further cutsto meet increased expenses for the next fiscalyear.59 On June 17, the city asked a bankrupt-cy judge to allow it to cancel labor contractscovering 400 public employees. The unionsremained unyielding. A bankruptcy attorneyrepresenting the unions said that his clientswould contest the bankruptcy on thegrounds that the city could pay its bills if itincreased revenues and cut expenses, andthat the unions would seek tens of millionsof dollars in damages if the city got the greenlight to obviate labor contracts.60

The city owed employees raises of 14 per-cent on July 1, 2008. Vallejo financial officials,on July 23, told Judge Michael McManus ofthe U.S. District Bankruptcy Court for theEastern District of San Francisco that the citywould have run out of money in the first twoweeks of the fiscal year that started July 1, hadit not declared bankruptcy and sought to voidunion contracts. Before declaring bankruptcy,the city projected exhaustion of its reservesbefore the end of the last fiscal year, negativecash flows each month of the current fiscalyear, and a cumulative $16.6 million deficit.61

The unions argued that Vallejo could payits debts if it accepted $10.6 million in conces-sions that the unions had then offered, spentsome of the $136-million reserve it held out-side the general fund, and took other mea-sures to cut spending and increase revenue.

The union based its case on an analysis by aconsultant it hired, Roger Mialocq of HarveyM. Rose Associates, a firm that also serves asthe independent budget analyst for severalCalifornia local governments, including theSan Francisco Board of Superintendents.62

The city contested each of Mialocq’s sav-ings and revenue estimates, saying they wereeither already implemented or impossible.“The Report lacks credibility and is riddledwith fundamental analytical defects,” arguedthe city’s lawyers. They also accused Mialocqof bias—he had said in depositions that hetook the assignment because he was worriedabout the impact of bankruptcy on otherCalifornia local governments, particularlySanta Clara County, a struggling Rose client—and said that he should not be considered anexpert on government finance because he isnot a certified public accountant. The city alsosaid that the $136 million off-budget reserve isindependent of the general fund. Wells Fargo& Co., trustees of the city’s enterprise-funddebt, supported the city’s contention. “Thereare no circumstances under which the city—inor out of Chapter 9 [bankruptcy]—can freelyaccess these funds,” argued an attorney forWells Fargo. “The funds are irrevocably dedi-cated to the protection of bondholders.”63 OnSeptember 4, 2008, Judge McManus approvedthe city’s petition.64 The police and fire unionsappealed the ruling on September 18, 2008.65

The Vallejo disaster unfolded against thebackdrop of budget trouble for all of California.On September 23, 2008, California governorArnold Schwarzenegger (R) signed the tardieststate budget ever in California history—by 85days66—after long negotiations over how toclose a $15 billion deficit.67 Schwarzeneggersought to control costs by vetoing $510 millionin spending, which comes on top of an execu-tive order imposing a hiring freeze on about10,000 state workers that were laid off inAugust 2008.68 (On October 2, Schwarzeneggeralerted then-Treasury Secretary Henry Paulsonthat California planned to request $7 billion inemergency federal loans.)69 On December 1,Schwarzenegger declared a state fiscal emer-gency and ordered the legislature to hold a spe-

14

In 2007, 292 Vallejo

city employeesmade over$100,000.


cial session to address the state’s ailingfinances.70

By January 2009, with the country inrecession, the state’s projected budget deficitthreatened to balloon to a whopping $42 bil-lion.71 To address this looming shortfall, thenew budget, which was approved by the leg-islature and sent to the governor in February2009, includes $15 billion in spending cutsover 17 months and $13 billion in new tax-es.72 However, some parts of the budget need-ed to be approved by voters. On May 19,2009, California voters rejected five of six bal-lot proposals by wide margins across thestate. (The one measure to pass, Proposition1F, freezes pay for legislators and statewideoffice-holders in budget deficit years.)73 As aresult, the state’s deficit projection, which theproposed budget sought to cut to $15 bil-lion, jumped to $21 billion.74

A big stumbling block in Schwarzenegger’sefforts to curb the growth of state spendingwas employee payroll. The January 29, 2008,approval by a state superior court of Schwarz-enegger’s plan to shut down several stateoffices for two Fridays a month—forcing238,000 state workers to stay home withoutpay—was an overdue breakthrough in a longhistory of frustrations for his predecessors,but this modest step was too little, too late, tohalt years of growth of state employees’salaries. “Past plans for reductions have beentangled in a thicket of policy protections,political alliances, and legal precedents thatorganized labor has built up over the years,”noted Los Angeles Times reporter Evan Halperafter the ruling. In 1991, a state court thwart-ed then-governor Pete Wilson’s (R) effort tocut state employees’ salaries by 5 percent, rul-ing that he could not do so without the legis-lature’s consent. And in 2003, then-governorGray Davis’s (D) efforts to lay off nearly 12,000state workers went nowhere. Halper reportsthat the last round of mass layoffs in the statehad occurred in 1975, when 2,500 CaliforniaDepartment of Transportation employeeswere let go during a previous budget crisis.75

On May 20, 2009, the California State Person-nel Board listed 2,817 vacancies.76

As unionization in the public sector iscommon in state and local governmentsaround the nation, this scenario could berepeated elsewhere. Pew Center on the Statesmanaging director Susan Urahn told the NewYork Times that “California is an example ofwhat you will see” across the country, as oth-er states (40 of which are in the red), as well ascities, seek to manage their own deficits.77 ASeptember 2008 National League of Citiessurvey of the nation’s city financial officerspaints a discouraging picture. “Confrontedwith declining economic conditions drivenby downturns in housing, consumer spend-ing, and jobs and income, city finance offi-cers report that the fiscal condition of thenation’s cities has weakened dramatically in2008,” says the report. An overwhelmingmajority of survey respondents identifiedemployee-related costs as having increasedsubstantially: wages (cited by 95 percent ofrespondents); health benefits (86 percent);and pensions (79 percent). Wages and healthcare costs were cited by respondents ahead ofall other costs, except for inflation (98 per-cent).78 In public-sector collective bargainingagreements across the nation, the conditionsthat led to the mess of Vallejo have beenbaked into the cake.

Conclusion:What Can Be Done?

Over the past five decades, organizedlabor’s overall membership has shifted toinclude an ever-greater number of govern-ment employees, a trend that appears likelyto continue. As more labor unions come torepresent employees in the public sector, theyare likely to increase costs on governments,especially at the state and local level, whereunions are most prevalent. Unlike private-sector unions, public-sector unions are notfettered by the need to keep their employerfrom going out of business. As a result, pub-lic-sector unions can make demands for theirmembers well beyond what private-sectorunions can.

15

In public-sectorcollective bargaining agreementsacross the nation,the conditionsthat led to themess of Vallejohave been bakedinto the cake.


The fact that government officials lack anincentive to hold down costs does not meanthat government’s capacity for growth isunlimited, or that such growth will always berapid. Government services are paid for by tax-es, on which popular opposition acts as acheck. This, naturally, limits to some extent thepotential reach of public-employee unions. Nevertheless, the checks that do apply to

public-sector unions’ power are weak. TheTiebout effect posits that citizens can “vote withtheir feet” by choosing to reside in the jurisdic-tion that comes closest to their preferred pack-age combination of services and taxes. However,real-estate transaction costs of selling one homeand buying another provide plenty of slackroom for successful rent-seeking by public-sec-tor union members, as variations in local fiscalconditions would have to be quite considerableto overwhelm not only transaction costs, but allother factors that affect an individual’s choice ofresidential location. Similarly, the theoreticaldisciplining effects of the median-voter modelare overwhelmed by the effect of imperfection intaxpayer information. Such rational ignoranceresults in politicians offering packages of bene-fits that are highly concentrated and visible tothe beneficiaries, while making the costs vagueand widely dispersed—and thus, veiled from tax-payers. One likely and persistent element in thepackage will be higher-than-necessary wages topublic employees. However, even when the costsare well known, their impact on any one taxpay-er might seem sufficiently small so as to not bea deciding factor in determining voter choice,and even less so in fostering a Tiebout-type reac-tion. To enforce their demands, the weapons

that unions have at their disposal includestrikes and mandatory arbitration. In thecase of strikes, they can be especially disrup-tive in the public sector, where an interrup-tion of public services causes severe painamong voters, who cannot simply shift todifferent suppliers for the public services thatgovernment provides in a monopolistic fash-ion. To avoid the threat of such strikes, manyunions and governments agree to submit tobinding arbitration, which can impose costs

on government finances as great as, or evengreater than, strikes. An arbitrator will neveraward a settlement that is less than manage-ment’s final offer, so the union is guaranteedto obtain at least some of its demands, andwill never come out worse than the statusquo ante. Public-sector unions’ upward-ratcheting

effect on wages has reinforced itself wherevergovernment employees have become union-ized—as the economic literature indicates. Asnoted, the public sector is more amenable tounion-based collective bargaining than theprivate sector. While unionism did manage togain a significant foothold in the private sec-tor at one time—due in large part to govern-ment intervention—it has nonetheless recededthere, while it has grown in state employment. This dynamic will persist in government

regardless of which political party controls theelected branches of government. In Washing-ton, in state capitals, and at city halls, execu-tives and lawmakers come and go, but careergovernment employees stay on in the bureau-cracy. While repeal of state collective bargaining

laws may be desirable, it is politically very diffi-cult, so there are other reforms that govern-ments can undertake. Politically viable reformsinclude repealing laws that legalize strikesagainst government, as well as laws that imposebinding arbitration on the settlement of public-sector labor disputes. Another possible reformis to limit the scope of collective bargaining. Atpresent, particularly in the field of public edu-cation, teacher-union contracts control almostevery aspect of school activity—there is no rea-son why matters like textbook selection shouldbe subject to collective bargaining. Moreover, unlike most of their private-sec-

tor counterparts whose dues are collected byprivate parties, public-employee unions enjoythe privilege of having their collection of duespaid by government—that is, the taxpayers.Requiring the unions to pay for the cost oftheir dues collection would be a small, thoughsensible, reform. Amendment 49 in Colorado,a ballot initiative that lost at the ballot box inNovember 2008, was such a measure.

16

Politically viablereforms includerepealing lawsthat legalize

strikes againstgovernment, aswell as laws thatimpose binding

arbitration on thesettlement of public-sector

labor disputes.


However, Colorado voters did approveAmendment 54, which was on the same ballotas Amendment 49. Amendment 54 preventsparties that receive “sole source governmentcontracts” from making, facilitating, or induc-ing contributions to any state or local politicalparty for two years after the end of the con-tract. This would include collective-bargainingagreements. However, how the law will playout in practice remains to be seen. On January28, 2009, several unions filed suit in DenverDistrict Court seeking to have the law declaredunconstitutional, on First Amendment free-speech grounds and 14th Amendment equal-protection grounds.79

The fight over these two ballot measuresunderscores the difficulty of reform. ProtectColorado’s Future, an organization set up tooppose the two above measures (as well asAmendment 47, a right-to-work proposal, whichfailed to pass), and financed mostly by public-employee unions, spent nearly $30 million onthe campaign.80

Richard Epstein proposes some otherreforms that merit lawmakers’ consideration.Epstein endorses what he describes as “a blan-ket prohibition against unearned increases inpensions or wages to public employees forcompleted work.” He also favors creating amechanism to allow citizens to challenge pub-lic-sector collective bargaining agreements incourt, “say within 60 days of signing.” In addi-tion, Epstein says that “we have to insist thatgovernment officials negotiate contracts thatpermit them to reduce employment levels inthe face of diminished revenues.” This lastproposal is easier said than done, and mayrequire imposing such a statutory require-ment on public officials (which Epstein doesnot mention).81

At the federal level, Congress should refrainfrom making the problem worse by interven-ing in state and local governments’ labor rela-tions, as some members of Congress nowseem to want to do vis-à-vis public safety work-ers, such as police and firefighters.These suggested reforms are only a begin-

ning. Many of the problems outlined in thispaper will persist as long as government

employees continue to unionize in large num-bers. Thus, state and local lawmakers wouldbest serve the interests of the majority of theirconstituents by avoiding public-sector collec-tive bargaining. Short of that, they need theability to drive a harder bargain. Journalists have a role to play, as well, in

keeping government officials and unionsaccountable. Collective-bargaining agreementsare public information, and are posted onlineby the Department of Labor. (Union financialreports are available at unionreports.gov; col-lective bargaining agreements are available athttp://www.dol.gov/esa/olms/regs/compliance/cba/index.htm.) By providing publiclydigestible scrutiny and analysis of the largeamount of information in collective-bargain-ing agreements in their own jurisdictions, localreporters can help voters overcome (even if par-tially) the problem of rational ignorancedescribed above. For its part, the federal gov-ernment should look for ways to make thesedata more user-friendly.As keepers of the public purse, legislators

and local council members have an obliga-tion to protect taxpayers’ interests. By granti-ng monopoly power over their governments’supply of labor to labor unions, elected offi-cials undermine their duty to taxpayers, sincethis puts unions in a privileged position toextract political goods in the form of highpay and benefits that are way above anythingcomparable in the private sector. Under suchan arrangement, government, being itself amonopoly, leaves the citizens whose money itsquanders with no options.

Notes1. Bureau of Labor Statistics, “Union Members in2008,” Economic News Release, January 28, 2009,http://www.bls.gov/news.release/pdf/union2.pdf.This was a slight uptick from 12.1 percent for2007, but small enough to not be significant.

2. David E. Bernstein, Only One Place of Redress:African Americans, Labor Regulations, and the Courtsfrom Reconstruction to the New Deal (Durham, NC:Duke University Press, 2001), p. 6.

3. Max Green, Epitaph for American Labor: How

17

State and locallawmakers wouldbest serve theinterests of themajority of theirconstituents byavoiding public-sector collectivebargaining.


Union Leaders Lost Touch with America (Washington:American Enterprise Institute Press, 1996), p. 100.

4. The numbers are derived from Bureau of LaborStatistics figures at www.unionstats.com, whichis maintained by economists Barry Hirsch ofGeorgia State University and David Macphersonof Florida State University. The BLS began keep-ing track of public sector union membership in1958.

5. Ibid.

6. Bureau of Labor Statistics, “Union Members in2008.”

7. Ibid.

8. Federal Labor Relations Authority, http://www.flra.gov/10.html. Because federal employeesoperate under this different system, they arebeyond the scope of this paper.

9. S. Brady Calhoun, “Police Union: Panama CityIs Dragging Its Feet,” Panama City News Herald,August 16, 2008, http://www.newsherald.com/news/panama-67520-city-union.html.

10. This section borrows heavily from Don Bellanteand James Long, “The Political Economy of theRent-Seeking Society: The Case of Public Employ-ees and Their Unions,” Journal of Labor Research 2(Spring 1981): 1–14; and from Don Bellante andPhilip Porter, “Agency Costs, Property Rights, andthe Evolution of Labor Unions,” Journal of LaborResearch 13 (Summer 1992): 243–56.

11. See, for example, Adolph A. Berle and GardinerC. Means, The Modern Corporation and PrivateProperty (New York: Macmillan, 1932).

12. Joseph Schumpeter, to cite another suchexample, was of the opinion that this agencyproblem would become so severe as to lead to thedemise of capitalism. See his Capitalism, Socialism,and Democracy (New York: Harper & Brothers,1942).

13. One of the classic examples of the literatureexamining the mitigation of the agency problemin the modern corporation is Henry Manne,“Mergers and the Market for Corporate Control,”Journal of Political Economy 73 (April 1965): 110–20.

14. On the median-voter model, see AnthonyDowns, An Economic Theory of Democracy (NewYork: Harper Collins, 1957). On the Tiebouteffect, see Charles Tiebout, “A Pure Theory ofLocal Expenditures,” Journal of Political Economy 64(October 1956): 416–24.

15. Robert Congleton has demonstrated in a formal

model how rational ignorance is sufficient to gen-erate “fiscal illusion.” See his “Rational Ignorance,Rational Voter Expectations, and Public Policy: ADiscrete Informational Foundation for FiscalIllusion,” Public Choice 107 (April 2001): 35–64.Thus, it is entirely possible that median-voter effectswill not significantly affect the lack of resistance topublic employee rent-seeking.

16. Gerald Scully, “The Convergence of FiscalRegimes and the Decline of the Tiebout Effect,”Public Choice 72 (October 1991): 51–59.

17. Melvin Reder, “The Theory of Employmentand Wages in the Public Sector,” in Labor in thePublic and Nonprofit Sectors, ed. Daniel Hamermesh(Princeton: Princeton University Press,1975).

18. Richard Epstein, “The Public Mischief of PublicUnions,” Forbes, March 3, 2009, http://www.forbes.com/2009/03/01/pensions-bankruptcy-government-opinions-columnists_california. html.

19. Ibid.

20. Elaboration of this point is a large part of thesubject matter of William Niskanen’s classic work:Bureaucracy and Representative Government (Chicago:Aldine-Atherton, 1971).

21. See, for example, James Bennett and WilliamOrzechowski, “The Voting Behavior of Bureau-crats: Some Empirical Evidence,” Public Choice 41(January 1983): 271–83.

22. This likelihood presents a potential principal-agency problem between a union and its mem-bers, which may misalign the incentives of unionofficials with those of their members to a degree.It would strengthen the symbiotic relationshipbetween bureau managers and elected officials onthe one hand and union officials on the other.

23. This interest is in contrast to private-sectorworkers, for whom the lack of such interest is atthe heart of the “insider-outsider” theory ofunion behavior. See Assar Lindbeck and DennisSnower, The Insider-Outsider Theory of Employmentand Unemployment (Cambridge, MA: MIT, 1989).

24. See Kevin O’Brien, “Compensation, Employ-ment, and the Political Activity of Public Em-ployees Unions,” Journal of Labor Research 13 (June1992): 189–203, and the studies cited therein.

25. See Don Bellante and Philip Porter, “Publicand Private Employment over the Business Cycle:A Ratchet Theory of Government Growth,”Journal of Labor Research 14 (Fall 1998): 613–28.

26. See Sharon Smith, “Equal Pay in the PublicSector: Fact or Fantasy?” Princeton University,

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Industrial Relations Section, Research ReportSeries no. 122 (1977).

27. The literature through 2003 is briefly surveyed inJosefa Ramoni, “Compensation Comparisons be-tween the Public and Private Sectors in the UnitedStates: A Propensity Score Matching Approach”(doctoral dissertation, University of South Florida,2004).

28. Bellante and Long.

29. See the studies cited in George Borjas, LaborEconomics (New York: McGraw-Hill, 2010), p. 226.

30. For the earliest such evidence, see James Long,“Are Government Workers Overpaid? AdditionalEvidence,” Journal of Human Resources 17 (Winter1982): 123–31.

31. See Don Bellante and Albert Link, “Are PublicSector Workers More Risk Averse Than PrivateSector Workers?” Industrial and Labor RelationsReview 34 (April 1981): 408–12.

32. See Joseph Quinn, “Wage Differences amongOlder Workers in the Public and Private Sectors,”Journal of Human Resources 14 (Winter 1979): 41–62.

33. A rather exhaustive survey of these studies isH. Gregg Lewis, “Union/Nonunion Wage Gaps inthe Public Sector,” Journal of Labor Economics 8(January 1990): S260–S328.

34. Joseph Gyorko and Joseph Tracy, “An Analysisof Public- and Private-Sector Wages Allowing forEndogenous Choices of Both Government andUnion Status,” Journal of Labor Economics 6 (April1988): 229–53.

35. Wendell Cox and Samuel Brunelli, America’sProtected Class: The Excess Value of Government Em-ployment (Washington: American Legislative Ex-change Council, 1994).

36. Bureau of Labor Statistics, National Compen-sation Survey: Employee Benefits in State and LocalGovernments in the United States, September 2007,http://www.bls.gov/ncs/ebs/sp/ebsm0007.pdf.

37. Bureau of Labor Statistics, Employee Benefits inthe United States, March 2008, http://www.bls.gov/news.release/pdf/ebs2.pdf.

38. Stephane Fitch, “Gilt-Edged Pensions,” Forbes,January 22, 2009, http://www.forbes.com/forbes/2009/0216/078.html.

39. Scott Dilley, “A History of Public-Sector Collec-tive Bargaining in Washington State,” Policy High-lighter, Evergreen Freedom Foundation, September2, 2008, http://www.effwa.org/main/article.php?art

icle_id=2532. Unions spend large amounts of mon-ey on ballot initiatives and candidate races, oftenoutspending their opponents in a pattern that isconsistent with the public-choice model of concen-trated benefits and diffuse costs.

40. “Making the Governor the Public Employer ofAdult Family Home Providers,” Final Bill Report,ESHB 2111, http://apps.leg.wa.gov/documents/billdocs/2007-08/Pdf/Bill%20Reports/House%20Final/2111-S.FBR.pdf.

41. H.R. 413, 111th Cong., 1st sess., http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h413ih.txt.pdf.

42. Including these government unions, 12 of thetop 20 all-time donors are unions. Center for Re-sponsive Politics, “Top All-Time Donors 1989–2008Summary,” http://www.opensecrets.org/orgs/list.php?type=A.

43. Similarly, the 1988 U.S. Supreme Court’s Beckdecision gave private-sector agency fee-payingemployees the right to pay only for “representa-tional” expenses, thus withholding the portion ofagency fees to be used for political activity. Com-munications Workers of America et al. v. Beck et al., 487U.S. 735 (1988), http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=487&invol=73 5.

44. Abood et al. v. Detroit Board of Education et al., 431U.S. 209 (1977), http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=431&invol=209.

45. Chicago Teachers Union, Local No. 1, AFT, AFL-CIO et al. v. Hudson et al., 475 U.S. 292 (1986), http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=475&invol=292.

46. Lehnert et al. v. Ferris Faculty Association et al. 500U.S. 507 (1991), http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=500&invol=507.

47. Winston-Salem/Forsyth County Unit of the NorthCarolina Association of Educators et al. v. A. CraigPhillips, State Superintendent of Public Instruction et al.,United States District Court for the MiddleDistrict of North Carolina, Winston-SalemDivision, September 18, 1974, 381 F. Supp. 644,87 L.R.R.M. (BNA) 2925, 75 Lab. Cas. 53, 542.

48. One rare case of pushback was PresidentRonald Reagan’s firing of striking members of theProfessional Air Traffic Controllers Association. In1981, PATCO proposed legislation to revamp rela-tions between the Federal Aviation Administrationand air traffic controllers. Since it was unable tonegotiate for wages and benefits under existingfederal law (the Civil Service Reform Act of 1978),PATCO made administration support for this leg-

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islation one of its bargaining demands. TheReagan administration contended that to accedeto such a demand would set a very bad precedent.PATCO apparently believed that the threat of astrike against an industry so essential to thenation’s economy would bring about a change inadministration policy and that, even if there were astrike, they could negotiate amnesty for strikers aspart of a settlement. That was a serious miscalcula-tion. The air traffic controllers went on strike andPresident Reagan, following the mandates of feder-al law, fired the strikers. After that, the number ofstrikes against government declined by about 50percent . The Bureau of Labor Statistics, which hadkept detailed statistics on public sector strike activ-ity since 1958, ceased reporting on strikes in thepublic sector, making further analysis of this issueimpossible from that time on. However, this can beconsidered the exception that proves the rule, sinceit is a unique event. The reaction among politiciansand media pundits at the time was surprise bor-dering on disbelief.

49. However, as noted, teachers unions generallylike to maintain the ability to strike, and thushold the vast majority of public-sector strikes.Keeping kids out of school may be a big problem,but it will not lead to the serious disasters thatwould result from police officers and firefightersgoing on strike.

50. Sally Connell, “SLO Police to Receive HigherPay,” San Luis Obispo Tribune, June 15, 2008.

51. See Chris Edwards, Stephen Moore, and PhilKerpen, “States Face Fiscal Crunch after 1990sSpending Surge,” Cato Institute Briefing Paper no.80, February 12, 2003, http://www.cato.org/pubs/briefs/bp80.pdf.

52. Steven Malanga, “The Conspiracy Against theTaxpayers,” City Journal, Autumn 2005, http://www.city-journal.org/html/15_4_taxpayers.html.

53. Andrew Ward, “Vallejo Asks Permission toReject Contracts,” The Bond Buyer, June 19, 2008,http://www.bondbuyer.com/article.html?id=20080618218D1M2S.

54. Michael B. Marois, “Vallejo, California, Plansto File for Bankruptcy,” Bloomberg, May 7, 2008,http://www.bloomberg.com/apps/news?pid=20601103&sid=atl3yFmV508A&refer=news.

55. Terence Chea, “City Officially Files for Bank-ruptcy Protection,” San Jose Mercury News, May 24,2008.

56. Ibid.

57. Marois.

58. George Will, “Pension Time Bomb,” WashingtonPost, September 11, 2008, http://www.washingtonpost.com/wp-dyn/content/article/2008/09/10/AR2008091002726.html.

59. Carolyn Jones, “Vallejo Votes to Declare Chap-ter 9 Bankruptcy,” San Francisco Chronicle, May 7,2008, http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/06/BACH10HUK6.DTL&tsp=1.

60. Ward.

61. Andres Ward, “Is Vallejo Really Broke? ItsUnions Want to Know,” The Bond Buyer, July 25,2008, http://www.bondbuyer.com/article.html?id=20080724HFB58CR6.

62. Ibid.

63. Ibid.

64. Jim Christie, “Judge Approves California CityBankruptcy Petition,” Reuters, September 5, 2008,http://www.reuters.com/article/marketsNews/idUSN0529542020080905.

65. “Unions Appeal Ruling Granting VallejoBankruptcy,” San Francisco Chronicle, September21, 2008, http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/09/21/state/n100835D77.DTL.

66. Matthew Yi, “Governor Cuts, Signs Long-Overdue Budget,” San Francisco Chronicle, September24, 2008, http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/24/MND1133LEV.DTL.

67. Jennifer Steinhauer, “State Budget in CaliforniaSets Record for Tardiness,” New York Times,September 2, 2008, http://www.nytimes.com/2008/09/03/us/03calif.html?ref=us.

68. Yi.

69. March Lifsher and Evan Harper, “Schwarze-negger to U.S.: State May Need $7-billion Loan,”Los Angeles Times, October 3, 2008, http://www.latimes.com/business/la-fi-calif3-2008oct03,0,5726760.story?track=rss.

70. “California Faces ‘Budget Crisis,’” BBC News,December 2, 2008, http://news.bbc.co.uk/2/hi/americas/7760249.stm.

71. CBSNews.com, January 3, 2009, http://www.cbsnews.com/stories/2009/01/03/eveningnews/main4696947.shtml.

72. Stu Woo and Justin Check, “Californians Geta Budget That Leaves Few Happy,” Wall StreetJournal, February 20, 2009, http://online.wsj.com/article/SB123503429614220905.html.

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73. Eric Bailey, “California Voters Kill BudgetMeasures,” Los Angeles Times, May 20, 2009, http://www.latimes.com/news/local/la-me-props20-2009may20,0,5134709.story.

74. Stu Woo, “Cuts Loom in California ifPropositions Fail,” Wall Street Journal, May 12, 2009,http://online.wsj.com/article/SB124208323316008467.html.

75. Evan Halper, “Reducing California StatePayroll a Daunting Task,” Los Angeles Times, January31, 2009, http://articles.latimes.com/2009/jan/31/local/me-workers31.

76. California State Personnel Board, http://jobs.spb.ca.gov/wvpos/search_p.cfm?showAll.

77. Jennifer Steinhauer, “In Budget Deal, CaliforniaShuts $41 Billion Gap,” New York Times, February20, 2009, http://www.nytimes.com/2009/02/20/us/20california.html?scp=1&sq=in%20budget%20deal,%20california&st=cse.

78. Michael A. Pagano and Christopher W. Hoene,“City Fiscal Conditions in 2008,” in Research Brief onAmerica’s Cities, Issue 2008-2, National League ofCities, September 2008, http://66.218.181.91/ASSETS/A49C86122F0D4DBD812B91DD5777F04D/CityFiscal_Brief_08-FINAL.pdf. Other items

receiving high response rates included infrastruc-ture (85 percent) and public safety (83 percent),both of which carry high labor costs. The authorsdescribe the survey as follows: “The City FiscalConditions Survey is a national mail survey offinance officers in U.S. cities. Surveys were mailedto a sample of 1,055 cities, including all cities withpopulations greater than 50,000 and, using estab-lished sampling techniques, to a randomly gener-ated sample of cities with populations between10,000 and 50,000. The survey was conductedfrom April to June 2008. The 2008 survey data aredrawn from 319 responding city finance officers,for a response rate of 30.2%. The responses receivedallow us to generalize about all cities with popula-tions of 10,000 or more.”

79. Felisa Cardona, “Two Suits Challenge Amend-ment 54,” Denver Post, January 29, 2009. Some non-profit organizations that receive state funds—including Children’s Hospital, the Denver Centerfor the Performing Arts, and the University ofDenver—filed another suit, fearing that their lob-bying ability would be hamstrung.

80. Charles Ashby, “Pro-Union Groups Sue toNullify Amendment 54,” Pueblo Chieftain, January30, 2009.

81. Epstein.

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STUDIES IN THE POLICY ANALYSIS SERIES

644. Getting What You Paid For—Paying For What You Get Proposals for theNext Transportation Reauthorization by Randal O’Toole (September 15, 2009)

643. Halfway to Where? Answering the Key Questions of Health Care Reformby Michael Tanner (September 9, 2009)

642. Fannie Med? Why a “Public Option” Is Hazardous to Your Health by Michael F. Cannon (July 27, 2009)

641. The Poverty of Preschool Promises: Saving Children and Money with theEarly Education Tax Credit by Adam B. Schaeffer (August 3, 2009)

640. Thinking Clearly about Economic Inequality by Will Wilkinson (July 14, 2009)

639. Broadcast Localism and the Lessons of the Fairness Doctrine by John Samples (May 27, 2009)

638. Obamacare to Come: Seven Bad Ideas for Health Care Reformby Michael Tanner (May 21, 2009)

637. Bright Lines and Bailouts: To Bail or Not To Bail, That Is the Questionby Vern McKinley and Gary Gegenheimer (April 21, 2009)

636. Pakistan and the Future of U.S. Policy by Malou Innocent (April 13, 2009)

635. NATO at 60: A Hollow Alliance by Ted Galen Carpenter (March 30, 2009)

634. Financial Crisis and Public Policy by Jagadeesh Gokhale (March 23, 2009)

633. Health-Status Insurance: How Markets Can Provide Health Securityby John H. Cochrane (February 18, 2009)

632. A Better Way to Generate and Use Comparative-Effectiveness Researchby Michael F. Cannon (February 6, 2009)

631. Troubled Neighbor: Mexico’s Drug Violence Poses a Threat to the United States by Ted Galen Carpenter (February 2, 2009)

630. A Matter of Trust: Why Congress Should Turn Federal Lands into Fiduciary Trusts by Randal O’Toole (January 15, 2009)


629. Unbearable Burden? Living and Paying Student Loans as a First-Year Teacher by Neal McCluskey (December 15, 2008)

628. The Case against Government Intervention in Energy Markets: Revisited Once Again by Richard L. Gordon (December 1, 2008)

627. A Federal Renewable Electricity Requirement: What’s Not to Like?by Robert J. Michaels (November 13, 2008)

626. The Durable Internet: Preserving Network Neutrality without Regulation by Timothy B. Lee (November 12, 2008)

625. High-Speed Rail: The Wrong Road for America by Randal O’Toole (October 31, 2008)

624. Fiscal Policy Report Card on America’s Governors: 2008 by Chris Edwards(October 20, 2008)

623. Two Kinds of Change: Comparing the Candidates on Foreign Policyby Justin Logan (October 14, 2008)

622. A Critique of the National Popular Vote Plan for Electing the President by John Samples (October 13, 2008)

621. Medical Licensing: An Obstacle to Affordable, Quality Care by Shirley Svorny (September 17, 2008)

620. Markets vs. Monopolies in Education: A Global Review of the Evidenceby Andrew J. Coulson (September 10, 2008)

619. Executive Pay: Regulation vs. Market Competition by Ira T. Kay and StevenVan Putten (September 10, 2008)

618. The Fiscal Impact of a Large-Scale Education Tax Credit Program by Andrew J. Coulson with a Technical Appendix by Anca M. Cotet (July 1, 2008)

617. Roadmap to Gridlock: The Failure of Long-Range Metropolitan Transportation Planning by Randal O’Toole (May 27, 2008)

616. Dismal Science: The Shortcomings of U.S. School Choice Research andHow to Address Them by John Merrifield (April 16, 2008)

615. Does Rail Transit Save Energy or Reduce Greenhouse Gas Emissions? by Randal O’Toole (April 14, 2008)


614. Organ Sales and Moral Travails: Lessons from the Living Kidney Vendor Program in Iran by Benjamin E. Hippen (March 20, 2008)

613. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World by Michael Tanner (March 18, 2008)

612. Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration by Jim Harper (March 5, 2008)

611. Parting with Illusions: Developing a Realistic Approach to Relations with Russia by Nikolas Gvosdev (February 29, 2008)

610. Learning the Right Lessons from Iraq by Benjamin H. Friedman, Harvey M. Sapolsky, and Christopher Preble (February 13, 2008)

609. What to Do about Climate Change by Indur M. Goklany (February 5, 2008)

608. Cracks in the Foundation: NATO’s New Troubles by Stanley Kober (January 15, 2008)

607. The Connection between Wage Growth and Social Security’s FinancialCondition by Jagadeesh Gokhale (December 10, 2007)

606. The Planning Tax: The Case against Regional Growth-Management Planning by Randal O’Toole (December 6, 2007)

605. The Public Education Tax Credit by Adam B. Schaeffer (December 5, 2007)

604. A Gift of Life Deserves Compensation: How to Increase Living KidneyDonation with Realistic Incentives by Arthur J. Matas (November 7, 2007)

603. What Can the United States Learn from the Nordic Model? by Daniel J. Mitchell (November 5, 2007)

602. Do You Know the Way to L.A.? San Jose Shows How to Turn an UrbanArea into Los Angeles in Three Stressful Decades by Randal O’Toole (October 17, 2007)

601. The Freedom to Spend Your Own Money on Medical Care: A Common Casualty of Universal Coverage by Kent Masterson Brown (October 15, 2007)

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Vallejo Con Dios