Wisconsin’s experiment in public-labor law

Just over three years have passed since Wisconsin Governor Scott Walker signed Public Act 10 (PA 10), a major labor-reform bill.

Organized labor, legislative Democrats, and their supporters claimed Walker was destroying collective-bargaining rights for government employees and responded by occupying the state capitol in Madison. Thousands of protesters assembled to chant, “This is what democracy looks like,” scream, and sing, accompanied by bullhorns, bagpipes, and drums. The assembled multitude showed its displeasure by spitting on Republican legislators and urinating on the governor’s office door. Time magazine branded him “Dead Man Walker.”

Three days after the demonstrations began, Democratic state senators fled the state to prevent a quorum from conducting legislative business. When the law passed anyway, opponents of PA 10 appealed to the courts to strike down the legislation. After the state Supreme Court upheld the bill, they initiated a recall, which Walker won on June 5, 2012.

America was gripped by the drama, even in the middle of a national presidential race. As soon as Walker became the first governor in American history to survive a recall, however, the media and the country lost interest.

The significance of Walker’s victory is tectonic. Wisconsin is the birthplace of government unionism, dating back to 1932 when the Wisconsin State Employees Union was founded. In 1959, the state enacted the Public Employee Collective Bargaining Act, which allowed the creation of bargaining units.

A half-century later, restrictive union rules and generous compensation packages had helped to push the state government into severe financial straits. Wisconsin’s bi-annual budget had a $3.6 billion deficit, despite recently enacted tax increases and stimulus spending.

Gov. Walker sought savings by insisting that public employees contribute to their health care and pensions and by demanding that the state would competitively bid the health-insurance provider rather than allow the union to choose its preferred provider.

The governor then limited collective bargaining to base wages, not work rules and benefits, and freed the school districts to hire and fire teachers on merit. Further, he eliminated mandatory union dues, and government agencies now no longer collect dues on behalf of the unions. PA 10 also required that the members of government unions approve their leadership each year through recertification elections.

Following the melodrama, which ended with Gov. Walker’s second election victory for his first term in office, what has Wisconsin’s experiment in public-labor law wrought?

First, the financial crisis has passed. The state’s $3.6 billion budget deficit has been replaced with a surplus of $997 million, allowing the governor to recommend reducing state-income taxes further. Second, property taxes have been reduced for the first time in 15 years, with further reductions suggested. Third, unemployment is down by a full percentage point. Fourth, CEO magazine has improved Wisconsin’s position in the “Best State for Business” ranking from number 41 up to number 20. Fifth, the MacIver Institute of Wisconsin has estimated that PA 10 in its first year allowed school districts to save $1.7 billion and local governments and state agencies another $500 million. Sixth, the change in work rules has opened avenues for creative problem-solving and educational reform in the state’s public schools, such as instituting merit pay. Seventh, the Walker budget did not require additional taxes, a large layoff of public employees, or cuts in Medicaid.

Gov. Walker broke the dysfunctional system whereby unions of public employees leveraged their collective bargaining to preserve unaffordable benefits and blocked promising reforms. Wisconsin has now dramatically changed its labor law by restoring control of government spending to the taxpayers. In short, he has shown us “… what democracy looks like.”

Norman Poltenson is publisher of The Central New York Business Journal. Contact him at npoltenson@cnybj.com