The Supreme Court’s recent Janus ruling, which ended the unions’ ability to extract dues from people who don’t want to join them, has been hailed as a catastrophe on the left.
Ironically, it is just possible that this ruling, so unpopular with liberals and progressives, will save blue states from financial Armageddon.
Without union pressure, blue states will be less likely to sign onto ruinous retirement packages for public employees that they simply have no way of paying.
As Arthur Laffer and Steve Moore explain in today’s Wall Street Journal, unfunded pension liabilities in the U.S. total about $1.4 trillion. And it’s union states that are in trouble:
Not coincidentally, of the states with the 10 largest deficits by dollar value, eight do not have a right-to-work law. Three states—California, Illinois and New Jersey—account for a third of the pension hole. California and New Jersey each have net liabilities of about $170 billion, and Illinois’s are $140 billion.
The Illinois crisis is so severe that paying the promised pensions would require a 30-year property-tax increase that would cost the median Chicago homeowner $2,000 a year, according to a study from three economists at the Chicago Fed. Not a penny of that added tax money would pay for better schools, police, roads, hospitals or libraries. Already, Illinois’s property taxes are among the country’s highest.
The pension problems have gotten so bad because state lawmakers don’t dare to stand up to powerful government unions. Consider the legendary California Teachers Association, which collects some $240 million a year from its 325,000 members and about 28,000 nonmembers who have been forced to pay fees. The CTA is the most influential political force in Sacramento. It spent twice as much on politics from 2000-10 as the next largest donor—also a government union, the California State Council of Service Employees.
Yes, this is a testament to the unions’ vaunted hardnosed collective bargaining.
But these obligations cannot be met without imposing heavy tax burdens on the rest of us (and in many circumstances, not even then).
The unions will remain powerful–but not as powerful now that Janus has deprived them of the power to confiscate money of non-members.
Instead of being upset, blue states should see Janus as a golden opportunity to get the most onerous parts of their budgets under control.