A Tax Cut for Workers and Financial Security for Their Unions

(Karla Ann Cote/NurPhoto/Sipa USA via AP Images)

Union activists and supporters rally in Foley Square in Manhattan on June 27, 2018.

As the president of the American Federation of State, County and Municipal Employees, Lee Saunders does more for America’s working class families in one day than I have done in a lifetime. So when he writes an op-ed criticizing a legislative proposal that I and others have advanced to undo the devastating effects of the Supreme Court’s decision against public-sector unions in Janus v. AFSCME Council 31, everyone—myself included—should pay serious attention.

The proposal is known as direct reimbursement. To understand how it works, begin with the premise that unions produce, on average, a 17 percent wage premium for the workers they represent. Before Janus, workers received all 17 percent in their paychecks, but were required to send 2 percent to the union to support its collective bargaining–related costs. 

Janus held that this required payment violates the First Amendment rights of objecting workers. The result for unions is severe. For example, AFSCME itself initially projected that it would lose at least 15 percent of its members (and member dues) and that another 50 percent would be “on the fence.”

So here’s the solution: Government can reimburse the union for the identical set of collective bargaining–related expenses directly. Workers would receive the same net 15 percent wage increase, unions would receive the same level of resources, and government employers would spend the same total 17 percent on wages and union bargaining costs combined.

To evaluate whether direct reimbursement would be good for workers, start with the reduction in workers’ taxes: Because the reimbursement approach eliminates the portion of worker wages that was automatically sent to the union anyway, it reduces workers’ taxable income. An unmarried worker earning $50,000 would get a $200 tax cut; a similar worker earning $60,000 would receive a $300 tax cut. That alone is a benefit for hard-working union members that is worth fighting for.

Saunders’s criticism of the proposal turns largely on his worry that direct reimbursement will compromise union independence. As he puts it, “no experienced union negotiator would want his or her management counterpart to literally control union revenue.”

I completely agree. That is why the model legislation I’ve offered would forbid government employers to have such control. Indeed, the reimbursement approach I’ve suggested would operate much like the agency fee model before Janus. Unions would calculate their annual budgets for all collective-bargaining related expenses. Then, the government would be required to pay them that amount—just as non-members covered by union contracts were required to pay for the same expenses before Janus. An employer would have no ability to threaten to unilaterally reduce a reimbursement payment in exchange for concessions by the unions.

Precisely because unions will not suddenly become a mere puppet of management, Saunders makes a separate point about the appearance of impropriety. “If the union makes difficult choices to settle a contract in tough fiscal times,” he asks, “will workers suspect it was to preserve the union’s ‘payoff’ from the boss?” 

This problem is nothing new. Unions have fought against this appearance concern for as long as they’ve existed. Many unions receive benefits from employers, after all, whether in the form of paid release time (in which employees who are also union officials are compensated for the time they devote to representing their fellow workers) or (before Janus) an agency fee clause.

Yet these benefits have not provoked widespread distrust among union members in the public sector. That’s because the answer has always been good, old-fashioned zealous advocacy, where unions fight vigorously for workers at the bargaining table and ensure that workers are being treated fairly under a contract. As long as unions continue doing that, there’s no reason to think that a change in the mere form of the government’s support will affect what members think. 

Still, none of this is to suggest that union leaders and members at the local level should have no say in the matter of government reimbursing the union’s collective-bargaining expenses. That’s a decision each union’s members should make for themselves—which is why lawmakers like New York Assembly member Richard Gottfried are proposing legislation to make direct reimbursement clauses a subject of collective bargaining, not a forced policy for all unions to implement everywhere. 

Given the freedom to choose, some unions (including a number that I’m working with) will see reimbursement as a way to undo Janus by ensuring adequate resources for unions without affecting government budgets—and all the while giving workers much-needed tax relief.

Others may choose not to negotiate for a reimbursement clause, preferring instead to trade that financial security away for some other wage or benefit increase for workers. A reimbursement bill would be a win for them, too, since it would give them added leverage to fight for worker gains.

Still others may choose to stay out of the legislative battle for a reimbursement bill on the belief that it isn’t worth the cost of the inevitable attacks from the right. I have no quibble with that view, although it is different from actively opposing a reimbursement bill that would allow other locals to choose to preserve their own financial security.

The critical point in all of this is that unions and union members should have the freedom to make these choices about what’s best for them. And that’s why I agree with AFSCME’s president on this bottom line: We should think of legislative responses to Janus as creating additional tools for unions to utilize, rather than as magic bullets. Saunders suggests, for example, that “policymakers should create opportunities for workers to educate one another on the decision to join the union, free from any outside influence.” He’s right. But workers should also have the opportunity to decide if they want their employer to reimburse the union for its bargaining-related expenses. All unions—and all workers—can benefit when unions have these extra tools at their disposal.

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