California business leaders are unanimous in their desire for the California Legislature to proactively improve the state’s business climate, as opposed to only enacting policies that will further hinder economic growth.
But it is far less understood how to actually get to a place where the Legislature both acknowledges that there are major issues with the state’s business climate and works with business leaders to advance solutions.
I have thought long and hard about this issue and believe that public sector collective bargaining reform should be among the top priorities, if not the top priority for the business community to improve the state’s business climate.
The short answer about why reform is needed is that the state’s current system of collective bargaining locks in high-cost government and prevents meaningful government reforms that will both increase efficiencies and make the state more hospitable to business.
But the root causes of the state’s poor business climate are really political in nature, and therefore need political solutions.
Most business leaders in California continue to be astonished at how out of touch the California Legislature is with business community and business climate issues. And again, the root cause of this aloofness is a political problem—the California Legislature is controlled by Democrats who are closely tied to their pro-labor base, namely the state’s public employee unions.
So to move the needle on business climate issues in the California Legislature, political pressure must be applied to the state’s public employee unions. Ideally, the business community needs to level the political playing field between business and labor and perhaps the best way to do this is through public sector collective bargaining reform.
Governor Arnold Schwarzenegger saw the nexus between union issues and the California economy in the mid-2000s, but his political approach largely failed because he tried addressing the policies without first addressing the political power of the state’s public employee unions.
Pro-business policy change is not possible in the current political environment because the state’s public employee unions are too powerful and can almost always unilaterally defeat all attempts to make the state more business friendly.
Thus, the road to improving the state’s business climate must start with political reform, and I believe public sector collective bargaining reform is the best way to get there.
After all, the establishment of collective bargaining rights for public employees in California is what created the state’s public employee unions to begin with, and gave rise to their ascent to become the most powerful political interest in California.
In 1968, the California Legislature passed the Meyer-Milias-Brown Act which established collective bargaining for California’s municipal and county employees. Collective bargaining rights were extended to school districts in 1976, state government employees in 1978, and higher education employees in 1979.
I have served as an expert witness and participant in dozens of major sets of public sector labor negotiations around California over the last six years, including the 2013 labor standoff for the Bay Area Rapid Transit District (BART) and the lead expert witness in labor arbitration for the City of San Francisco over the last two rounds of negotiations.
Based on my experience, I believe that the state’s collective bargaining system is “broken” and serves to lock in unaccountable, unsustainable and high-cost government.
Collective bargaining also serves to empower the state’s public employee unions as the preeminent political force in California by allowing them to not only control government operations at the bargaining table, but also control government through the political process at both the state and local, primarily by giving large sums of political contributions.
The state’s collective bargaining rights were put into place to provide a “reasonable method of resolving disputes regarding wages, hours, and other terms of conditions of employment between public employers and public employee organizations,” according to the Meyers-Milias-Brown Act.
But the actual effect has been to give public sector unions almost unilateral control over both state and local government operations, as well as the state’s political system.
Since every major change to government organization and operation must either be made in the California Legislature, at the ballot box or in collective bargaining—public sector unions are effectively able to even prevent the most common sense reforms such as teacher tenure, merit pay, right to work, and civil service reform.
The state’s collective bargaining process is also deeply flawed and essentially “corrupt” due to unchecked conflicts of interest. It is standard practice for local elected officials to recuse themselves from votes on legislation that impacts businesses or groups that are contributors to their campaigns, but this standard does not apply to public sector unions.
Public sector unions are legally allowed to make large campaign contributions to the elected officials who are in charge of the collective bargaining process and who ultimately decide what pay and benefit increases public employees are awarded. The result is a continuous increase in the salaries, benefits and perks of public employees that far exceed their private sector counterparts and any reasonable standards of just public compensation.
Real public sector collective bargaining reform would serve to both control the cost of government, which is essential to limiting the state’s tax burden, as well as limit the ever increasing war chest of campaign contributions afforded to the public sector unions by curbing union dues, which are based on the continuous upward spiral in public employee wage and benefit costs.
The current process is also hugely expensive and inefficient and represents a huge transfer of wealth from the state’s public agencies to law firms and labor attorneys who are key participants in the collective bargaining process.
Thus, collective bargaining reform holds the key to improving the state’s business climate both by controlling the cost of government, and helping level the political playing field between the business community and public sector unions in the state’s political process, which will serve to produce a more business-friendly political environment.
David Kersten is the president of the Kersten Institute for Governance and Public Policy (www.kersteninstitute.org ). He has participated an expert witness and financial analyst in dozens of major sets of public sector bargaining negotiations all over California. Kersten is also an adjunct professor of public policy at the University of San Francisco.