ECONOMIC INSIGHTS

The objective of ECONOMIC INSIGHTS is to bridge the gap between the latest economic
data and what it means for Delaware businesses.

RE: Janus: a game changer

WHAT'S HAPPENIING?

Until recently, if you were offered a public school teaching position in Delaware you would
be mandated to join the Delaware teachers’ union (DSEA). Union dues would
automatically be deducted from your paycheck, and unless you “opted out”, monthly
contributions to the union Political Action Committee would be deducted as well.

Two weeks ago, if you were offered most government job positions in Delaware you would
be mandated to join the Association of Federal, State, County and Municipal Employees
(AFSCME). Union dues would automatically be deducted from your paycheck.

DSEA and Delaware ASFME used member dues to pour millions of dollars into the
campaigns of union friendly elected officials, mostly Democrats. The intent was that those
elected officials would support spending on union compensation and promote better
working conditions.

The rules of the game changed when the Supreme Court of the U.S. issued a 5-4 ruling on
Janus v. AFSCME.

Mark Janus, a Springfield Illinios social worker, declined to join the Illinois AFSCME
union. Mr. Janus did not agree with the political shenanigans in which AFSME was
engaged. The union endorsed candidates and spent money on electioneering. While pushing
for increased pay and benefits, the union advocated for the increased taxes that were
submarining the Illinios economy.

The Supreme Court rejected the idea that the unions’ interest in collecting what they called
“fair share” fees trumps a nonmembers First Amendment rights. AFSME argued that Mr.
Janus was a “free rider” enjoying the benefits paid for by member dues. Mr. Janus said he
was not a free rider to a desired destination, but “more like a person shanghaied for a
unwanted voyage.”

Estimates are that 10% to 30% of workers will choose to leave the public unions over
coming months.
WHY IS IT HAPPENING?

Public employee union’s control of Delaware elected state government has succeeded.

In a study of the compensation of Delaware state employees—excluding public safety and

teachers—the Delaware Public Policy Institute found that after controlling for education
and other factors that state government employees receive somewhat lower salaries than
private sector workers, but benefits that are approximately 53% to 102% more generous
than similar private sector workers. The most generous benefits to state workers are in
pensions, health coverage and retire health care.

The unions have been so successful that elected officials have swarmed to write checks that
they cannot afford. According to studies from a variety of organizations, the state of
Delaware has an unfunded health care liability of $7B (total annual state spending is
$4.4B).

Even though state employees are paid with public funds, a decade ago the Delaware state
legislature voted that all records on individual pensions were confidential. The state will
not even release individual pension data without names.

DSEA has managed to get the state legislature to erect substantial barriers to the opening
of additional charter schools in Delaware, and have thwarted other efforts at increasing
school choice. Meanwhile, according to national tests (NAEP), two thirds of Delaware’s
public school 8th graders are functionally illiterate in reading and math.

Flush with money and influence, union managements have drifted into advocating
progressive positions that are supported by a minority of voters and have little to do with
the delivery of state services. Among these are such policies as the elimination of all
migration regulations, free college, and allowing first graders to declare their gender
without parental input.

Ever since the passage of the National Labor Relations Act of 1935, conservatives and
business owners have argued that coerced payment of union dues is a violation of First
Amendment rights. A battle has ensued.

Today 28 states have Right To Work laws that prevent mandatory union membership as a
condition of employment. Court case after court case has been fought. In the most recent,
public unions were prevented from extracting union dues from public funds received by
home health-care workers.
Both advocates of closed union shops and free labor markets have strongly held beliefs, and
Janus v. AFSCME is another round in the contentious battle.

THE IMPLICATIONS FOR BUSINESS?

With union financial campaign support, Democrats have dominated Delaware state
government for almost three decades. In order to maintain government spending on
employee compensation, the Democrats have been committed to raising taxes. The
Democrats have also stood firmly against school choice.

With cut backs in union campaign support following a drop in member dues, the pendulum
may shift in Dover. The result will hopefully be reduced taxes, improved public education,
and restored economic growth.

Looking forward, the unions will have to better market the many tangible benefits they
offer members, such as legal representation and training.

Dr. John E. Stapleford

President, ECON First. Contact: john@econfirst.com
302-650-4965
ECON First provides web-based marketing strategies based upon economic analysis and web
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