It is a basic axiom of government collective bargaining: If you have to bargain with a union about anything, you are liable to have to bargain with them about everything, and that includes things that you aren’t supposed to bargain about at all. This why collective bargaining with government employees is such a problem: Even when the state Legislature seems to lay down the law, government unions can still find a way to interfere.
As our Director of Health Policy and Pension Reform Jonathan Ingram noted a couple of days ago, Illinois Gov. Pat Quinn has yet to make use of his authority, under Public Act 695, or PA 97-0695, of the 97th Legislature, a bill that Quinn himself signed last June. This act gives the executive branch the authority – responsibility even – to unilaterally determine what the state will contribute towards retiree health insurance.
Beginning on the effective date of this amendatory Act of the 97th General Assembly, the Director of Central Management Services shall, on an annual basis, determine the amount that the State shall contribute toward the basic program of group health benefits on behalf of annuitants (including individuals who (i) participated in the General Assembly Retirement System, the State Employees' Retirement System of Illinois, the State Universities Retirement System, the Teachers' Retirement System of the State of Illinois, or the Judges Retirement System of Illinois …
The amount of the contribution is left to the discretion of the director of Illinois’ Central Management Services, or CMS. There is no formula, or any requirement, that the director consult with the union beforehand, and the director can issue an emergency rule that sets a new contribution level immediately.
The law gives the governor and the CMS director the ability to create immediate savings by benchmarking health insurance contributions to match those of other states, capping subsidies for early retirees and ending retiree health insurance subsidies for future employees. These three actions would save the state $1.2 million every day. For a state in dire fiscal straights, with more than $200 billion in unfunded retirement liabilities and a backlog of $8 billion in unpaid bills, saving money should be a high priority, and this would be a relatively easy way to save. So why the holdup?
Quinn has said that PA 07-0695 requires him to bargain with American Federation of State, County and Municipal Employees, or AFSCME, and other state employee unions over retiree health insurance contributions. But the statute scarcely mentions collective bargaining – and what it does say about bargaining pertains to local governments, not the state. That’s not the problem.
Nor does the labor law require that Quinn bargain with AFSCME or any other state employee union over retiree benefits. The basic rule about retirees was laid down by the U.S. Supreme Court in Allied Chemical and Alkali Workers v. Pittsburgh Plate and Glass, which stated:
The Act … is concerned with the disruption to commerce that arises from interference with the organization and collective-bargaining rights of "workers"—not those who have retired from the work force. The inequality of bargaining power that Congress sought to remedy was that of the "working" man, and the labor disputes that it ordered to be subjected to collective bargaining were those of employers and their active employees. Nowhere in the history of the National Labor Relations Act is there any evidence that retired workers are to be considered as within the ambit of the collective-bargaining obligations of the statute.
When a worker retires he or she is no longer part of the bargaining unit that the union represents. That means that employers are not required to bargain over retiree benefits. The Supreme Court was applying the National Labor Relations Act, or NLRA, the federal law that applies to unions in the private sector when it wrote this decision. But the laws that apply to government employee unions in Illinois were largely based on the NLRA, and courts in Illinois will generally follow what the Supreme Court does. This goes for the Allied decision too; retirees are not part of the bargaining unit, and governments are not required to bargain over retiree benefits. The government may choose to bargain over retiree benefits, but is not required to. It can act unilaterally without violating the labor law.
So, the health benefit law allows – indeed calls for – the executive to set contribution levels. Labor law itself is not an obstacle. But there is one more authority in Illinois that can tell the governor not to change retiree contributions. It’s not a statute or a court decision or an elected official, it’s AFSCME, the union that represents state employees. Under state law, Quinn is required to bargain with this union over wages, benefits and working conditions for current employees, and the latest round of negotiations are not going well for the governor. He has yet to sign a new deal, the old contract has been terminated and an unprecedented state employee strike is entirely possible. In prior years – before PA 97-0695 – AFSCME had negotiated extremely costly health benefits for retirees, and it is loathe to give them up. The governor may not be legally required to reach an agreement with AFSCME on retiree health benefits, but he does have to reach an agreement with the union on wages and working conditions for current employees.
And that gives AFSCME its opening. It can tell the governor, “Go ahead and change retiree health insurance. We can’t stop you. But wait ‘til you see our wage demands for current employees.”
The law gives unions leverage over the governor, and that leverage can be used to affect almost anything. In the right circumstances, it can even be used to block a state law from being implemented that could save the state hundreds of millions of dollars. In collective bargaining, everything is negotiable; even state law.
Paul Kersey is Director of Labor Policy at the Illinois Policy Institute