Shadowbosses: Government Unions Control America and Rob Taxpayers Blind by Mallory Factor

of retiree health care. When government workers retire early, the state provides full health-care coverage for them until Medicare kicks in (and even after that to some extent). With so many government workers retiring at fifty-five, fifty, or even earlier, these health-care costs are considerable. But nineteen states don’t put aside any money at all to pay these health-care costs, they just use a “pay as you go” plan and pay the health-care costs for the current year. But in future years, health-care costs and pensions will crowd out other important items in the state or local budget, like public safety and education. But again, that’s tomorrow’s problem.
    Unfunded state liabilities for health care and pensions amount to over $1.36 trillion, based on states’ own actuarial calculations. 53 The only problem is that these gloomy calculations are
too optimistic
—because most states assume that they will earn an 8 percent annual return on their pension fund investments. Who can expect a return on their investments that high, especially without taking on risky investments? Not you and me, and not state pension funds, either. In reality, America’s state pensions earned under 4 percent annually from 2000 to 2010, about half the rate the actuaries use for their calculations. 54 The U.S. Senate Finance Committee recently came out with a more realistic estimate of the unfunded state and local government pension obligations, finding that they may exceed $4 trillion. 55
    When the government assumes overly rosy investment conditions—an 8 percent annual return—and bases pension policy on those conditions—sooner or later, the government will come looking for your wallet. It’s like buying your child a pony, assuming that your kid will go out and earn the $10,000 it takes a year to pay for food, medical care, and board for the pony. Your kid’s going to come up short, and you’re going to have to make up the difference. There’s no such thing as a free pony—or a free pension.

Chapter 6 Summary Points
    About half of all state and local government revenue is now spent on pay and benefits for state and local employees, and that is increasing.
Many union contracts allow workers to hike their pay by performing largely useless work—like police officers in Englewood, New Jersey, being paid $3,000 a year extra for showing up to work fifteen minutes early to change into uniform, or being paid $25,000 or more in “extra-duty pay” to stand around construction sites.
Union contracts also may allow government employees to increase their pensions considerably by working extra overtime in the last years before retirement.
States with high rates of unionism have heavier state tax burdens and slower employment and income growth than less unionized states.
The most likely states to default on their obligations have an average unionization rate 20 percent higher than the other states.
Right-to-work states show far more growth in average real personal income (24.9 percent) than heavily unionized states (7.8 percent) from 2000 to 2010.
Median state debt per person is nearly three times higher in heavily unionized states than in lightly unionized states.
Government pensions are destroying state finances. California’s per capita unfunded pension liability is over $13,500 per person, Connecticut’s is $17,622, and Rhode Island’s is $20,271. In contrast, less unionized states have an average unfunded pension liability per person of $10,030, still bad but much better.
Unions are changing the demographic map of the United States as taxpayers flee highly unionized states and move to less unionized states. One consequence is that right-to-work states as a group gained eight to nine representatives, and heavily unionized states lost the same number of representatives, each of the last three times congressional representatives were reapportioned based on population.

CHAPTER 7
Corruption and Conspiracy
    S OVIET dictator Joseph Stalin