Put an End to the Privatization of Public Resources and Declare Public Sector Labor Unions Illegal

Rauner turns to privatization push during second year in office

April 30, 2016

Chicago Tribune - Stymied at the statehouse by ruling Democrats, Republican Gov. Bruce Rauner is spending year two trying to shift government functions to the private sector.

Since January, he's formed a private not-for-profit corporation to handle the state's business recruitment efforts; announced a plan to allow private companies to build and manage new toll lanes along a congested stretch of the Stevenson Expressway; and called for private donors to step in to help the financially struggling state museums and fairgrounds.

And the first-term chief executive continues to insist the state should be allowed to expand its ability to outsource work to private contractors, one of the key stumbling blocks that has stalled negotiations on a new contract for unionized state workers.

The privatization push comes as state government remains stuck in a historic budget impasse centered on a fight between Rauner and Democratic leaders over his business-friendly, union-weakening legislative agenda. It's a way for Rauner to show he's working to fix the state's financial mess even as the stalemate drives Illinois deeper into debt. Tapping private-sector resources can relieve costly burdens on taxpayers and help government be more efficient, Rauner says.


Still, only one of Rauner's ideas has been fully executed — the economic development not-for-profit, which he created by executive order. The others require buy-in from the legislature. As pressure mounts to resolve the nearly yearlong budget fight, Rauner has been working to position his ideas as options Democrats could grant him as part of a broader deal on spending.

"He wants these things on the table, to be considered in that sort of grand bargain type of discussion," said Republican Sen. Matt Murphy of Palatine. "Philosophically, the idea is, let's look at ways we can operate government in a way that is more efficient and cost-effective and maybe produces better results."

But much like the governor's legislative agenda, Democrats view Rauner's privatization agenda through a different lens: rooted in an effort to reduce costs on taxpayers and businesses by weakening worker rights.

"There of course is a concern that this is really a precursor to doing away with the unionized state employees," said Democratic Rep. Lou Lang of Skokie, a top deputy to House Speaker Michael Madigan. "The governor has spent a good deal of time aggressively going after, even attacking, public-sector labor unions."

Economic development move

Indeed, Rauner acknowledged as much when he announced the change in how Illinois recruits businesses. The governor said he was outsourcing the state's economic development efforts to a private corporation to get around hiring restrictions like seniority rules, salary limitations and requirements to hire from within the ranks of state employees.

"We want the best and the brightest, most creative deal structures in the world to come here," Rauner said. "They're not going to go through that baloney. Running our state government with the restrictions we've got around recruiting talent is almost impossible. And this is going to free us up from a lot of it."

Rauner's move came after months of deadlock with Madigan over legislation to do much the same thing. The plan appeared poised for passage, but Madigan wanted a clause that would repeal the not-for-profit's authority after three years unless lawmakers voted to renew it. Rauner objected and the deal was effectively dead.

So the governor got around the legislature by forming a corporation on his own and signing an executive order directing the Department of Commerce and Economic Opportunity to work with the new not-for-profit. Rauner said he had decided to take "unilateral action" because Madigan's insistence on a sunset clause meant it would be hard to recruit "superstars" to work on the project.

Executive orders are a political tool used from the White House to governors' mansions.

"That's a tried-and-true tradition of a chief executive who is having difficulty with the legislature, to go around the legislature and use his or her powers unilaterally," said Chris Mooney, director of the Institute of Government and Public Affairs at the University of Illinois. "You want to have some successes. He's had very few in the legislative arena."

But Rauner's go-it-alone strategy gave Democrats an opening. They've raised concerns about transparency at the private entity and questioned how taxpayer interests will be protected. Rauner so far has not allayed those concerns.

When he announced the venture in February, Rauner insisted the group would be "a transparent operation," that board meetings would be public and that the organization would be subject to the state's Freedom of Information Act.

Three months since its creation, little is known about the organization and what it is doing on the state's behalf. Meetings are not public and the group won't reveal its donors. On Friday, Rauner was asked what happened to his transparency pledge.

"I apologize, my understanding of how much is FOIA-able and how much is public was not 100 percent accurate. Everything that has to do with the taxpayers themselves, every deal, every proposed incentive package, everything that will touch a taxpayer will be publicly disclosed and will be FOIA-able and out there publicly," Rauner said. "If it has nothing to do with that, if it's purely management internally of that organization, if it's purely board meetings on general management practices, that will not be FOIA-able, that will not be publicly disclosed."

That's the kind of thing Democratic lawmakers said they were trying to avoid with the bill they negotiated with Rauner last year, which spelled out open records requirements for the private entity.

Rauner DCEO director Jim Schultz has moved out of his post at the agency to run the corporation, and a board of business leaders, many of them political donors to both parties, was announced last month.

The corporation's first hire was Kelly Nicholl, a marketing expert who worked for the Indiana Economic Development Corp. and was behind the organization's "Illinoyed" slogan, part of a media campaign to lure businesses from Illinois to the neighboring state. She's one of just three employees, including Schultz, she said in a recent interview.

Nicholl described the not-for-profit as a "startup" venture, saying it is currently borrowing office space on Clark Street in downtown Chicago. She would not say who had provided the space or reveal the names of donors who are funding the organization, saying she "would have to get permission from them" first.

And what about those open board meetings Rauner promised?

"It is a private corporation," Nicholl said. "We will be posting all of our board meeting minutes on a transparency portal on the website. Unless it's a publicly held company, most board meetings are not public."

Last month, Lang tried to dig into the not-for-profit's operations, organizing an oversight committee to question state officials about the arrangement. Schultz said the company's role would be limited to identifying opportunities and incentives and making recommendations to the state agency, which will still have total control and final approval over any venture.

Lang wondered about the need for a corporation at all, saying the department already does business with local economic development agencies. He also raised questions about hiring decisions, the governor's involvement and what benchmarks of success the company will be expected to reach.

Schultz argued that Rauner will have "no direct relationship" to the company he created. Schultz also deferred on many questions, saying he had to consult lawyers before answering.

Potential compromise

The governor has used every lever of his office to promote his privatization ideas.

He has refused to approve funding to keep the Illinois State Museum open during the budget impasse, instead using his veto pen to suggest the museum find the money in private and public partnerships. He held a news conference at the state fairgrounds to highlight the need for $180 million in repairs, saying private donors should be allowed to step in and cover the costs. And he's tried to put the state's landmark Loop office building up for auction, saying taxpayers would be better served by unloading the asset, even if it means leasing new office space in Chicago or Springfield.

Still, there might be daylight between Rauner and Democrats on another privatization idea.

When Rauner announced this year that the Illinois Department of Transportation was pursuing a public-private partnership to build toll lanes on a portion of Interstate 55, he did so while flanked by lawmakers from both parties. Acknowledging he can't make the project happen on his own, Rauner used his bully pulpit — and the desire of lawmakers to be seen serving their constituents — to present the proposal as a bipartisan idea, thus giving it a greater chance of success.

Also boosting the project's odds of approval: Democrats don't have to worry that the plan would undermine their union allies because existing state law requires collective bargaining agreements in public-private transportation projects.

Sen. Martin Sandoval, a Chicago Democrat who chairs the Senate Transportation Committee, stood alongside Rauner when the governor announced the plan and praised the idea as "a win for taxpayers and drivers."

The idea is for the state to partner with private investors to build special toll lanes along a 25-mile stretch of I-55 between the Veterans Memorial Tollway and the Dan Ryan Expressway. Private contractors would help pay for the construction and recoup their investment by charging tolls. The governor first needs the go-ahead from federal environmental regulators and approval from the General Assembly.

Democrats have favored such public-private partnerships in the past. A similar arrangement was proposed for the Illiana toll road plan to link I-55 with Interstate 65 in Indiana, and was backed by former Gov. Pat Quinn. Since Rauner took office, that plan has stalled amid legal complications over environmental concerns.

How Government Unions Became So Powerful

September 4, 2010

Wall Street Journal - This weekend we celebrate Labor Day in a country divided between two kinds of workers. The first is the private-sector worker, the vulnerable one who rides the business cycle without shock absorbers. The second worker, who works for the government, lives a cushioned existence in which terminations take years, pension amounts are often guaranteed, and recessions are only thunder in the distance. Yet worse than this division is the knowledge that the private-sector worker will pay for public-sector comfort with ever higher taxes.

How did we get here? Over the course of the past century, officials and politicians of both parties have sought to shut unions out of government or, when that failed, constrain their power within government. Early 20th-century strikes by police and other public employees were effective but proved politically damaging. Over time, the unions opted for a more quiet form of coercion -- what might be called compensation coercion. Their success in this area brought them to the privileged ground they hold today.

The origins of our current predicament began back in 1912. Presidents Theodore Roosevelt and William Howard Taft placed gag orders on postal employees to prevent them from communicating with Congress on any matter, including wages. The gag offended many members of Congress, who then supported a bill sponsored by the progressive Robert La Follette that aimed to curtail presidential authority by making it harder to fire public employees.

The Lloyd-LaFollette Act of 1912 gave federal workers the formal right to organize. What that might portend did enter the minds of the bill supporters. But many thought wholesale unionization too remote for possibility. Others saw Lloyd-Lafollette as a relatively tame statute, a lesser evil that might stall the progressive movement. Unions took Lloyd-LaFollette as the base for a movement.

Many people assumed that public unionism was emasculated for good by the city of Boston's refusal to rehire striking police officers after the Boston Police Strike of 1919. The circumstances of the strike were such that it was nearly impossible not to side with the patrolmen. Police wages were not keeping up with inflation. Their working conditions were appalling. When the police went on strike, the city and state delayed before calling in outside help and the city descended into riots and chaos.

Calvin Coolidge, then Massachusetts governor, saw the strike as inexcusable and rejected the idea that any blame be assigned to authorities. Any failure to adequately respond, he said, "cannot justify the wrong of leaving the city unguarded," which furnished the opportunity for riots. He then made it clear the policemen would not get their jobs back. "There is no right to strike against the public safety by anybody, anywhere, any time," he said.

On the question of militant action, Franklin Roosevelt proved similarly stalwart. In a 1937 letter on collective bargaining to Luther Steward, president of the National Federation of Federal Employees, Roosevelt warned that "government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. Roosevelt added that "I want to emphasize my conviction that militant tactics have no place in the functions of any organization of government employees." Roosevelt did permit aggressive union action in the private sector by signing the Wagner Act of 1935.

In 1962, President John F. Kennedy signed Executive Order 10988, which permitted collective bargaining by federal employees. Widely seen as a gift to George Meany, the AFL-CIO head who helped Kennedy win the White House, the executive order was also a gift to government unions, both because it widened federal membership and because it signaled national approval of unions for state and local employees.

Public workers took a blow to their dignity in 1981 when President Ronald Reagan, following Coolidge's lead, fired 11,000 striking air-traffic controllers of the Federal Aviation Administration. Forgotten is that the Reagan, Bush, Clinton and Bush years were the period when the tenure rules, pay schedules and compensation packages of today were signed.

Another factor leading to the rise of the public unions is the decade-over-decade increase in the size of government. Not only through the New Deal, but also through the 1950s and onward the number of workers in the public sector grew. By 1962 they represented an eighth of the national work force. If we did not have so many government employees today, the cost of sustaining them would not be so high.

Another contributing factor was union sentimentalism. Union law governing private business, from the Wagner Act on, did permit strikes and more dramatic forms of bargaining than often allowed public workers. Some states, out of a sense of fairness, gave public workers similar rights.

One was Wisconsin, where heirs to LaFollette passed laws strengthening public unions in the early 1960s. But in many states, lawmakers and citizens alike, sympathetic to public workers, sought to compensate them for this difference with job security and good pensions. States like New York even wrote into their constitutions guarantees that the pension amounts promised employees at hiring would be paid out decades later, no matter what happened to the state budget in the interim. To cover those pensions set decades ago, lawmakers must increase taxes today.

Fifty years ago in Wisconsin, the American Federation of State, County and Municipal Employees charged a critic of collective bargaining with wanting to make the public worker "a second-class citizen." Tolerance for such arguments has permitted construction of a new system in which it is the private-sector employee who finds himself second class.

This article appears in full on CFR.org by permission of its original publisher. It was originally available here.

 

In the mid 1930s efforts were made to unionize American postal workers, but were opposed by President Franklin D. Roosevelt. Roosevelt, "an ardent supporter of collective bargaining in the private sector, was opposed to it in the public sector." Roosevelt in 1937 told the nation what the position of his government was: "All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service.... The very nature and purposes of government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with government employee organizations. Change came in the 1950s. In 1958 New York mayor Robert Wagner, Jr. issued an executive order, called "the little Wagner Act," giving city employees certain bargaining rights, and gave their unions with exclusive representation (that is, the unions alone were legally authorized to speak for all city workers, regardless of whether or not some workers were members.) Management complained but the unions had power in city politics. By the 1960s and 1970s, public-sector unions expanded rapidly to cover teachers, clerks, firemen, police, prison guards and others. In 1962, President John Kennedy issued Executive Order 10988, upgrading the status of unions of federal workers. After 1960, public sector unions grew rapidly and secured good wages and high pensions for their members. While manufacturing and farming steadily declined, state- and local-government employment quadrupled from 4 million workers in 1950 to 12 million in 1976 and 16.6 million in 2009. In 2009 the U.S. membership of public sector unions surpassed membership of private sector unions for the first time, at 7.9 million and 7.4 million respectively. In 2011, states faced a growing fiscal crisis and the Republicans had made major gains in the 2010 elections. Public sector unions came under heavy attack especially in Wisconsin, as well as Indiana, New Jersey and Ohio from conservative Republican legislatures 2012 update. Conservative state legislatures tried to drastically reduce the abilities of unions to collectively bargain. Conservatives argued that public unions were too powerful since they helped elect their bosses, and that overly generous pension systems were too heavy a drain on state budgets. [Source]

 

Related:

• Rauner plans public-private update to I-55 that may add tolls
• Rauner creates new economic development arm, but no guarantees of transparency  
• Top Ten Reasons Why Public Sector (government) Unions Should Be Illegal