Government Spending

City Budgets Squandered on Pointless Union Giveaways

"Project labor agreements" requiring union contracts on most government work are spreading in California.

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Talk to almost any city or school district official in California, and it won't take long before the poor-mouthing begins. Budgets are stretched to the bone. There's barely enough money to pave the roads and pay for textbooks. If only taxpayers would pay more, there might be enough money to improve services or better educate the kids.

Yet with every tax hike and bond measure, services never really improve. That's because the problem isn't a lack of money, but the foolish way that officials spend what they've got. And few cities have behaved of late more foolishly than Santa Ana, Calif., whose policies should offer a warning for others.

Earlier this month, the Santa Ana City Council voted unanimously to approve the county's first citywide "project labor agreement" for most city-funded construction projects. Councilman Jose Solorio called the vote "historic," which it is, but only in the sense that it's a historically bad move that will hurt Santa Ana residents by assuring they get fewer public services.

PLAs are union-drafted construction agreements that essentially mandate the use of unionized contractors on most city projects. Supporters made a big deal of this PLA's hiring preferences for local workers, but that's largely a mirage. Cities cannot require that workers come only from certain ZIP codes, so they set easily evaded "goals" as a means to sell this giveaway to local residents. Unions need only exert their "best efforts" to hire from the local labor pool.

The city's own staff report estimates that "this agreement will add an additional 10-20 percent for public work on the construction phase." The report says that may mean an additional $2.7 million to $5.4 million a year. That's real money that could be used for real projects in a city that often has serious budget woes. Santa Ana residents ought to be angry about such "generosity."

Yet news reports quote Solorio arguing the city doesn't anticipate any new costs beyond hiring a full-time person to administer the agreement, because the city already pays "prevailing wage." I take umbrage at hiring a new person to administer an unneeded contract rather than serve residents, but that's a side point.

The main point is that PLAs do boost costs. Solorio obviously hasn't done his homework on this widely-researched issue. Yes, cities already pay artificially inflated prevailing wages. With a PLA, the wage mandates won't change, but the number of bidders on contracts will drop precipitously. Less competition means higher prices.

The contract limits nonunion contractors to those with five or fewer employees. The bigger nonunion contractors already have a workforce they know and trust, but to bid for a city project they'll have to use workers from the union hiring hall. Most firms simply won't bid for these jobs. This is how trade unions use political muscle to shove aside competitors. They also get to micromanage city contracts. City residents aren't going to benefit.

PLAs are a bad idea, but they are spreading. The Orange County Register reported last week that the Santa Ana Unified School District is considering entering into a similar "community workforce agreement." Only one other school district in the county (Anaheim Unified School District approved one last month) has one.

Santa Ana schools ought to know better. In 1999, voters approved a school bond that promised to build 13 new schools. After it passed, the district voted to sign a PLA. When all was said and done, Santa Ana was only able to build five schools because of insufficient funds. In poor, struggling districts, this is an outrage. The kids suffer to help well-paid union officials.

There are all sorts of other problems with these agreements and the Santa Ana process. PLAs require construction workers to pay into union pension funds, but few of them will be on the job a sufficient number of years to be vested. Is that fair?

Backers of these agreements tout the supposed benefit that unions agree that "they shall not incite or encourage, condone or participate in any strike, walk-out, slow-down, picketing, observing picket lines," according to the city staff report. But this is like a mugger who points a gun to your head and promises the benefit of not shooting you if you hand over your wallet. Thanks so much.

Eric Christen, executive director of the Poway-based Coalition for Fair Employment in Construction, which opposes PLAs, also questioned why the city rushed through the measure. The problem isn't just a questionable process, but unquestionably bad policy. "At what point is $1 million or $2 million or $500,000 too much to pay for the council's canine affection for union demands?" Christen asked. "They don't care. It's just play money to them."

The next time Santa Ana officials complain about tight budgets or the school district proposes a new bond measure, remember their votes on PLAs. If they can squander 10 percent to 20 percent of their budget on this nonsense, they've got plenty of money already.

This column first appeared in the Orange County Register.

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  1. I’ve heard enough of these stories to conclude that the people of California desire these things. They want to pay higher taxes while at the same time receiving less services. They want unaffordable housing. They want to ensure that it is hard and expensive to do business in their state.

    Why they want these things is an interesting enough topic to warrant an article. And it is something I would be interested in finding out about. Do they believe they are deserving of punishment? If so does the punishment have a end? And if they don’t think it should end then why haven’t they killed themselves yet? Since a self induced death penalty should be the next logical step after determining that you are deserving of never ending punishment.

    1. Actually – aside from elites like Hollywood or Silicon Valley who aren’t affected – it’s mainly a matter of the people of California not wanting to vote for icky Republicans. The crippling economy just comes along for the ride.

      1. not wanting to vote for icky Republicans

        Given that 32% of Californians are Latino and that 34% of the nation’s welfare recipients live in California, it’s not “ickiness” that keeps Californians voting for Democrats, but naked self-interest: millions of Californians want to keep bringing in relatives from third world countries, and millions of Californians want to continue to receive government handouts. And Democrats are willing to cater to those desires in order to get votes.

        Fortunately, for the country, we have a winner takes all system, so the large majorities Democrats have in California due to their cronyism don’t guarantee national victories.

  2. I’m not sure about California specifically, but nationally, education spending has been on the whole rather flat (as percent of GDP) for about 15 years.

    I can tell you from personal experience that there are many districts in which there is grossly inadequate funding. Oklahoma is probably the worst offender. Starting pay is around $31,000 with a masters degree only bumping that up about $1000 more. School maintenance is terrible, books are outdated (10 year old biology books, not enough for an entire period, much less for each student), and massive class sizes (over 30 students per period). It’s apparently only gotten worse since I left. Many school districts (though not my old one) have had to start shuttering the school one day a week. No unions to blame for this one either.

    Now, you might ask yourself, how could they get teachers if everything is so bad? They don’t. When I started, it was to take over as a long term sub for a teacher that got fired for showing up to work drunk, was held on as a sub the whole year before getting hired on as an official full time teacher the following school year. When i left, there was at least one class I personally knew about that had no permanent teacher the entire year. There were bouncing it sub to sub because there was literally no one to hire.

    1. and because the government has a monopoly on schooling, there is no competition. Case and point of why the government should not be running schools.

    2. I’m not sure about California specifically, but nationally, education spending has been on the whole rather flat (as percent of GDP) for about 15 years.

      Measuring education spending relative to GDP is foolish, just like it would be foolish to measure food expenditures relative to GDP.

      In constant dollars, per student educational spending has increased massively since the 70’s and 80’s, with no significant improvement in performance. Furthermore, US per student educational spending is much higher than it is in Europe, again, with no demonstrable benefit. And within the US, per-student spending is largely unrelated to educational outcomes.

    3. I can tell you from personal experience that there are many districts in which there is grossly inadequate funding. Oklahoma is probably the worst offender. Starting pay is around $31,000 with a masters degree only bumping that up about $1000 more.

      So, like OECD average then. And Oklahoma is the worst in the US.

      Incidentally, private school K-12 teacher salaries in Oklahoma City are $39k-$69k.

      books are outdated (10 year old biology books, not enough for an entire period, much less for each student)

      Have students pay for their public school textbooks, like they do in other countries, and you can bump up teacher’s salaries by $10k/year easily ($300/student/year * 33 students/teacher).

    4. None of this proves a shortage of funding; more likely than not it means money is being wasted on other things.

      More over, I don’t see the problem with 10 year old bio textbooks; no new development in the last 10 years is going to be very relevant at the pre-college level.

    5. Proposition 98, a minimum of 40% of California’s general fund spending is mandated to be spent on education and the actual percentage of the general fund spent on education is over 50%.

  3. California?
    No body cares.
    Secede already, and take Hawaii with you.

  4. Oh, I don’t know that the giveaways are pointless. There’s a point to it alright; the word normal folks use to describe it is “corruption”. The unions back the politicians, and the politicians pay them back. The people paying for all of this–the taxpayers–are not represented in the contract negotiations, all highfalutin’ talk about how our “public servants” represent the people notwithstanding.

    In other words, just another day in the world of “Democratic Socialism”.

  5. I just assumed that every blue and/or coastal city already had this sort of thing in place. In NYC I think there’s not only a ZIP-code quota but sex and race quotas for public anything.

    And BTW this is the main reason I despise private sector unions just as much as pubsec unions.

  6. Who squndered who here?

    1. City Budgets Squndered on Pointless Union Giveaways: New at Reason

      Just so long as no one is “squndering” lower case letters or proof-reading expertise.

  7. Is Reason protesting the letter ‘a’ or something?

    1. a is rcist.

  8. “Squndered”?

  9. Cities cannot require that workers come only from certain ZIP codes

    As far as I know, they can, actually. It’s just that everyone knows it’s a really, really bad idea. You sell the bond to the voters with the promise that you’re going to hire local, so that the money doesn’t “leave the area,” but in general if you can’t get local companies/local workers there’s a reason.

    Public officials will often concede these “local hire” provisions knowing full well that they cause nothing but headaches, and doing what they can to minimize the need for actual compliance – hence the “good faith effort” clauses. The job I’m on right now has suffered some of its worst problems from the local hire people.

    Santa Ana is a little behind the times, though – these are all over the Bay Area, but the hip cats call them “Project Stabilization Agreements” now (which sounds like something straight out of an Ayn Rand novel), highlighting that “like a mugger who points a gun to your head and promises the benefit of not shooting you if you hand over your wallet” aspect.

  10. I would argue that there’s a more complex dynamic going on in relation to the public bid system in general.

    The low-bid system is design to remove choice from the public agency that is having work performed. The point is that they can’t just hire whomever they want – they have to hire the low bidder.

    This means that the system of public construction is fundamentally adversarial. It’s not about satisfying your customer/client – it’s about squeezing as much money as you can out of a project and forcing your way in the door on the next one even if the agency you are bidding to despises you with white hot passion.

    Things like PSAs/PLAs and other “bend-over-backwards” requirements intentionally restrict the bidding pool, but often not for any reason other than to bar shady little fly-by-night bidders from putting in lowball guesses for bids, only looking at the project after they’ve been awarded it, and then hiring guys from the Home Depot parking lot to get the work done.

    So, often the only intent of the PLA is to restrict the pool of bidders to good-sized union companies, who will bring a baseline of ability that the public low bidder often simply doesn’t have.

    1. “So, often the only intent of the PLA is to restrict the pool of bidders to good-sized union companies, who will bring a baseline of ability that the public low bidder often simply doesn’t have.”

      After due diligence, I’ve often found the low bidder *does* have the ability to do the job.
      There are times when that’s not true, but the crony laws you are supporting are less effective than making the contracting agent responsible for his/her decision: Fuck up and get FIRED!

  11. The difference between graft and justice is the law, which isn’t that much a difference because the law is just as much of an ass as the legislator who wrote it, and that filth is just a distillation of whatever loopy collective agenda the voters have.

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