Earlier in this paper we have shown that public employee collective bargaining under PERA can affect basic public policy issues, limiting the authority of elected officials. We have also shown that government employee unions have evolved into ideological entities with a distinct political agenda. PERA has distorted Michigan government so that it is more intrusive and burdensome than the people of Michigan would probably prefer. Adding to the distorting effect of PERA is the law's allowance of mandatory union dues and agency fees.
As is the case under the National Labor Relations Act, Michigan's PERA allows a collective bargaining agreement to include language stipulating that all workers covered by that agreement must either join the union formally or pay an agency fee in lieu of dues. This is technically referred to as an agency-fee clause. The money involved is far from trivial; a Mackinac Center Freedom of Information Act request revealed that the state of Michigan turned over a total of $17.6 million in dues and fees to six unions during 2008. These payments represented membership dues for 38,500 state employees and amounted to an average of $456 in union dues per employee. If we assume that union dues and fees are the same for local government employees, state and local governments turned over $142.5 million dollars in union dues and agency fees for 312,500 government employees in 2008. If this amount of money were eliminated, it would take a decent-sized chunk out of Michigan governments' perennial budget deficits.
To describe these payments as membership dues gives a misleading impression of what the payments are. They do not arise out of an agreement between voluntary members of a private organization; rather, they arise from collective bargaining agreements negotiated by employers on one side and unions on another. While workers can reduce their dues somewhat, they cannot prevent the transfer from going forward.[*] An employer may refuse to grant a union the right to collect mandatory dues, but this is rarely done. Mandatory dues are highly valuable to union officials, and because unions generally allow these to be withdrawn from employee salaries, they appear to be cost-free for employers, at least in the short run.
The funds are collected and turned over by the government. Once they are turned over, there is little oversight as to how they are spent. Unlike the federal government, which has at least rudimentary financial reporting rules for unions, Michigan labor law does not. As a consequence, only unions that represent private-sector employees are required to report, and employees and taxpayers are left with no spending information for many government employee unions.[†]
Earlier Mackinac Center research shows that less than half of union spending goes toward employee representation, and to the extent that one can evaluate government employee unions, they were no more scrupulous than private-sector unions. This discovery negates the most common rationale for agency-fee clauses: that unions need these funds to perform their services as collective bargaining representatives. The National Education Association and Michigan Education Association were especially unfocused, with only 29.5 percent of their spending going into worker representation. And many unions, NEA/MEA among them, appeared to be categorizing contributions to political and ideological campaigns as representation.
With agency fees effectively granting millions of dollars in guaranteed revenue to unions with strong political tendencies and little financial accountability, it would be fair to say that PERA has created a permanent, taxpayer-funded lobby for big government.
[*] For more information on workers' rights with regard to agency fees, see Robert Hunter, "Compulsory Union Dues in Michigan," (Mackinac Center for Public Policy, May 1, 1997), (accessed September 2, 2009).
[†] The Labor-Management Reporting and Disclosure Act, which establishes the financial reporting requirement, only applies to union organizations that represent private-sector employees. The effect of the federal law is that the Michigan and federal bodies of the NEA/MEA, AFSCME and SEIU, all of which represent some private-sector employees, are required to file LM-2 forms, but the vast majority of their locals are not, because those locals do not represent any private-sector workers. The majority of government employee union organizations in Michigan are not required to file LM-2 reports, and there is no state reporting requirement. For more information see Kersey, "Union Spending in Michigan: A Review of Union Financial Disclosure Reports."