Study of Union Financial Reports Reveals Excessive Waste, Political Activism

Examination of union LM-2 reports reveals pattern of high overhead and administrative costs, limited attention paid to core mission of worker representation

News Release
Thursday, Aug. 28, 2008

Paul Kersey
Director of Labor Policy

MIDLAND — Administrative and overhead costs for unions are unusually high, and spending on workers’ representation — the core task of labor unions — is correspondingly low, according to a study released today by the Mackinac Center for Public Policy. "Union Spending in Michigan: A Review of Union Financial Disclosure Reports," examined national, state and local data from federal LM-2 reports for six prominent unions and used the information to create estimated budgets.

Director of Labor Policy Paul Kersey’s review of union financial reports shows that less than half of a typical union member’s dues go into representation, which was nearly matched by the costs of overhead and administration. In contrast, a typical nonprofit will usually try to keep overhead and administrative costs at around half of what is spent on its core programs. Overall, six unions, all with a significant presence in Michigan, were examined: Teamsters, National Education Association/Michigan Education Association, United Auto Workers, Service Employees International Union, American Federation of State, County and Municipal Employees, and United Brotherhood of Carpenters and Joiners of America.

"Our review of union reports indicates that Michigan unions tend to have rather bloated operations, with high operating costs. Our research also suggests that unions in Michigan are not focused on representing workers," said Kersey. With only 29.5 percent of its spending dedicated to representation, the National Education Association appears to be the least focused on its members and their workplace concerns.

The report also notes numerous flaws that remain in the current union financial reporting system, such as a loose definition of what constitutes representation spending, or the ability of unions to treat their fundraising mechanisms as representation. In some cases, contributions to overtly political organizations were listed by the unions under representation. "On the whole these loopholes tend to work in the unions’ favor," Kersey noted, "but even with these very generous rules, most unions spend less than half of their funds on worker representation."

Michigan currently allows for workers to be forced to pay union dues or agency fees as a term of employment under collective bargaining agreements. In recent years, as Michigan’s economy has struggled, there has been increased interest in a state right-to-work law, under which workers could not be forced to pay union dues or fees. Prior Mackinac Center research has shown that right-to-work states have outperformed Michigan in terms of economic growth and job creation.

"We give unions in this state tremendous power and access to financial resources," Kersey concluded, "but the financial reports indicate that unions in Michigan may be misusing what we have given them."