Where Union Money Goes

As mentioned earlier, our estimates are based on LM-2 reports filed by individual union organizations at the national, intermediate and local level. Much of the data is unverified and the rules give individual unions considerable leeway as to how individual items might be classified. The union's own word, without supporting documentation, is the basis of the allocation of staff and employee time among the various functional categories of representation; politics and lobbying; contributions, gifts and grants; general overhead; and administrative (union governance), as well as the resulting distribution of wages and benefits among those functions.

The various unions — and sometimes different units within the same union hierarchy — treated LM-2 reports very differently. The Carpenters union generally avoided attempting to pass off payments to political organizations as representation expenses, while SEIU had a number of entries attributed to representation that were likely political in nature. The National Education Association also had a sizeable number of dubious entries attributed to representation; its Michigan subsidiary had somewhat fewer. AFSCME locals in Michigan varied wildly in the extent to which staff time was attributed to representation or administration.

In assembling these estimates, we have taken what we believe to be the best approach to analyzing union spending given the limitations of the LM-2 reports. We have generally taken the reports filed by the various unions at face value, unless those reports strained credulity. Most of the reports filed by the largest locals in Michigan were used, as were all of those filed by intermediate and national organizations. Where inappropriate expenditures were found, they were noted, but as a general rule we did not attempt to adjust the unions' own figures except, as described earlier, to apportion the costs of benefits for the unions' own employees and to include strike benefits as a cost of representation.

The vast majority of union-represented workers in Michigan are required to pay union dues or agency fees as a term of employment. This examination of LM-2 reports was undertaken so that Michigan workers, lawmakers and anyone else interested in the prosperity of Michigan's working men and women could have a better understanding of how unions in Michigan use these funds.

Are the unions that receive all these mandatory dues and fees using this money wisely? Are these funds being used for their proper purposes — ensuring that these workers have effective representation in the workplace — or are they being used for something else? The answers that we found are not encouraging.

Graphic 31: Total Union Spending by Functional Category - click to enlarge

Among the six unions that we reviewed, representation made up as much as 55.2 percent, and as little as 29.5 percent, of total spending. On average, the unions we examined spent less than half of their funds on representation. General overhead took up more than a quarter; overhead and administrative costs combined made up nearly as large a portion of union expenditures as workplace representation.

We conclude with a high level of confidence that the 6.1 percent figure for political and lobbying expenditures underestimates union political activity; the only question is by how much. We have documented that unions have attributed payments to political advocacy groups under both representation and contributions. It is entirely possible that non-itemized expenditures have been misallocated in the same manner. And itemized disbursements make up a minority of the expenses for most unions. Employee time is allocated almost entirely on the honor system. A union that is willing to present a contribution to the Campaign for America's Future or ACORN as a representation expense is certainly capable of treating time spent on political activism as representation time as well. We cannot prove this has happened and will not speculate as to how prevalent it is, but this is a likelihood that workers and policymakers should bear in mind as they examine how union staff are spending their time.

What we can say with more confidence is that LM-2 forms suggest the union movement is a fairly bloated one, with overhead and administrative costs far out of line with what is needed to support the core union mission of worker representation.