Every dollar in contract benefit today turns into multiple dollars of liability tomorrow

When America first began to unionize in the 1820s, there was a culture of poor working conditions and abhorrent pay scales across the manufacturing industries. Unions came at a time when the American worker needed a voice, and they found that voice in collective bargaining. However, collective bargaining in America today has created a culture of incentivized non-productivity.

I have the highest respect for the many hard-working, dedicated employees in our country. Many are part of a collective bargaining unit, and many are not. My comments are not intended to fault any hard-working Americans or minimize their service. Many of the Mat-Su Borough employees put in countless hours to operate disaster centers when floods arise or work the assembly meetings long into the night. It is time, however, for all of us to be aware of the economic problems we face, identify their causes and work on solutions.

As mayor of the Mat-Su Borough, I was recently faced with a decision on vetoing a borough employee union contract. While many facets of the contract grated against my values of rewarding hard work, I did not veto the contract because I realized that by looking at comparable contracts statewide, the problems are endemic.

For example, in addition to the 12 paid annual holidays that full-time employees receive, every employee in this contract is also entitled to between one and three additional days each month, depending on rate of pay, that can either be used as paid leave, sick days or those days can be “cashed in” on a quarterly basis. I cannot find anything in the non-union, private sector that resembles a benefit like this.

The nature of union contract negotiations is that each contract is intended to set a precedent for any other type of union contract in the state. I remember a round of contracts when I was on the school board that appealed to us to become the “lighthouse” with a new, unprecedented benefit. It was a benefit that at the time Kenai had the distinction of being the “beacon.” I remember commenting then that we might be the lighthouse that was leading everyone onto the rocks. You can be sure that the next contract in the state used the new benchmark to leapfrog to a new level.

This progressive incremental system across the state has brought us to where we are today. This incentivized non-productivity is costly in terms of efficiency, work rate, output and yield, and also in terms of the cost of doing business, including retirement benefits for the Public Employees’ Retirement System and the Teachers’ Retirement System (PERS/TRS). This cumulative problem statewide has amassed an unfunded liability that is about $19 billion and will not start to decline for another 20 years.

In order to reign in this problem, the state has forced municipalities to add 22 percent to all payroll expenditures to pay into the PERS/TERS liability. Because the “fix” is tied to current employee counts, the state essentially froze the employee counts so that municipalities do not have the flexibility to reduce the employee count without expensive termination studies and penalties that would track the life of that position through retirement. That means every dollar in contract benefit today turns into multiple dollars of liability tomorrow. This problem is so huge that other states are bankrupt and a few, like Wisconsin, are trying to fix it. Anchorage Mayor Dan Sullivan has stepped up as a leader in Alaska to work on this problem, and I commend him.

What I find most troublesome about the contract liabilities is that we are asking borough taxpayers to carry that burden. We are asking property owners who are working two and three jobs to pay for the very incentives that entice some public employees into non-productivity and inefficiency. As a farmer, I am fundamentally opposed for the government to pay people not to work or farmers not to farm. I believe these problems are unique to the 21st century and if leadership across the country, states and local governments do not take action, we will face economic and social problems that are not yet fathomable.

Larry DeVilbiss has been mayor of the Mat-Su Borough since January 2011.