Teachers’ Unions Should Mind Their Business

April 18, 2016

Teachers’ Unions Should Mind Their Business. The two national teachers’ unions, their state affiliates and their local units are well-known for their activities regarding public policy, tax revenues and collective bargaining. They are tax-exempt organizations, similar to charities, think tanks and non-profit groups, but they are also very big businesses. While it is impossible to generate comprehensive data, the combined annual revenues of teachers’ unions at all levels easily exceed $2 billion.

The business side of teacher unions is largely unexamined. Information for outsiders is limited to public disclosures required of all tax-exempt organizations, and additional details for those unions that are subject to the federal Landrum-Griffin Act. Even for insiders, information is difficult to come by due to restricted distribution. Secrecy is enhanced by the lack of competition between teachers’ unions. Except in rare instances, unions aren’t checking out each other’s dirty laundry.

Though unique in many ways, teachers’ unions are still financial entities, with income and expenditures, employees, buildings and liabilities to manage. So it shouldn’t be surprising to discover they run into situations familiar to big businesses in the private sector – not to mention their opposite number in the public sector, school districts.

Here are a few examples of recent events within both teachers’ unions. While they might overlap with the unions’ policy agenda, they are primarily business problems that NEA and AFT are no more adept at handling than the corporations they routinely criticize.

* Current and former employees of the California Teachers Association have their defined benefit pension plan managed by a union trust. The trust’s financial health is overseen by the federal Pension Benefit Guaranty Corporation. The PBGC rates each pension plan green, yellow or red. Green means the plan has on hand at least 80% of the funds necessary to cover its liabilities. Yellow means the plan requires monitoring, and red means the plan is less than 80% funded and requires corrective action. CTA retired staff have been warned that the plan will likely enter the red zone this year.

Without getting lost in pension limbo, let’s just say that CTA will either have to increase revenues to its pension fund, or reduce benefits for future recipients. If this sounds familiar, it’s because it is the same situation faced by municipal and state governments across the country.

* Current and former employees of NEA’s national headquarters, along with about 25 state affiliates, have their pension managed by a different union trust. It doesn’t have a red zone problem, but it does have a contractual one. Back in 2007, NEA signed a memorandum of understanding with the staff to bring its funding of retirement liabilities up to 100% by 2021. According to the staff union, that deadline is in jeopardy because of “lower than projected return on investments; longer life spans of Plan participants; a reduction in the ratio of active to retired participants; and lower than anticipated salary increases.” In other words, all of the predictions NEA made about the future were wrong.

Now NEA wants to renegotiate that MOU – exactly the sort of thing one would expect a corporation with a burdensome deal to do. And because NEA employees and retirees are union through-and-through, they are having none of it.

* Everyone knows the troubles the Wisconsin Education Association Council has had the past five years. Now the WEA Trust, the union-affiliated health coverage provider, reached a settlement of a lawsuit brought by 141 school districts. The trust will pay $7.5 million of federal reimbursement money the districts claimed the trust had improperly kept for itself. Other districts were originally involved in the suit, but apparently reached separate, undisclosed agreements with the trust.

The trust was founded to be a not-for-profit alternative to corporate insurance companies, which might do things like, I don’t know, retain federal reimbursement money instead of returning it to school districts.

* The American Federation of Teachers has received a lot of press play for using “its clout as a shareholder” to alter the direction of Pearson, Inc. and end its “support of high-stakes testing.” A lot of people were surprised to learn that teachers’ unions were making money from Pearson stock, but there is more irony present than just that.

AFT believes that the simple holding of Pearson shares entitles it to participate in corporate decision-making, even to the point of swaying the opinion of the company’s officers. Yet the union denies the same right to its agency fee-payers, who cannot vote for union officers or even whether to ratify or reject the collective bargaining agreements their fees are supposedly paying for.

AFT and its alliance of U.S. and British unions hold 193,000 voting shares of Pearson stock. Politico helpfully provides the context: That’s out of “roughly 821 million total.” So the unions hold 0.02% of the voting shares.

How does AFT routinely react to something that 0.02% of its members want? Almost 5,700 members – or 0.38% – want AFT to withdraw its endorsement of Hillary Clinton. AFT ignored them, and Pearson will ignore AFT.

Which brings us to: Who are those union people who decided to invest in Pearson, and why? At what meetings were the decisions authorized and how much member input was solicited? What price was paid for the shares, and were they bought at a time when the unions were badmouthing the company in public and in the press? Maybe someday AFT’s corporate practices will be as transparent as Pearson’s.

“Corporation” may have a specific definition in law, but whether one sells gasoline, soft drinks, insurance or teacher representation, we should be equally skeptical of their motives and practices.

Recent Intercepts. EIA’s daily blog, Intercepts, covered these topics April 12-18:

* Teachers: This Is Why You Don’t Get More Media Love. Everything is relative.

NEA Affiliate Executive Directors Under Pressure. The storm clouds dissipate, but there’s a flood in the basement.

* Signature-Gathering Blitz Needed to Qualify Tax Hike Extension for CA Ballot. Get right on it, Ben Dover and Seymour Butz.

North Dakota United’s Finances. Subsidized by two parent affiliates.

Quote of the Week. “There are issues of nepotism and teachers are maxed out and stressed and feel that the union doesn’t always have their back. We’re told that we should fear retaliation, but that’s not why we pay dues. We pay dues to not fear retaliation.” – Melissa Cimini, candidate for the presidency of the Providence Teachers Union. (April 13 GoLocalProv News)