June 19 (Bloomberg) -- Leaders of the largest U.S. union of public-sector workers are vowing to fight efforts by state and local governments to balance their budgets with cuts to employee benefits even as voters have sided with that strategy.
Delegates to the biannual convention of the 1.6 million-member American Federation of State, County and Municipal Employees meeting this week in Los Angeles, said their members should get what has been promised them.
“When we defend our benefits and retirement security, we’re fighting for the survival of the middle class,” AFSCME’s retiring president, Gerald McEntee, said in remarks prepared for his keynote address at the Los Angeles Convention Center. “And when we stand up for collective bargaining, we are fighting for the future of America.”
States were $1.38 trillion short of the amount they need to meet their obligations for retiree benefits in their 2010 budget year, according to a study by the Pew Center on the States in Washington released yesterday. That figure, up 9 percent from the year before, includes $757 billion in unfunded pension obligations and $627 billion for retiree health.
Two weeks ago, voters in San Diego and San Jose, California, approved ballot measures to restructure benefits for municipal workers after the cities said they couldn’t afford them. A number of states, including Wisconsin, Indiana and Ohio, have taken steps to limit collective bargaining for public employees.
“Public employees should have no better retirement benefits than the taxpayers they serve,” San Diego Mayor Jerry Sanders said in a statement after voters approved a restructuring of benefits.
McEntee, whose successor is scheduled to be selected June 21, reminded the workers that fighting over rights and benefits have gone on for decades, according to the remarks that were distributed after his address, which was closed to reporters.
Threatened cuts to benefits is the subject of workshops at the convention as well as informal discussions among the 5,000 attendees.
“If you paid into it, you should get it,” David Mariasi, a financial aid officer at Eastern Connecticut State University in Willimantic, Connecticut, representing Local 2836 at the convention, said in an interview. Mariasi has gone three out of four years without a pay increase with the promise it was helping fund his pension.
Unions representing nurses, correction officers, child-care workers and trash haulers say they are wrongfully maligned by politicians who claim pension cuts are needed to avoid a default.
“We recognize we have to share the sacrifice, but should not be a whipping boy for every politician out there,” said Danny Donohue, who heads AFSCME’s largest local, the Civil Service Employee Association of New York, in an interview.
Donohue, who is running to succeed McEntee, who has overseen the union since 1981, said the unions understand budget concerns and a need to work with lawmakers.
“It’s ironic we’re the ones picked on because we have pensions and health care because we gave up pay increases for that,” Donohue said. “In the endgame, we just want to have a decent retirement.”
To take away what was promised is unfair, said Santos Crespo Jr., the president of Local 372 in New York, which represents board of education employees.
“How is that? Where did the initial money go? Why don’t you have it anymore?” asked Crespo, 62, standing outside the convention hall.
The unfunded obligations have grown in recent years as prolonged unemployment and demand for services followed the longest recession since the Great Depression. Most states cover such expenses on a pay-as-you-go basis, making such payments increasingly difficult.
The Pew report blamed a combination of investment losses in public pensions and a failure to set aside enough money, because of other priorities or drops in state revenue due to economic downturns.
Workers “have been paying into it; it was the government that was not fulfilling their obligations,” said Francis Ryan, a history professor at Temple University who has written a book about AFSCME.
Workers have little chance of holding onto their entire pensions, he said. Politicians and voters won’t come to their rescue, and concessions will need to be made to ensure there is some retirement, he said.
Many workers are already resigned to working longer with fewer benefits, and putting off retirement for a few years. Further compromise will be made more difficult by lack of trust among negotiators, as union leaders say they are convinced Republican governors, such as Scott Walker of Wisconsin and John Kasich of Ohio, are as interested in breaking the union as they are in balancing their budgets.
Walker survived a union-led effort two weeks ago to recall him. Kasich-backed legislation to limit collective bargaining was thrown out by a referendum.
The governors, both Republicans, target public-sector unions because they are as a source of cash and votes for Democrats, said Ryan.
“They could have made minor changes, but they wanted to wipe us out,” said Michael Bauer of Local 3557 in Ohio, which maintains roads, while walking into the convention hall.
Unions scored a victory last week when California’s Democratic-controlled legislature sent to Governor Jerry Brown a bill without proposed language that would have authorized the governor to furlough workers if unions balked at a proposed one-year, 5 percent payroll reduction.
Bauer, 56, is resigned to working a few more years than he planned and seeing cuts in his health care. Pensions must be changed to give workers more responsibility for management, like a 401(k), he said. Though the workers deserve the full promised pension, they are willing to compromise.
“It’s not like we didn’t pay into it,” Bauer said. “The workers paid into the plan.”
Some unions have negotiated deals to head off more draconian cuts. Last month, the mayor and union leaders in Providence, Rhode Island, agreed to cut pensions for workers, including police and firefighters, while preventing bankruptcy for the city.
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