This week Wisconsin Governor Scott Walker introduced a state budget that would not only balance the budget but also eliminate collective bargaining rights for select state unions. His proposal and the subsequent fallout have littered front page headlines across America.

Many news sources have comprehensively documented the situation, so-much-so, we can agree on the following facts by proxy:

  • The latest Wisconsin budget proposal will “balance the budget.”
  • The proposal eliminates collective bargaining rights from unions representing state employees and teachers. Not all public unions are subject to losing this right.
  • Wisconsin Senate Democrats left the state to force a filibuster by absence.
  • Wisconsin Assembly Republicans held a vote without any Assembly Democrats present. The Democrats burst into the Assembly to prevent the vote, which did take place. This vote prevents any further amendments or edits of the bill. The vote was rescinded.
  • Thousands of people: anti-union, pro-union, tea party, students and many more descended on Madison to protest.
  • Major state employee groups have given into Walker’s proposed wage and benefit reductions in exchange for collective bargaining rights going forward.

Here’s where there does not appear to be agreement of fact:

  • That there really is a budget deficit. How a publicly audited entity can have this ambiguity is uncertain. Measuring a current year or cumulative deficit is a matter of taxes/income in versus programs/cash out and the same projections for the coming year.
  • The introduction of the bill was done properly. Some see Walker’s actions as bullying, abrupt, and biased. Others see it as simple satisfying of campaign promises. Whether a governor has to build some consensus among the legislation and the minority party is a matter of taste that appears divided among party lines.
  • The value of a teacher. Some see this as equity, finally, while those affected are predicting significant financial distress ahead. There is disagreement over whether the teachers’ plights are either comparable or much worse than private sector workers affected by the global financial crisis.
  • Whether the bill fairly or unfairly exempts other large public unions, fire and police for example. It is probably more than coincidence that these unions contributed to Walker’s campaign and do not face the same reduction in bargaining rights. However, a successful pass of this bill likely means that these unions will face the same situation some point in the future.
  • Whether, the actions of anyone affected by this situation are reasonable.

Despite these facts and uncertainties, the debate has not focused on collective bargaining, its value, and its drawbacks to a tax base. Collective bargaining done under a union presents a uniform voice to an employer, trustee, or intermediary to drive the majority benefit of its membership base. While many call the original unions’ fight for safe work conditions archaic in today’s age of OSHA, human rights, and general compassion, the role of unions have changed to homogeneously push for better wages and benefits and advance political agendas.

Collective bargaining draws a common denominator among members and pushes for an agenda that can be applied en masse across its base. This does not have to be unionized, but in labor situations, the union creates conformance pressure on members and critical mass-based pressure on negotiating opponent.

Collective bargaining from the government’s perspective eliminates the need to have the same discussion repeatedly with individual members or small pockets of members. The government settles on a uniform compensation package, one set of rules, and common benefits equitably spread across the state. Well, as close as you can get at least.

The drawbacks, which are Walker’s focus, include the unions’ ability to strongly influence above-market benefit and wages packages, particularly retirement benefits. The bill also implies unions can better their position if they have funded certain campaigns. It can economically be agreed that defined benefit plans across all industries and the public sector are too difficult to be adequately funded in volatile economic times. However, in the case of teachers, the union has achieved better than market results requiring some teachers to have only $25 per month deducted from their checks to pay for health insurance.

It’s because of this generous compensation package that the unions have quickly conceded this point to Walker in a counterproposal to retain collective bargaining. The unions’ intent appears to be to retain collective bargaining to improve this situation with future administrations.

I think the crux of this situation comes down to the connections from eliminating collective bargaining to retaining a tax base. Eliminating collective bargaining will reshape future salary and benefit negotiations with public school teachers.

First, the state will have to allocate a portion of the budget towards education. Whether this will be earmarked or itemized among programs, salaries, administrative costs, etc. has not been communicated.

Next, the education allocation will have to be cascaded to the county-city-district level. At this point, wealthy or densely populated areas should be able to push their legislators to receive an inequitable share of this push down. Rural, disorganized, or lightly-populated areas stand to lose.

With the allocation set, and it appears to be a revolving allocation budget-over-budget year, either cities or school districts will have to begin negotiating salary and benefits with teachers. This will be done absent a true market value initially until some type of equalization. Based on the total tax base and state economy, teachers may see rise and fall in their packages.

From here, individual teachers will have to negotiate their salaries. Absent collective bargaining, someone has to represent the school district vis-à-vis the government. This person or people likely would be akin to a corporate human resources department. This is another taxpayer-funded layer of management formerly done by the teacher-funded union.

Depending on how individual school districts value teachers, compensation could be widely skewed. For instance biology teachers may command more than gym teachers. Or 10-year teachers may receive more than first-year teachers. Some of this seems intuitive, but it will all be in the hands of the school districts and their own interpretations including teacher performance evaluations. This introduces a highly subjective and potentially political process that has hamstrung private corporations.

Districts could create tenure or offer additional benefits to retain exceptional teachers, which means the competition for teachers would be market-based. Wealthier districts may be able to attract and retain the best teachers. But in this situation, only a small number of families would benefit from this scenario. Further, pure market competition would reduce retention, inhibit student development, and create broader turnover in schools.

Why wouldn’t someone transfer if offered higher compensation?

So, how does the state retain a tax base? Families interested in strong public education will migrate to school districts with better facilities, teachers, and historic academic results. These areas will experience increases in property values and subsequent increases in property taxes. Families that can or choose to afford this are not at risk of loss. However, families that cannot afford these districts may opt for out of state relocation. For Wisconsin, this may be a viable excuse to augment leaving the state for better weather.

For families that cannot afford to relocate either to quality education districts or out of state, they will have to cope with adequate facilities, faculty, and results. These will not be the best in state; college recruiters from the Ivy League may not consider them. Poorer districts likely will lobby for additional funds for special education, facilities improvement, or basic up-to-snuff improvements. This not only limits the general educational value but also will cost the state taxpayer more to bring inadequate public schools close to parity. Again, this may be incentive for tax base migration.

Tax base retention will require the state to have adequate education, services, and administration to effectively carry out programs. For education in particular, opportunity should be afforded to a majority of taxpayers. The current system has the infrastructure to accomplish that.

But, the current system needs adjustment, which is where Walker is heading. Instead of a complete overhaul to the bargaining process, he should take the unions’ offer to eliminate excessive retirement benefits and equalize health care costs with the private sector. He also has a chance to not eliminate collective bargaining, but reshape the rules to use it as a tool to eliminate government. He could further apply these rules (such as requiring market-based compensation comparisons to drive negotiations) across all public unions. This would be true reform.

Lastly, public unions should have leverage commensurate to their membership and heft, not campaign funding.

While there are no easy answers, I just hope Governor Walker looks a few steps ahead on the effects of this proposal.