There is little doubt that financial transparency is a major deterrent to labor union and political corruption. Yet, where the two meet–unions of government employees–there is virtually no financial transparency.
Unions composed entirely of government employees at the state and local level are not covered by the federal Labor-Management Reporting and Disclosure Act (LMRDA), also known as the Landrum-Griffin Act. Among other things, the act requires labor unions to file annual financial reports with the U.S. Department of Labor.
Unions of federal employees are required by the Civil Service Reform Act of 1978 to file financial disclosure forms with the U.S. Department of Labor.
Right to Know
Public-sector labor unions take an active role in the election of candidates for local office–school board, city council, etc.–and transparency of their political expenditures is in the public interest, says Brian M. Johnson, policy director for the Alliance for Worker Freedom.
“As we have seen, unions often act contrary to the best interest of their members,” Johnson said. “By mandating public-sector union financial disclosure, union members and the general public will finally get to see where all these coffers of money are going.”
A few states have laws requiring public-sector unions to file financial reports or make them available to members on request. Where financial reports are required, however, it does not appear any effort is made to make them generally available–on the Internet, for example.
The law in Connecticut specifically states the reports “shall not be open to public inspection” and authorizes the state Labor Commissioner to “destroy any report filed under the provisions of this section after such report has been on file two years.”
Requiring unions to make financial statements available only to members does little to help public officials or the general public, because this requirement does not enable those outside the union to gauge the political influence of unions on public policy.
Court Rulings Help
Some public employees receive their union’s financial information thanks to the efforts of the National Right to Work Legal Defense Foundation. These are employees in states where the laws giving public-sector unions monopoly bargaining power also sanction contracts requiring non-members to pay a fee for union representation.
In 1977, in Abood v. Detroit Board of Education, the U.S. Supreme Court ruled unions could force non-member-fee payers to pay only for the actual cost of union representation.
In 1986, in Chicago Teachers Union v. Hudson, the Court ruled unions must provide non-member-fee payers with a financial statement, based on audited information, showing expenses by category and indicating how much of each expense is chargeable as a representation expense and how much is not.
In yet another right-to-work Supreme Court case, Lehnert v. Ferris Faculty Association, the Court established a three-part test for determining what expenses were chargeable and which were not.
The Supreme Court did not delineate the expense categories for these states, but they include items such as collective bargaining, grievance representation, administrative costs, lobbying, public relations, litigation, organizing, publications, contributions, and politics.
“Under the Hudson decision, non-members of public-sector unions receive more information about union finances than does the average member,” said Mike Antonucci, director of the Education Intelligence Agency.
Good Starting Point
Legislation requiring unions to provide copies of the so-called Hudson statements to a state agency and for the agency to make them public could be a starting point for financial transparency reform. Because the reports must be prepared, such a requirement would avoid the common union objection that preparing the reports is too burdensome. However, the process would fall short of providing adequate information.
The greatest need for public-sector union financial transparency is in states that have enacted compulsory public-sector bargaining laws. This is where unions are stronger and where resistance to transparency will be greatest.
But the likelihood of strong resistance shouldn’t discourage proponents of open government from advocating public-sector union financial disclosure legislation. Promoting the passage of such laws will increase public awareness of the need for union financial transparency.
David Denholm ([email protected]) is president of the Public Service Research Foundation, an independent, nonprofit organization that studies union influence on public policy.