Testimony in Opposition re: Senate Bill 135 – Senate Government Affairs Committee
Thursday, April 4th, 2019
6:30 pm

 

My name is Robert Fellner and I am the policy director for the Nevada Policy Research Institute.

We oppose SB135 because it will increase annual spending by an estimated $500 million, a cost that will be passed onto taxpayers through higher taxes, reduced services or both.

Collective bargaining for public workers is unwarranted because the public sector lacks any of the imbalances that collective bargaining in the private sector was intended to fix. While private-sector employers could theoretically profit by underpaying their workers, the public sector has neither owners, nor profits, over which to negotiate. Elected officials making decisions regarding public workers’ compensation do not have to pay for these costs themselves. This explains why state workers already receive compensation packages that are, on average, well above market rates (Biggs, 2019; Fellner, 2019). For example:

• After accounting for the price differences between the states, Nevada state workers are the fifth richest compensated among state government workers nationwide (Fellner, 2019).
• When measured as a percentage of private sector compensation, Nevada state workers rank 2nd highest nationwide (Fellner, 2019).
• An “apples-to-apples” comparison that compared similarly skilled and educated government workers against their private sector counterparts found that average compensation for Nevada state workers was 29 percent above market levels — the 9th highest disparity nationwide (Biggs & Richwine, 2014).

Because “government pay is set by elected officials who pay more attention to concentrated government employees than poorly coordinated taxpayers,” (Utgof, 1983, p. 12) public-sector collective bargaining results in a situation where labor and management both profit from higher spending, and thus share the same goals.

Rather than rectifying a power imbalance, government unionization creates one, with organized labor and politicians benefiting at the expense of the taxpaying public, who are almost entirely shut out of the negotiation process, despite being the ones responsible for paying all of the costs.

The most robust, empirical analysis ever conducted on this issue found that, “per capita government spending rises by $500 to $750 in states that mandate collective bargaining in the governments’ workforce.” (Lawrence, Sherk, Dayaratna, & Belt, 2016). The researchers determined that extending collective bargaining to Nevada state workers would increase spending by $325 million to $685 million annually[1] (Lawrence et al.).

This committee should oppose SB135 because the entire premise on which it is based — that state workers are underpaid — is demonstrably false. Instead, SB135 will force Nevada taxpayers, most of whom earn far less than state workers do, to pay more, so that public-sector compensation can increase.

Finally, while this committee should oppose SB135 for the reasons outlined above, if collective bargaining is to be extended to state workers, it must be transparent. As Governor Steve Sisolak explained to the Las Vegas Review Journal in 2011 when he was still a county commissioner:

“…the public that is ultimately paying this bill has a right to know what’s being negotiated away or not. I mean how do they know if…the elected leaders, are doing a good job if they don’t know what’s being talked about. I think that everybody should be in favor of the transparency…”[2]

By raising costs and reducing the amount that can be set aside for savings, SB135 would threaten Nevada’s fiscal solvency and likely result in severe cuts in public services and tax hikes when the next economic recession hits — precisely when Nevadans can least afford them. However, the Legislature can reduce the damage that SB135 will cause by requiring that all negotiations be transparent, as Governor Sisolak previously called for, and subject to the state’s open meeting and public records laws.

Thank you for your consideration and please feel free to contact me with any questions.

[This testimony was authored by Director of Policy Robert Fellner, and presented to the Legislature by NPRI President John Tsarpalas]

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References

Biggs, A. (2019, March 2). Collective bargaining for state government workers would bust the budget. The Las Vegas Review-Journal. Retrieved from: https://www.reviewjournal.com/opinion/commentary-collective-bargaining-for-state-government-workers-would-bust-the-budget-1609500/

Biggs, A., & Richwine, J. (2014, April 24). Overpaid or Underpaid? A State-by-State Ranking of Public-Employee Compensation. AEI Economic Working Paper 2014-04.

Fellner, R. (2019). The Political Push for State-Worker Collective Bargaining. Retrieved from the Nevada Policy Research Institute: https://www.npri.org/wp-content/uploads/2019/02/Nevada-Collective-Bargaining.pdf

Lawrence, G., Sherk, J., Dayaratna, K., & Belt, C. (2016, April 11). How Government Unions Affect State and Local Finances: An Empirical 50-State Review. Retrieved from Heritage Foundation: https://www.heritage.org/jobs-and-labor/report/how-government-unions-affect-state-and-local-finances-empirical-50-state

Utgoff, K. C. (1983). Compensation Levels and Quit Rates in the Public Sector. The Journal of Human Resources, 394-406.

 

[1] In 2018 dollars. Original estimate of $307 to $647 million was in 2014 dollars.

[2] Q & A with County Commissioner Steve Sisolak, Las Vegas Review-Journal, May 1, 2011.