Government unions bloated with overhead

In Illinois, government workers are typically forced to pay money to a union as a condition of employment. That’s something Gov. Bruce Rauner would like to change.

Giving employees a choice in the matter would make unions more accountable to those they serve. As it is, unions divert a lot of money from what should be their main purpose – representing their members – to bloated overhead costs and political activities.

The Better Business Bureau’s “Standards for Charity Accountability” calls for a nonprofit to spend at least 65 percent of its budget on “program activities.” For instance, a food bank should spend the vast majority of its money on food.

Nonprofits in Illinois typically spend around 90 percent of their budget on their missions, with the remainder going to overhead and administration.

Meanwhile, all but one of Illinois’ major government unions fail to reach the Better Business Bureau’s standard, by the unions’ own accounting.

For instance, the Illinois Education Association, or IEA, the state’s biggest teachers union, devoted just 26 percent of its budget to representation in 2014. Nearly 70 percent went to administration and overhead and 3 percent went to political activities, according to LM-2 reports filed with the U.S. Department of Labor in 2013.

By contrast, the state’s second-biggest teachers union, the Illinois Federation of Teachers, or IFT, devoted 60 percent of its budget to representation.

That looks good compared to the IEA. Until you dive into the details.

The Illinois Policy Institute identified nearly $400,000 in IFT spending categorized as representation that should have been deemed overhead costs. Such spending included money used for rent, electricity, phone service, water, cleaning, office-equipment leases and office supplies. This all falls under the definition of overhead, which consists of the ongoing operating costs needed to run an organization.

The IFT also gave $3.6 million to its affiliates, primarily to the Chicago Teachers Union, or CTU. Most of its spending had vague justifications such as “subsidies and assistance.” Yet all this money was counted under representation.

But there’s no telling what that money was used for; the CTU – counting no private-sector workers among its ranks – is not required to file LM-2 reports with the U.S. Department of Labor.

The IEA, according to its report, counted its affiliate support as administrative costs.

If only half of the IFT’s “subsidies and assistance” ultimately went to representation, then the percentage of the IFT’s budget used for representation would drop to 45 percent from 60 percent.

The biggest part of a union’s budget is personnel. Even here, it appears as if the IFT lumped way too much spending under representation. The Illinois Policy Institute examined the spending for the clerical employees in the state’s biggest government unions. Clerical employees are typically support staff involved in the operation of an organization – in other words, overhead.

According to the union’s financial reports, the IEA’s clerical workers spent, on average, 10 percent of their time on representation and most of the rest on overhead and administration. By contrast, the IFT’s clerical staff, on average, devoted 47 percent of its time to representation.

The Service Employees International Union, or SEIU, Healthcare performed relatively well in this category. Clerical employees there spent an average of 67 percent of their time on representation. Meanwhile, the American Federation of State, County and Municipal Employees, or AFSCME, was lowest at 5 percent.

Government unions have every incentive to make it appear as if they are spending more than they actually are on the work of representing members. The IFT is certainly not alone in padding its representation budget, though it appears to be the worst offender.

Giving workers a choice in representation would push unions to spend their money more efficiently and effectively. As it is, this lack of accountability has lead to budgets bloated with overhead and administrative costs.

David Giuliani is a Government Reform Analyst at the Illinois Policy Institute.