AFSCME’s contract demands: A close look at the $3B hit to taxpayers

Ted Dabrowski

Former Vice President of Policy

Ted Dabrowski

John Klingner

Policy Analyst

John Klingner
February 8, 2017

AFSCME’s contract demands: A close look at the $3B hit to taxpayers

Despite the fact that the average AFSCME worker makes over $100,000 a year in total compensation, the union has made health care, salary and benefit demands that are out of line with what Illinois taxpayers can afford and would aggravate the state’s financial crisis.

The leaders of the American Federation of State, County and Municipal Employees have been trying for nearly two years to cram a new contract down on taxpayers, which would cost $3.1 billion more than what the state has proposed. The union has gone so far as to call a strike vote in an attempt to get its way.

AFSCME demands ignore the fact that the state is in a financial crisis, its population is shrinking, and overburdened taxpayers already have to pay for state workers’ generous benefits. These benefits include: the highest salaries in the nation when adjusted for cost of living, heavily subsidized health care, free retiree health insurance for most workers, and overly generous pensions. All those benefits mean the average AFSCME member makes over $100,000 a year in total compensation.

So what’s in that $3.1 billion in additional costs to taxpayers? What are the components that make up the difference between the state’s offer and AFSCME’s demands?

Health care benefits account for the biggest portion of the $3.1 billion difference: These benefits would cost taxpayers $1.7 billion in additional expenses if AFSCME gets its way. Salary and overtime benefits would cost an additional $1 billion. And other miscellaneous costs would add $400 million to taxpayers’ burden.

AFSCME state worker pay

Health care costs: AFSCME’s demands would cost taxpayers $1.7 billion more than the state’s offer

AFSCME is fighting to keep its members’ platinum-level heath care benefits at bronze-level prices. This would cost taxpayers $1.7 billion more over three years compared with the state’s plan.

Today, taxpayers are forced to pay not just their own insurance costs, which have jumped dramatically under the Affordable Care Act, but also for Cadillac health care coverage for AFSCME employees.

Illinois taxpayers on average subsidize more than three-quarters of each AFSCME worker’s health costs. That means nearly $15,000 in taxpayer subsidies for each worker.

AFSCME state worker pay

In contrast, the state has offered health care reforms for workers that would maintain effective, affordable coverage for state employees while bringing costs more in line with what taxpayers can afford.

Under the state’s reform plan, Illinois taxpayers would still subsidize 60 percent of AFSCME workers’ annual health care costs, or over $11,600 per worker annually.

This reduction in taxpayers’ costs for AFSCME workers’ health care would have major implications for Illinois’ budget because other union contracts contain “copycat” clauses that are affected by changes to AFSCME’s contract. The state’s reforms would also involve university employees and other state workers who are part of the State Employees Group Insurance Plan. The reforms would affect over 200,000 workers and their dependents. 

Salary and overtime benefits: AFSCME’s demands would cost taxpayers $1 billion more than the state’s offer

AFSCME leaders are seeking four-year raises ranging from 11.5 to 29 percent, as well as a 37.5-hour workweek before overtime kicks in. Union leaders are also fighting for overtime rates of 2.5 times regular pay on “super holidays,” such as Christmas Day, and two times regular pay on “regular holidays,” such as Presidents Day. These salary and overtime demands would cost taxpayers $1 billion more over the next three years than the state’s plan offers.

Hitting taxpayers with these additional costs simply isn’t fair, especially when the growth in private-sector salaries is compared with that of AFSCME salaries.

Private-sector workers – who pay for AFSCME and other state worker benefits – have seen their own earnings outpaced by inflation from 2005 to 2015. In contrast, the AFSCME worker median base salary, at $63,660, has risen by 43 percent over that same time period.

AFSCME state worker pay

The state’s counteroffer proposes a more reasonable plan on behalf of taxpayers: a temporary salary freeze in return for new merit pay and incentive bonuses, a 40-hour workweek, two times regular pay on super holidays, and 1.5 times pay on regular holidays.

The state has already negotiated salary reforms with 20 other unions – from affiliates of the Teamsters to the Illinois Federation of Teachers – and it is looking to do the same with AFSCME.

AFSCME pay and benefits are already generous

AFSCME’s demands must be taken in the context of its members’ already generous pay and benefits:

  • Highest-paid state employees: Illinois state workers are the highest-paid state workers in the nation when their pay is adjusted for cost of living.
  • Cadillac heath care: AFSCME members get platinum health care coverage, but pay little for it. Taxpayers subsidize more than three-quarters, or nearly $15,000, of each state worker’s yearly health care costs.
  • Free retiree health insurance: State workers receive free health insurance during retirement – even if they retire in their 50s – as long as they work 20 years for the state. These benefits are worth $200,000 to $500,000 in today’s dollars.
  • Generous pension benefits: The average lifetime pension benefits of a career state worker exceed $1.6 million. These benefits come on top of Social Security, in which a vast majority of state workers also participate.

In light of these and other generous benefits AFSCME workers enjoy, the state’s proposed reforms are fair and responsible. 

Next steps 

The Illinois Labor Relations Board last year determined that AFSCME and the state were at an impasse in contract negotiations, which meant the state could begin implementing its last, best contract offer to AFSCME employees.

However, AFSCME has petitioned state courts to stop that implementation. And since the labor board’s ruling against AFSCME, the union has offered new “compromises” on wages and health insurance that are not really compromises at all.

This latest “offer” is a desperate attempt by AFSCME to restart the game after it’s already been lost. AFSCME is still seeking to increase the burden on taxpayers, only now the union is using its “offer” as a pretext for a strike vote. The union is expected to finish voting by Feb. 19.

AFSCME’s demands will only lead to higher taxes on struggling taxpayers and will drive more families and businesses out of Illinois. That will only push Illinois further toward the financial death spiral indicated by Moody’s Investors Service’s latest warning about Illinois’ deteriorating fiscal health.

Instead of demanding additional benefits, AFSCME should follow the lead of the 20 other state unions that have reached an agreement with the state and accept a contract that brings state worker costs in line with what Illinoisans can afford.

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