Union Scam
Let's have full disclosure of union finances.

By Robert Hunter & Shawn Miller. Robert Hunter, a member of the National Labor Relations Board under President Ronald Reagan, is director of labor policy with the Mackinac Center for Public Policy. Shawn Miller is a summer research intern with the Mackinac Center.
August 22, 2001 1:30 p.m.

ave you heard the one about the union that spent none of its members' dues on political campaigns and lobbying?

Neither had most people — until last week, when the Associated Press reported on several major unions' practice of reporting zero political expenses to the IRS. No unions were identified by name in the report, but a recent tax complaint, filed by the Landmark Legal Foundation, has drawn attention to the big-spending National Education Association's claim that it has made no political expenditures since 1994.

Such patent absurdities may satisfy IRS bureaucrats, but rank-and-file workers who are forced to underwrite the frenetic activities of Big Labor know better. For their sake, Congress and the Department of Labor should strengthen federal reporting requirements for unions, thereby allowing workers the chance to take back some of their hard-earned dollars from ravenous union officials.

Unions collect an estimated $13 billion in dues each year to fund their various efforts. How much of that $13 billion is spent on collective bargaining and other core employee-representation duties and how much goes to lobbying and other peripheral activities? Since unions are not required to make any meaningful disclosures of their political expenditures, it's impossible to say.

However, in two cases where the U.S. Supreme Court examined union finances, Lehnert v. Ferris Faculty Association and Communications Workers v. Beck, it found that 90 percent and 79 percent, respectively, of union dues paid had nothing to with employee representation and everything to do with advancing the unions' political and social agenda.

Unions certainly have the right to participate in the political process, but with that right comes a responsibility: The Court ruled in both cases that unions must respect the rights of workers to know how much of their dues are being spent on politicking — and to opt out of paying for that politicking.

Despite the Supreme Court decisions, workers have had a tough time finding out just how much of their dues dollars go to fund activities unrelated to collective bargaining, and many have even suffered union retaliation just for attempting to assert their rights. The government is of little help: The Department of Labor — apparently as uncurious as the IRS — does not require unions to disclose or report any of their political spending or activity beyond a yes-or-no answer as to whether or not a given union has a political action committee fund.

In other words, the political spending of most unions — including public-sector unions like the NEA — goes largely unreported not just to the taxman but to union members and the public at large.

Now let's imagine a slightly different scenario. What if a publicly traded, billion-dollar corporation refused to supply investors with a prospectus or annual report of its financial dealings?

Such a company would not be long for this world. It would run afoul of the U.S. Securities and Exchange Commission (SEC), to say nothing of failing to attract investors, and go belly up in short order.

It's long past time to treat unions as we treat corporations and require them to make meaningful disclosures of their political and other expenditures to the general public and to their dues-paying "investors."

Lawmakers should pass legislation to require annual disclosure of union financial dealings, reported through an independent, third-party auditor, using uniform accounting standards. Union disclosure, similar to SEC regulations governing corporate disclosure, should include breakdowns of a) assets and liabilities; b) salaries paid to officials and support staff; c) contributions to state or national affiliates; d) funding for organizing activities, contract negotiations, and other collective bargaining related activities; and e) funding for any political or lobbying activities, with detailed listing of candidates, organizations, political parties, or other entities receiving union dues money.

Being a member of a union is not like being a member of, for example, the Rotary Club, where individuals voluntarily join because of the values promoted by the organization. Unionization in the 21 states that lack a right-to-work law often involves at least a mandatory dues payment as a condition of employment.

If union leaders believe the political, social, and lobbying activities they are engaged in ultimately serve the interests of union workers and the labor movement as a whole, they should make that case before their members. If workers still disagree, unions should be willing to comply with the law as it stands and refund to members that portion of dues used to subsidize the union's non-workplace-related agenda.

It's unclear whether the unions' failure to report political expenditures to the IRS will trigger any government action. But if investors can voluntarily choose firms to invest in based in part upon financial information the law requires corporations to provide, shouldn't union workers be allowed the chance to choose how much money — if any — they wish to "invest" in their union's political agenda?