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February 2017 Policy Study, Number 17-3

   

The Wisconsin Miracle: Governor Scott Walker and the Historic Act 10 Reform Measure

   

Introduction

   

 

In 2011, Wisconsin Republican Governor Scott Walker faced a massive fiscal crisis with a $3.6 billion budget deficit and high unemployment. He promised not to raise taxes and famously declared that Wisconsin was “open for business.” In order to resolve the fiscal crisis, Governor Walker understood that he could not raise taxes and that massive spending cuts would end up hurting Wisconsin’s public schools and local governments. The solution to this problem was to reform the collective-bargaining process in Wisconsin. Governor Walker understood that public-employee unions were not only standing in the way of political reform, but also costing the taxpayers tremendous amounts of money with generous benefits those in the private sector often do not receive — for example, public employees often do not have to pay or pay very little for health insurance. Governor Walker realized that by reforming collective bargaining, he could save taxpayers billions, solve the fiscal crisis, and close the benefits gap between private-sector and public-sector workers.

 

When Governor Walker decided to pursue collective-bargaining reform, a policy which became known as Act 10, he opened up the biggest political fight of 2011 between Act 10 supporters and progressive Democrats and big labor, who argued that Walker was trying to undermine the “right to bargain collectively” and, in the process, “destroy unions” in Wisconsin and “undermine key public services such as education.” From a historical perspective, Governor Walker was reforming labor policy in one of the most progressive states in the Union, and he was attempting to change state government for the long term. Governor Walker understood once the battle for Act 10, or the “battle of Madison,” began that Democrats and unions would put out a massive offensive that would be seen across the nation, as demonstrators protested in Madison on a continual basis. As Governor Walker wrote:

 

They [union leaders] understood that our reforms were the leading edge of a national grassroots movement for fiscal reform — a movement that is flying below the radar of the mainstream media, but which holds the hope for a bold conservative resurgence across America. They understood the threat this grassroots movement posed to their entrenched interests. So they decided to fight back. And they made Wisconsin ground zero in their counteroffensive.[1]

 

Governor Walker was able to get Act 10 passed through the Legislature, even when several Senate Democrats fled to Illinois to attempt to obstruct the legislative process. Governor Walker explained that the results of the passage of Act 10 were as follows:

 

The state Legislature passed my budget repair bill, known as Act 10, that requires public workers to contribute 5.8 percent of their salaries to their pensions (up from zero for most) and to pay 12.6 percent of their health-insurance premiums (up from about 6 percent). We ended collective bargaining for everything except base wages. We ended compulsory union membership and stopped the forced collection of union dues — allowing teachers and other public workers to choose for the first time whether they wanted to join the union and pay dues. And we freed school districts from the stronghold of collective-bargaining rules — allowing them, for example, to buy health insurance on the open market and hire and fire teachers based on merit for the first time.[2]

 

Act 10 was a success, as it has saved Wisconsin taxpayers an estimated $5 billion. It also allowed Governor Walker and the Legislature to lower tax rates, encourage job creation, and improve education. “The big union bosses knew that if they did not stop our reforms in Wisconsin, the floodgates of change would open across the land,” noted Governor Walker.[3] Governor Walker’s Act 10 reform was the ultimate conservative reform measure at the state level that directly challenged the power of public-employee unions. As Governor Walker wrote:

 

But ultimately, the unions took their stand in Wisconsin because of the unprecedented nature of our reforms. We did not simply go after the money — lavish benefits unions had extorted from taxpayers over the years. We dismantled the entire system of corruption and cronyism by which the unions perpetuated their political power and dictated spending decisions to state and local governments. We took the reins of power from the union bosses and put the taxpayers back in charge.[4]

 

Iowa can learn from Governor Walker and his Act 10 reforms. The Iowa Legislature struggled to address a $118 million shortfall this legislative session, and the result is that the Legislature may postpone much needed tax reductions. In order to achieve any tax reductions and avoid deficits, the Iowa legislature must address state government spending. Although Iowa is already a right-to-work state, examining collective-bargaining reforms along the lines of what Governor Walker did would not only create opportunities to save taxpayers money, but also bring more flexibility to local governments and school boards and provide an opportunity for serious tax reductions. In his Condition of the State address, Governor Terry Branstad alluded to collective-bargaining reform, and he and his soon-to-be successor, Lt. Governor Kim Reynolds, should study the Wisconsin example. Reforming collective bargaining in Iowa will make conditions fairer between private- and public-sector workers, and it will begin the process of spending reform in terms of the state budget.  

 

   

 

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