States with more heavily unionized public-sector workforces are more likely to have higher total debt, according to this new study from the Beacon Hill Institute in Boston. Specifically, the study finds that each percentage point increase in public sector unionization equates to an added $78 in per-capita debt.
The money graf from the study’s summary:
“This paper will argue that the presence of public sector unions in a state leads to greater state profligacy. First, we find that every percentage point increase in the unionization of public sector employees is associated with an additional $78 of state and local government debt per capita. Informed citizens are well aware of the potential for public debts to impede the ability of governments to provide basic services, but promises to pay future benefits to public sector employees today may lead to identical issues. These promises, the most important of which are pension plans and retiree health benefits, are known as unfunded liabilities. In essence, state and local governments have committed to providing these benefits in the future, but any reasonable calculation shows that governments today are not putting enough money aside to keep their promises without severely burdening future generations. We show that, for each percentage point of the public sector workforce represented by unions, states are about one percent more likely to be rated as “very poorly managing their future liabilities” by the Pew Center on the States. States [that] put limits on the power of public sector unions will likely see better managed state finances and more realistic plans for meeting current and future obligations to public sector employees. The failure to address this issue will only lead to an enormous spike in tax rates or deep cuts in basic social services. The arithmetic does not lie.”