The Wall Street Journal featured an editorial summarizing the perilous state of union finances and why union bosses are so eager to pass EFCA to replenish and expand their coffers. These aren’t exactly new revelations, but the Journal does a nice job tying in how unions want to reduce transparency as a result of their financial mismanagement.
The Journal highlights the AFL-CIO’s “creative accounting ” woes:
Alarm is coming even from inside the AFL-CIO — specifically, from Tom Buffenbarger, president of the International Association of Machinists and Aerospace Workers, who sits on the AFL-CIO’s finance committee. Bloomberg News reports that he is circulating a report claiming the AFL-CIO engaged in “creative accounting” to conceal financial difficulties heading into last year’s Presidential election. As recently as 2000, the union consortium of 8.5 million members had a $45 million surplus. By June of last year it had $90.6 million in liabilities, or $2.3 million more than its $88.3 million in assets. “If we are not careful, insolvency may be right around the corner,” Mr. Buffenbarger warned.
The Journal also discusses how much debt the SEIU has accumulated:
As for the SEIU, as recently as 2002 total SEIU liabilities were about $8 million. According to its 2008 disclosure form, the union owed more than $156 million, a 30% increase over the $120 million it owed in 2007. Its liabilities now equal more than 80% of its $189 million in assets.
And of course, who could forget SEIU’s hypocrisy with Bank of America?
By the end of 2008, the SEIU also owed Bank of America nearly $88 million, including its headquarters loan and another $10 million for unspecified purposes. This is the same BofA that the union has spent the past months attacking as the face of Wall Street excess. The SEIU has protested outside of Bank of America offices and demanded the resignation of CEO Ken Lewis. We assume no one forced the SEIU to invest in real estate or borrow from a bank to finance it.
The union red ink helps explain why Mr. Stern and AFL-CIO chief John Sweeney are lobbying so hard for Congress to rig the rules to make it easier for unions to gather more dues-paying members.
The other lesson concerns union governance and transparency. Unions have a long history of corruption in part because they mix large amounts of cash from dues with political purposes and little oversight. Yet the same union leaders who denounce failures of corporate governance bitterly resisted the Bush Administration’s expanded disclosure, and now they want the Obama Administration to water down those rules. The news about rising union debt shows why that transparency is more necessary than ever.