Opening a hearing on Capitol Hill yesterday on labor union financial transparency, House Education and Workforce subcommittee Chairman Phil Roe, R-Tenn., declared: “Congress has a long-standing responsibility to shine a bright light on how the dues of union workers’ are being spent. In 2009, unions reported collecting more than $8 billion in workers’ dues. This figure alone highlights the importance of union transparency.”
The central question that the subcommittee is examining is how much information must union officials disclose to their rank-and-file members about union finances?
Candidates for public office, corporations, members of Congress all have to comply with financial disclosure regulations. This is even more important for unions, because membership is forced on some workers as a requirement of their jobs.
You don’t have to buy shares in corporations, you don’t have to run for office, but if you want to work in Michigan’s auto industry, you need to join the United Auto Workers.
So it’s especially unfortunate that the Labor Department, under President Obama’s appointee, Secretary Hilda Solis, is loosening the financial disclosure requirements put in place during the previous administration of President George W. Bush.
As a witness at the hearing, I testified that rank-and-file union members have a right to know what unions are doing with their dues and that Solis’ proposed changes would deny them vital information.
One union told the Labor Department in public comments, “detailed reporting requirements are unnecessary because union members are sophisticated enough to seek information about union financial matters from their unions, as well as seek publicly available information, such as that provided by the IRS.”
That sounds like a bogus rationale for making it more difficult for the rank-and-file to learn how their dues money is being spent.
If unions are misusing workers’ dues, the union is going to disguise this fact, and not tell members. Furthermore, the Internal Revenue Service data to which the union refers come out with a two-year delay, are not readily accessible, and disclose payroll and benefits information for only a few union officials.
The Bush Labor Department issued new rules in 2003 (when I was the department’s chief economist) to update Form LM-2, disclosing union receipts and expenditures, rules that took effect in 2005.
Unions had to specify itemized expenses for expenditures over $5,000 divided into representational activities, political activities and lobbying, contributions, gifts and grants, and union administration.
Forms, filed electronically, included union leaders’ salaries and time spent on union-related activities, and were displayed on the Labor Department’s website, allowing union members access to data.
After three years, the Labor Department expanded the form to make it easier for union members to identify corrupt behavior.
In January 2009, the Labor Department asked unions to disclose officers’ benefits, such as union contributions to health and retirement plans, which have increased in recent years, in addition to wages and salaries.
Another change included verification that sales and purchases of assets such as real estate and machinery were made without conflicts of interest, rather than to friends at distorted prices.
In addition, new forms gave members information on union-managed trusts, such as credit unions, strike funds, pension and welfare plans, and building funds.
But now the Solis Labor Department says that the expanded rules are too burdensome, even though the Bush Labor Department gave unions free software and training on completing the forms. The only reason that completing the forms would be too burdensome is that the organizations do not want to disclose some expenses.
Many workers have no choice but to join a union in order to work. Congress needs to protect these rank-and-file workers through detailed financial disclosure regulations.
Examiner Columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.
