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California Unions Uber Alles?

In the media coverage of the presidential election, one state that is unlikely to get much attention is California, which appears to be solidly in President Obama's column. Yet that doesn't mean that Golden State voters don't face some important decisions on November 6. Two very different ballot measures will help determine the trajectory of government growth in California -- and given California's size and influence, potentially throughout the nation.

The opposing measures would either curb or bolster the political influence of California's government employee unions, one of the state's most powerful interests -- which, like government unions elsewhere, constitute a permanent lobby for bigger government. As Manhattan Institute Senior Fellow Daniel DiSalvo notes in a new analysis of the measures and the current California political landscape, "California reformers face an outsize challenge. The state's public-sector unions are among the most powerful in the country, and 57 percent of state and local workers belong to unions."

Proposition 30, supported by Governor Jerry Brown (D) and several public sector unions, would increase the state's sales tax, from 7.25 percent to 7.5 percent, and the state income tax, by a percentage point or more, for all incomes above $250,000. For the public employee unions, the benefit of this measure is clear: More money to pay their members. For Governor Brown, it gains him the unions' support -- at least for now. (Proposition 38, an even bigger tax hike, is also on the ballot, though its chances look slim.)

For businesses, however, passage of Proposition 30 means an even more hostile environment -- which translates into more reasons for people to move out of state. And it doesn't even address the state's budget problems, since, as DiSalvo notes, "These are year-to-year cuts, not structural reforms."

Seeking to curb the unions' power is Proposition 32, which would bar direct donations to candidates by corporations and unions (a provision that could prove constitutionally problematic). However, another provision would prohibit unions from making direct deductions from members' paychecks tospend on political activities. This, says DiSalvo, would "deal a devastating blow to unions' political power."

California's government unions have a strong interest in helping to pass Proposition 3o and to defeat Proposition 32. In a perfect public choice scenario, they enjoy the political advantage of being an organized constituency receiving concentrated benefits. DiSalvo explains:

For this report, we analyzed 178 propositions placed before California voters between 1980 and 2010, to delineate the role of public-sector unions in the process. We found that these unions have been more effective playing defense: they are good at blocking changes that they oppose but less successful at obtaining policy changes that they want. This in no way diminishes the political significance of union activism, however, because the power to block change can be as significant as the power to produce it. Over the years, unions have managed to stymie reforms that might well have improved the performance of California's institutions. And they have sometimes won playing offense as well—securing victories that often have had huge negative consequences for the state's fiscal health. But there is a better predictor of success than whether public-sector unions are on offense or defense: how much they care about the result. The general pattern in our findings is that when these unions are heavily invested in an initiative's outcome, they win.

This degree of union power is not confined to California, which makes Wisconsin Governor Scott Walker's (R) success in implementing public sector labor reforms, and winning a union-sponsored recall election, remarkable -- in effect, the exception that proves the rule. The referendum in neighboring Ohio that defeated Governor John Kasich's (R) reforms seems to be a more typical case.

Of course, the difference in California this time, as in Wisconsin, is the absolutely dire state of California's public finances -- and public awareness of the same. Recent polls for both Proposition 30 and Proposition 32 show a very close contest. Reason Foundation polling director Emily Ekins observes, "As Prop. 30’s support slips, there are emerging signs that even California’s Democratic-leaning electorate has grown weary of the state’s tax increases and may be ready for some Wisconsin-like reforms." We'll know soon enough.

For more on public sector unions, see here and here.