California Department of Water and Power Trusts Used as Union Slush Fund
Public resources should be used to promote public purposes, meaning tax dollars should not go toward efforts that exclusively financially assist a private entity.
Over in California, a scheme has been set up that basically created a multi-million dollar slush fund with ratepayer money for the International Brotherhood of Electrical Workers Local 18.
LA Weekly describes how the trusts have been used:
The DWP and the union have been jointly running the two trusts — the Joint Training Institute and Joint Safety Institute — for more than a decade, at a cost to utility ratepayers (that’s you!) of $4 million a year. The trusts were established to operate safety seminars, but it appears that over time they became like a clubhouse for top-level union executives and DWP administrators.
For over a year, government officials sought to obtain an audit of the trusts, but faced resistance from the IBEW. After going to court, an audit was allowed and the Los Angeles City Controller recently released a scathing report on how tax dollars were wasted by the trusts.
Check out the LA Weekly story, which highlights how much money union officials spent going out to dinner at their favorites spots. The top hangout spot for IBEW union officials was Lulu’s, where they made 78 visits and spent $32,921.
At one point in U.S. history, nearly every state amended its constitution to end just this kind of wasteful spending. In the mid to early 1800s, a constitutional revolution occurred where dozens of states amended their constitutions to prohibit the use of public expenditures to aid private entities, a constitutional provision commonly called the Gift Clause.
Gift Clauses arose in reaction to scandals involving the corrupt transfer of taxpayers’ money to private enterprises. For example, in the 1830s, Illinois defaulted on interest payments after the state “invested” money to finance 1,341 miles of railroad (only 26 miles were built), and Indiana was forced into default as the result of “investment” in canals, turnpikes, and railroads.
Courts used to issue decisions like the following and strike down granting the public’s money to private interests. In Nebraska ex rel. Beck v. City of York (1957), the Supreme Court voided revenue bonds in aid of a private hog packaging company, finding no public purpose and a violation of the Gift Clause. “The financing of private enterprises with public funds is foreign to the fundamental concepts of our constitutional system. . . . To permit legislation of this character to stand in the face of constitutional prohibitions would constitute a death blow to the private enterprise system and reduce the Constitution to a shambles in so far as its protection of private enterprise is concerned.”
Over time the courts changed direction, creating so many exceptions that the Gift Clauses fell into disuse. Still, an Arizona case provides hope. Arizona’s Gift Clause forbids the state, or any local government within it, to “ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.” The Goldwater Institute, a pro-market public policy organization located in Arizona, filed a suit based on the Gift Clause to strike down the union release time provision from the Phoenix police union’s collective bargaining agreement.
California’s constitution contains a Gift Clause and the union slush funds at the DWP are as good as any case to try to revive California’s prohibition against giving away tax dollars to private interests. Clearly, using the public’s money to pay for union officials to go out to dinner, conferences, and other activity serves zero public purpose and is a grant of public money to a private entity. The Gift Clause should be used so that taxpayers can stop picking up union officials’ dinner tabs.