Unions Need to Grasp New Reality

Mr. Sergio Marxuach stated in these same pages that we are in a bankrupt economy. He argues that the model of transfer payments, tax incentives and government employment is spent. However, public sector unions continue to act as if it was smooth sailing.

Depending on the source, payroll represents some two-thirds of Puerto Rico’s government budget. Therefore, it is not possible to tackle the fiscal crisis without touching payroll. Yet public sector unions have not grasped this new reality.

Earlier this year CAREF prepared a serious proposal that spread the pain among the different sectors of society. The public sector unions could have taken this as a starting point and offered a reasonable proposal of their own. Instead, they denounced the CAREF proposal as the work of the “grandes intereses” and offered alternatives that were unrealistic and did not touch payroll.

While there are differences of opinion as to the number of public employees that need to be dismissed, the fiscal crisis has already resulted in dismissals and others are still required. The public sector unions could have been involved in negotiating severance packages or cuts in salaries and benefits to reduce the number of dismissals. Complaining about Law 7 is no substitute for serious negotiation.

Public sector employees enjoy a series of benefits that are not sustainable in the present circumstances and have not even been seriously discussed. These include a 37.5 hour work-week, 30 days of paid vacation, 18 days of paid sick leave, 19 days of paid holidays, and other paid licenses. These benefits were obtained at a time when the Puerto Rico taxpayer could afford it.

Private sector unions face market constrains when negotiating. If they press too much, the corporation may be forced to lay off personnel or even close. Puerto Rico’s public sector unions are not used to these constrains. Traditionally, increases in payroll costs could be passed on to either taxpayers or consumers.

Public sector unions, including those at WIPR, the Public Buildings Authority and the National Parks Administration, remain stuck in the past. They have been unable to negotiate under the new fiscal realities.

Particularly disappointing is the position taken by the University of Puerto Rico’s Hermandad de Empleados Exentos No-Docentes (HEEND). There are no dismissals scheduled. There are no salary cuts scheduled. While it speaks poorly of UPR’s management, there are also no work rule changes scheduled. And yet, HEEND could go on strike over a $140 salary increase agreed upon and not implemented.

The University of Puerto Rico’s budget comes mainly from an allocation of 9.6 percent of the average General Fund revenues over the past two years. As tax collections have declined, so has the UPR allocation. It will continue to decline in the immediate future. Part of this year’s shortfall is covered by over $100 million from the Federal stimulus package. This is non-recurrent income available only for two fiscal years: 2010 and 2011. Then what? HEEND seems oblivious to this reality and asks for Governor Fortuño’s intervention, in clear violation of the concept of university autonomy.

Puerto Rico needs strong public sector unions. But in order to be strong and serve their membership, they need to grasp the realities of the new fiscal environment.


Vicente Feliciano
President
Advantage Business Consulting