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Jun 17, 2010

Unions Get Beaten Up In California Elections

The Earth Rumbles in California

The costs of doing business and creating jobs in California have exploded, due partly to massive increases in public employee contracts and compensation. In last week's primary elections, three California cities saw taxpayers revolt and pass restrictions on arbitrary union power.

Vallejo, a Bay Area city of 117,000 people, became a "canary in the coal mine" for cities all around the country when it was forced into Chapter 9 bankruptcy in 2008 due to its public pension obligations. Since then, the city has tried to stabilize its finances by renegotiating its contracts with public employees. But a 1972 law requires it to use a third party to settle compensation disputes, and labor has won all 25 cases in which disputes have gone to binding arbitration. Last week, 52% of city voters approved a measure to rescind the law and give city managers more flexibility to renegotiate contracts. The victory was quite a feat, since unions poured considerable sums into a campaign to defeat the measure and Vallejo is a liberal bastion -- having voted 76% for Barack Obama in 2008.

Yet another victory for fiscal prudence took place in Chula Vista, a San Diego suburb whose 227,000 people make it the state's 14th largest city. Even though Mr. Obama won 61% there in 2008, city voters easily passed a ban on "project labor agreements," rules that require the payment of union-scale wages and benefits on any contract funded by government.

Unions used desperation tactics to try and defeat the measure. In a city that is majority Latino, they ran a Spanish-language ad that tried to link the ban to Arizona's new law cracking down on illegal immigrants. "The new Arizona law discriminates against Latinos. . . Proposition G in Chula Vista discriminates here against our community. Proposition G will take away jobs from our community," the ad said. The San Diego Union-Tribune said labor had had "hit a new low in its panic" to defeat the measure.

But city voters ignored such hysterical tactics. Locals have bitter memories of unions in Chula Vista in 2007 demanding a project labor agreement in exchange for not standing in the way of a $1 billion proposed hotel and convention center. The union held firm, and developer Gaylord Entertainment pulled out of the project due to excessive costs. The result? The loss of 12,000 temporary construction jobs and 2,000 permanent hotel jobs.

A third California city, Oceanside, with 180,000 people, also backed a ban on project labor agreements last week and even exempted city officials from paying union wages on some city employee contracts. As in the other two cities, the local electorate voted for Mr. Obama in 2008.

The success of these ballot initiatives is sure to be noted across California and in other states. Joe Mathews, an analyst at the centrist New America Foundation, predicts "a wider labor-business war [focusing] on similar measures" in the wake of last week's votes.

-- John Fund

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