Big Labor Trying To Buy Way Into North Carolina

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Since 1947, North Carolina and most states throughout the Southeast have been “right-to-work” states, meaning union membership is not be required as a condition for employment. According to the U.S. Bureau of Labor Statistics, North Carolina ranked 49th in union membership in 2005, with only 2.9 percent of its workforce belonging to labor unions. Recent events, however, show efforts may be underway to advance union activities and soften North Carolina ‘s staunch anti-union environment.

Political activity, especially campaign contributions, by big labor is on the rise in North Carolina . As a result, expect to see liberal politicians pushing a pro-union agenda that will not only hurt business and economic growth, but lead to higher prices and the elimination of jobs critical for many low-income families.

SEANC Agreement

From 2002-2004, when North Carolina and the rest of the nation were experiencing an economic slowdown, tough decisions had to be made. For two consecutive budgets (FY02 and FY03), state employees did not receive pay increases. Despite its 55,000-plus membership, the State Employees Association of North Carolina (SEANC) had been unsuccessful in raising money, and, therefore, wasn’t much of a player in the political process. State employees were also prohibited by law from going on strike.

Deciding it needed a larger voice in the political process, SEANC set out to develop new strategies to enhance its standing with political leaders. In November 2003, the SEANC Board of Directors instructed its executive director to “seek out like-minded organizations with which SEANC could partner to build its strength and effectiveness.” SEANC found that partner in the Service Employees International Union (SEIU), the fastest-growing union in the United States , and the nation’s second-largest public employees’ union.

SEANC saw the partnership as a way to use the vast resources of SEIU (currently estimated at $20 million in cash) to gain more leverage with legislators. In turn, SEIU wanted to use the new partnership to gain a foothold in North Carolina so it could begin to organize municipal, county and local government employees and learn techniques from SEANC in building a large public worker organization in the traditionally union unfriendly south.

In February 2004, the SEANC Board of Governors approved a five-year partnership with SEIU, in which SEIU agreed to provide the funding and SEANC the infrastructure and manpower to advance a common agenda. They want to see an end to the right-to-work provision and initiate a government run health care system.

2004 Election

With the 2004 elections approaching, the SEANC-SEIU partnership instantly became a major player by contributing some $1.5 million to sympathetic candidates in both parties. After what they felt were three years of being ignored by Governor Mike Easley, SEANC sought a replacement. Enter Republican gubernatorial nominee Patrick Ballantine.

Coincidentally, a central theme of the Ballantine campaign was a 20 percent (5 percent per year, for four years) raise for state employees. As a result, Ballantine won SEANC’s endorsement over Democrat incumbent Mike Easley. With that endorsement SEIU gave $500,000 to the Republican Govenor’s Association (RGA), $4,000 to Ballantine’s campaign, and an additional $10,000 on Ballantine’s behalf.

SEIU also pumped more than $900,000 into targeted state legislative races in which it thought it could most affect the outcome. Under an umbrella organization called “ North Carolinians for Heath Care” (NCHC), SEIU and SEANC provided mail pieces, phone calls and campaign organization for their candidates of choice.

The mail pieces were well designed and spoke in broad generalities about “reducing health care costs for small businesses” and supporting “new ideas to lower the cost of prescription drugs.” SEIU was mentioned twice on the mail pieces, but only by its initials, never verifying that the mail was from a labor union that supports “replac(ing) the failing employer-based (health care) system” (Read – government provided health care).

While political action committees (PACs) may only contribute $4,000 directly to a candidate’s campaign committee, PACs may funnel an unlimited amount on “independent expenditures” in support of/or in opposition to candidates. These expenditures can come in the form of mail, phone calls, TV and radio ads, or anything else traditionally associated with a political campaign. SEIU made independent expenditures on behalf of 17 state House and Senate candidates — fifteen were Democrats and two Republicans. The expenditures ranged from $446 for Leslie Cox to $176,000 for Alice Graham Underhill .

SEANC made the strategic decisions on which races to target and SEIU provided the money. While some districts received just a few phone calls, other high-value candidates like Alice Graham Underhill , Rick Glazier and Linda Coleman were the recipients of expensive media campaigns that included constant radio ads, slick mail pieces, and robo-operated telemarketer phone calls.

As a result, 11 of the candidates backed by the SEANC-SEIU coalition won on Election Day 2004, two Republicans and nine Democrats.

Other 2004 Involvement and Soft Money

While individuals and PACs are only allowed to contribute $4,000 to a candidate per election cycle, they can contribute unlimited amounts of money to party political committees, called soft money. Traditionally, three campaign committees are utilized for soft money donations: state political parties, a party’s designated House campaign committee and Senate campaign committee. These committees usually spend money on behalf of candidates for radio and TV ads, mail and phone calls. The supplemental spending by these party organizations often doubles and triples the amount a candidate can spend on his or her own, and is often the difference between winning and losing.

While SEIU was the only labor organization to make independent expenditures on behalf of specific North Carolina candidates, other unions contributed either directly to candidates or made large soft money contributions to the N.C. Democratic Party or its respective House and Senate campaign committees.

For the 2004 election cycle, the following unions spent

• Teamsters – $194,550
• N.C. Association of Educators (NCAE) – $311,000
• National Education Association (NEA) – $270,000
• International Brotherhood of Electrical Workers (IBEW) – $35,000

In total, big labor directly spent more than $2.2 million in North Carolina during the 2004 election cycle with an overwhelming majority going to either Democrat candidates or Democrat campaign committees.

DLCC and Speaker Black

While the donations listed above were disclosed through the N.C. State Board of Elections (SBOE), other political bodies operate outside the scope and jurisdiction of the board. 527 groups, as their Internal Revenue Service (IRS) calls them , are quasi-political organizations that can accept unlimited sums of money from any corporate or individual entity. These groups can spend this money in elections, so long as they do not specifically advocate the support or defeat of a particular candidate. But more times than not, large chunks of the money are transferred from these groups to either the state party or one of the respective campaign committees, where it can be used to benefit a specific candidate.

In 2004-2005, embattled House Speaker and prolific fundraiser Jim Black served as finance chairman of a 527 organization called the Democratic Legislative Campaign Committee (DLCC). This is a national organization whose purpose is to support and elect Democratic state House and Senate candidates throughout the country. Every August, Speaker Black holds a fundraiser for DLCC in Pinehurst, where hundreds of thousands of dollars are raised in support of Democratic causes.

In 2004, most of the contributions came from corporations with an interest in issues likely to come before the North Carolina General Assembly: lottery vendors, landfill operators, and tobacco companies. These corporate donations to DLCC apparently resulted in the channeling of $375,000 in soft money donations back to the N.C. Democratic Party, $225,000 to the N.C. Democratic House Committee, and $25,000 to the N.C. Democratic Senate Committee.

As a reminder, it is illegal for any North Carolina political committee to accept corporate contributions. Still, there is no doubt that Speaker Black raised hundreds of thousands of dollars in soft money from corporations for DLCC and within a matter of weeks $375,000 made its way back to North Carolina Democrat committees.

Due to the closeness in the time frame and the apparent connection between money raised by Black from corporations and then subsequently transferred from DLCC to either the N.C. Democratic Party or the N.C. Democratic House Committee, the NC State Board of Elections (SBOE) has launched an investigation into the matter.

Ironically, while the SBOE has been investigating the DLCC fundraising for some time now, it quickly held hearings and fined the Republican Governor’s Association nearly $200,000 for ads it ran in support of Patrick Ballantine. The alleged reason was because (as detailed above) SEIU’s contributions to RGA were illegal corporate expenditures in North Carolina, contributions almost identical to those given by SEIU to DLCC and then spent in North Carolina Democrat campaigns.

Jim Black’s annual DLCC fundraiser in August 2005 included a few new guests. In addition to the usual large corporate gifts from drug manufacturers and its industry group PhRMA, labor unions began to contribute heavily. According DLCC filings with the IRS, in the time period directly around Black’s fundraiser (not all groups deliver their checks on the exact date), more than $300,000 was raised from labor unions, with $100,000 coming from the Teamsters, and $50,000 each from SEIU, the American Federation of Teachers (AFT), NEA, American Federation of State, and County and Municipal Employees (AFSCME). The IBEW also chipped in $10,000. No money was transferred to any North Carolina political committees in 2005.

Even with the legal problems surrounding Speaker Black, the labor unions have continued to contribute to his cause. According to Form 8872 filed with the IRS on October 16, the DLCC paid Pinehurst Resort $53,390 on August 22, for expenses incurred in hosting his annual fundraiser. In the time period within one week of that event, reports show national labor unions again funneled large amounts of money into DLCC. That same report shows that the Laborers’ Political League gave $75,000; AFT, AFSCME and SEIU each gave $50,000; the Teamsters and Machinists’ Union gave $25,000 each; and the United Steelworkers contributed $10,000. In total, Jim Black raised $300,000 from labor unions, with hundreds of thousands of dollars more coming from Altria, FedEx, and various pharmaceutical companies.

On August 1, the DLCC gave $85,000 to the N.C. Democratic Party (NCDP). On August 2, it gave another $65,000 to NCDP. And most recently on September 7, DLCC gave $75,000 more to the Democratic Party.

Over the past two years, almost $600,000 has been raised by DLCC from labor unions at fundraisers hosted by House Speaker Black. As of September 30, the date of the last report DLCC filed with the IRS, $225,000 had been given to the N.C. Democratic Party. It will not be known how much more will be spent in North Carolina before the November 7 election until future reports are filed.

Within a few days of Speaker Black’s fundraiser in Pinehurst, the Teamsters’ PAC gave $5,000 to Black’s legal defense fund. Since Black will not reveal the names of the contributors to this fund, it is unknown if any other labor unions, corporations or other parties interested in the work of the General Assembly are donating to the fund.

2006 Elections – Union Money to N.C. Democratic Campaigns

Other unions got involved early in the 2006 election as well. On August 28 (within a week of Speaker Black’s fundraiser), the NEA gave a direct contribution of $265,000 to the N.C. Democratic Party, and on August 31, the Teamsters contributed $20,000 to the N.C. Democratic House Campaign Committee. Already, SEIU had donated $100,000 to the N.C. Democratic House Campaign Committee on June 2. It has subsequently given another $25,000 to the N.C. Democrat Senate Campaign Committee, $4,000 to the NCDP, and $22,000 in direct contributions to candidates.

So far in this election cycle, labor unions have donated $641,000 in reported contributions to North Carolina Democratic campaign committees. Political committees’ campaign reports are due with the SBOE on October 30, which covers the period from July 1-October 21. Unfortunately, with reports publicly available such a short time before the election on November 7, money will be spent and voters’ opinions will be influenced without knowing who is paying for the influence. The total amount spent by labor unions to influence this election cycle will not be fully known until sometime early next year.

Why?

Any special interest group becomes involved in the political process in order to shape the debate and influence decision makers. But just what are labor unions trying to accomplish by spending millions of dollars in North Carolina politics? Obviously, labor unions are going to rally behind the usual issues of collective bargaining and increasing the minimum wage. This agenda is already working, with the General Assembly voting this past session to increase the minimum wage $1 to $6.15/hour.

But what else might be driving the big labor agenda?

As reported earlier, in 2004, SEIU spent more than $175,000 under the guise of health care reform to support N.C. House candidate lice Graham Underhill (D-Craven). Underhill defeated her opponent, Michael Speciale (R-Craven), 51.2 percent to 47.1 percent, in one of the five-closest House races last election cycle. With the expenditures from SEIU added to her fundraising total, Underhill outspent her opponent by nearly 10 to 1 (this does not include any money the N.C. Democratic Party or the N.C. House Democrat Committee, funded by labor money, may have spent on her behalf).

During her first term in the General Assembly, Underhill sponsored bills to raise the minimum wage, increase teachers’ salaries, and expand Medicaid coverage to more individuals. She was appointed co-chair of the Subcommittee on Health Care and Health Insurance for Employees and Employers of the House Select Committee on Health Care.

In the two meetings of the subcommittee after the adjournment of the 2006 legislative session, the topics of discussion have included state approaches to universal health care coverage and issues regarding providing health insurance to every child in North Carolina . Not a word has been spoken in the committee regarding free market solutions to health care; every solution seems to be government-based. It is doubtful those who voted for Underhill knew that when they received mail stating that Alice Underhill would reduce health care costs, it would be by adopting a single-payer program of government-run healthcare, as advocated by SEIU.

SEIU also supported Linda Coleman (D-Wake) in her successful 2004 House campaign to unseat incumbent Sam Ellis (R-Wake). All in all, SEIU spent $82,370 on independent expenditures of mail, phone calls and radio ads. When the 2006-2007 budget was being debated by the General Assembly, Coleman, a former state employee and SEANC member, lobbied passionately for increased pay for state employees, fighting for every percentage increase that could be had, even threatening to hold up the budget process if state employees did not receive the same pay raise as teachers. In the end, she was able to secure a 5.5 percent increase for state employees, almost as much as state employees had received in the previous four years combined (6.5 percent).

Beginning to Realize Results

On August 18, Governor Mike Easley vetoed Senate Bill 542, which would have allowed any organization with at least 40,000 members, a majority of which are current state employees, to have access to state facilities. Only two organizations qualified for access, SEANC and the NCAE.

The same day as the veto, Easley signed Executive Order No. 105 that allows “reasonable access” to any facility under the authority of the governor (all state buildings) for the purposes of “membership recruitment and consultation” for any employees’ association that has at least 2,000 members in the state, of which 500 are current state employees. In two strokes of the pen, one to veto the bill, and another to issue the executive order, Easley saved SEANC and the NCAE millions of dollars. These unions now have free access to taxpayer subsidized meeting facilities.

The Executive Order also took one giant leap towards collective bargaining by stating, “representatives of such a domiciled employees’ association, who are state employees, shall meet annually with representatives of the governor regarding issues of mutual concern prior to the annual convening of the General Assembly.” Beginning in 2007, the governor and his staff, likely his chief budget writer, Dan Gerlach, will meet with SEANC and the NCAE before submitting the budget to the General Assembly in order to discuss issues like pay increases and changes to the State Personnel Act. The only difference between “meet and discuss” and collective bargaining is that any results of the meetings between Easley’s staff and the unions are non-binding. It can be inferred, however, that SEANC and NCAE will be allowed tacit approval of any budget before it is presented to the General Assembly.

Pay-to-Play?

In addition to passing its annual budget, one of the biggest issues on the agenda of the 2006 session of the General Assembly was to increase the minimum wage. Liberals rallied around the issue, claiming it was long overdue since the Federal minimum wage has not increased from its current rate of $5.15 an hour since 1997. The North Carolina House was first to act on legislation increasing the minimum wage by $1 to $6.15 an hour, by passing House Bill 2174 on May 30 by a 72-43 vote. Three days later, on June 2, SEIU donated $100,000 to the N.C. Democratic House Campaign Committee.

Then on July 19 Senate Bill 542 was resurrected from the dead. The original language was stripped (a bill dealing with aggravated factors in a criminal case) and moved through both chambers of the General Assembly in only eight days. It is rumored that SEIU has pledged an additional $150,000 in this election cycle to Democratic campaign committees. Again, reports disclosing these contributions will not be available until after October 31.

What’s on the Agenda for 2007?

Looking forward to the 2007 session of the General Assembly, it is reasonable to expect big labor will want a return on the millions of dollars it has poured into North Carolina campaigns. One potential issue is a softening the state’s right-to-work laws and allowing collective bargaining.

The initial signs are that big labor is making rapid strides in North Carolina . Recently, when issues of non-payment of overtime and other workplace complaints were lodged by sanitation workers in Raleigh , UE 150, a local branch of the United Electrical, Radio and Machine Workers of America rallied to the workers’ case and quickly recruited new members. UE organized walkouts on the job, with garbage going uncollected for days as workers and union leaders demanded meetings. While the workers were not technically on strike, their actions came very close to that designation. In the end, Raleigh Mayor Charles Meeker agreed to meet with union leaders to attempt to resolve the situation.

While Mayor Meeker’s willingness to meet and compromise with union leaders set a dangerous precedent, more disturbing were comments made by Representative Deborah Ross (D-Wake) in the October 1 Raleigh News & Observer regarding an “increased momentum” to loosen restrictions on collective bargaining. Concluded Ross, “I think it’s in a better position now than it’s ever been.” Ross, a former legal counsel for the American Civil Liberties Union (ACLU), further stated that the future of collective bargaining depends on who holds the power in the Legislature after the November elections.

Collective bargaining sets labor contracts for long periods of time, which takes away flexibility from business to change their workforce to respond to market pressures. It also locks workers into set positions and skills, not allowing a person to be more productive and grow in their skill set. The increased costs arising from these contracts are passed on to consumers, resulting in higher prices and less competitive products in the marketplace. One needs look no further than the economies of countries in Western Europe to see double-digit unemployment and stagnant economic growth rates caused by strong workers’ rights movements.

The sad financial state of the American automobile manufacturers is a prime domestic example of the ills caused by labor unions. Saddled with huge workforces receiving benefits out-of-line with the market, historically powerful companies like Ford and General Motors are now struggling to maintain their position in a competitive environment. Pension and health care plans negotiated by labor unions have caused the prices of American-made cars to become less competitive with foreign imports, thus hampering the finances of these companies. Ford’s corporate credit rating was recently downgraded to “junk.”

It is widely reported that when a person purchases a U.S. manufactured automobile today, they pay more for the health care costs of current or retired employees than for the raw steel used to make the car. As foreign automakers have looked to locate operations in the U.S. , they have built plants exclusively in right-to-work states around the southeast to avoid these high costs. Any change in North Carolina law would put the state at a severe economic disadvantage with its neighbors.

Big labor has also been strongly advocating for a socialist-based universal health care program. In Maryland , union lobbyists were able to get a bill passed that required all companies with more than 10,000 workers to spend a certain percentage of their payrolls on health insurance. Known as the “Fair Share Act,” the law was conceived and pushed to the forefront by the AFL-CIO and targeted at one company in particular, Wal-Mart. More than any other company in the United States , Wal-Mart has taken a very strong anti-union stance. No Wal-Mart store employs union labor, and Wal-Mart has even threatened to close a store before it would allow a union vote to take place. While the AFL-CIO has not emerged as a major player in the union movement in North Carolina , other unions have rallied behind this proposal. Similar versions of the Fair Share Act have been introduced in 19 other states, including Tennessee , Virginia and Georgia .

Along those same lines, SEIU and similar unions have stated their strong support for an end to the employer-sponsored health insurance system, thus turning over the responsibility of health care to the government. Nine states considered legislation concerning universal health insurance coverage in 2006. Undoubtedly, it will continue to be a focal point of union activity in North Carolina for the next year.

What Next?

After spending millions of dollars in North Carolina over the past two election cycles, the results of organized labor’s efforts are beginning to be seen. The governor has already significantly strengthened collective bargaining for state employees, the minimum wage has been increased and House committees are looking at universal health care proposals. Big labor is electing more labor-friendly representatives to the General Assembly and is making large campaign contributions in a manner that suggests it could be buying its agenda.

With the 2006 elections just a few short days away, North Carolinians need to be aware exactly who is financing these campaigns. In a Civitas Institute DecisionMaker Poll taken in October, 71 percent of people who voted in the 2002 and 2004 elections said North Carolina should continue to be a right to work state. Sixty-eight percent were also less likely to vote for a candidate who accepts large contributions from labor unions. It is clear that despite the increased presence and activity of labor unions, the people of North Carolina do not endorse big labor’s ideology or practices.

A recent report by the Tax Foundation found that North Carolina has the 11 worst business tax climate of any state in the nation. Labor unions’ big government, socialist solutions to state problems will only make matters worse. If big labor is not stopped, any competitive advantage North Carolina has enjoyed in the past will soon disappear.

Chris Hayes

Legislative Policy Analyst

APPENDIX

SEIU Independent Expenditures 2004 Election Cycle

Patrick Ballantine (R) – Governor: $509,981.93

Alice Graham Underhill (D) – House 3: $176,901.92

Linda Coleman (D) – House 39: $82,370.21

Keith Presnell (R) – Senate 47: $60,964.89

Harry Brown (R) – Senate 6: $50,302.17

Janet Cowell (D) – Senate 16: $47,901.32

Rick Glazier (D) – House 45: $45,148.37

Barry Jacobs (D) – House 50: $34,335.64

James Gooch (D) – House 32: $32,762.56

Doug Berger (D) – Senate 7: $31,072.99

Beverly Moore (R) – Senate 3: $24,075.96

David Redwine (D) – House 17: $18,515.77

Malcolm Graham (D) – Senate 30: $18,285.05

Walter Dalton (D) – Senate 46: $10,126.03

Bob England (D) – House 112: $9,046.21

Shelly Willingham (D) – Senate 3: $3,863.29

Scott Thomas (D) – Senate 2: $1,024.60

Leslie Cox (D) – House 51: $446.03

SEIU Direct Contributions to Candidates and Committees 2004 Cycle

N.C. House Democrat Campaign Committee – $50,000

Patrick Ballantine (R-Governor) – $4,000

Wayne Goodwin (D-Labor Commissioner) – $4,000

Malcolm Graham (D) – $4,000

Lucy Allen (D) – $4,000

Doug Berger (D) – $4,000

Leslie Cox (D) – $4,000

Margaret Dixon (D) – $4,000

Charlie Dannelly (D) – $4,000

Sidney Dunston (D) – $4,000

Don Munford (R) – $4,000

Martin Nesbitt (D) – $4,000

Bruce Goforth (D) – $4,000

Joe Hackney (D) – $4,000

Beverly Moore (R) – $4,000

Susan Fisher (D) – $2,000