WHO CONTROLS THE GOVERNMENT BUDGET?

Back in 1998, a few of the voices in the wilderness that dared to oppose the unionization of public employees warned that it would take away from the Governor and the Legislature a big part of the power to control the government budget.

The argument was that once the employees in government agencies had the right to collective bargaining to negotiate salary raises, economic benefits and many other working conditions, the agencies would effectively lose control over their budgets.

This past week, Sergio Marxuach of the Center for the New Economy, summarized the proposed budget for fiscal 2009. There is something interesting in the numbers. Contrary to popular opinion, the total budget and the total number of public employees are going down. The fiscal 2006 budget was $26.518 billion: the proposed 2009 budget is $26.331. This is a reduction of $186. The number of public workers was 224,021 in 2006: it will go down to 213,741 in 2009: a significant reduction of 10,280.

But at the same time the general fund payroll is going up. It was $5,257 billion in 2006 and will go up to $5,528 in 2009. This is a hefty increase of $271 million, or 5.16 percent.

Everyone, of course, is in favor of better salaries for teachers, policemen, health care workers. But the issue -- rather critical precisely in Puerto Rico – is who determines government salaries: who determines when to increase them, how much, in what time frame. In a government that is so deficient in providing many vital services for lack of funds, who makes the critical decisions as to spending priorities?

Setting priorities, especially in determining salaries, requires balancing two things: “justice” to the public employees, and “justice” to the people of Puerto Rico. Yes, the highest possible salaries for the employees, but not sacrificing vital services. Yes, raise the salaries, but insure that in return you get greater efficiency and quality of service for the people of Puerto Rico that pays for those increases.

The effect of Law 45, the 1998 law that authorized public employees to unionize and engage in collective bargaining, is to tilt the balance increasingly, relentlessly, in favor of unions in detriment to the people.

A good example is the gigantic Education Department. Everyone knows that as vital as public education is, and the great effort of many thousands of teachers and others, the quality of public education is tragically low, due in large part to the enormous lack of funds in the Education Department. Education Secretary Rafael Aragunde testified in the Legislature this past week that the department will close this fiscal year with a $53.3 million deficit.

To cite one example, an important administrative matter that came up in the public hearings. Legislators asked about the massive theft of student records, used for identity fraud: no less than 9,3535 files stolen in 39 schools in the past two years. Aragunde said that he simply does not have the money, $3 million, to digitize the files.

But the overriding challenge facing Aragunde and every Education Secretary before him is much bigger: in one word, payroll. Even a small salary increase has a huge budget effect. The Department has 72,000 employees. Of the proposed $2.46 billion general fund budget for fiscal 2009, no less than $2.08 billion is for payroll.

Last January, the Teachers Federation decided to strike for big salary increases that the Department could not remotely pay. The Federation ignored the fact that as a Law 45 union, it is specifically prohibited from going on strike. Gov. Aníbal Acevedo Vilá responded by decertifying the union. In the end, however, the teachers got a big raise. The Governor signed an executive order giving them a $250 a month increase: $100 now and $150 in July. Meanwhile, non-teaching employees will also get a $100 monthly increase in July, the result of their own collective bargaining. So as Aragunde told the legislators, as he struggles with the department’s budget shortfalls, he must come up with $200 million to pay for these pay raises.

Multiply many times the enormous pressure the Law 45 unions apply on the government. In the past three years, the Acevedo administration has negotiated some 80 collective bargaining agreements. This explains why while the Governor has reduced public spending and the public workforce, the percent of the total general budget for payroll goes up from 54.87 in 2006, to 58.27 percent in 2009.

This is the point. It will continue to rise, regardless of the economic situation in Puerto Rico, regardless of the deepening budget crisis, regardless of what else has to be sacrificed in vital services, regardless of what the Governor and the Legislature believe is best for all the people of Puerto Rico.

What we are seeing today, and will continue to see in the future, is precisely what those few voices in the wilderness tried to communicate back in 1998: those elected and appointed to determine payroll policies, to set critical spending priorities, have lost a large part of the control over the budget.

And in so doing, they have lost a vital part of the power to govern.