by Scott Walker
CHAPTER 6
“Nuclear Lite”
In my inaugural address, I invoked the one part of the Wisconsin constitution that has never been altered or amended since it was first approved in May 1848—the Frugality Clause—declaring, “It is through frugality and moderation in government that we will see freedom and prosperity for our people.” Now the time had come to begin restoring frugality to our government and prosperity for our people.
We began with prosperity. Immediately on taking office, we called a special session of the legislature to tackle my number one priority as governor: jobs. In my predecessor’s last term, Wisconsin lost 134,000 jobs, and the state’s unemployment rate had reached 9.2 percent. We needed to stop the hemorrhaging and start creating jobs again. So in our first three weeks in office, we cut taxes on health savings accounts (HSAs), cut taxes on job creators in Wisconsin, relieved unnecessary regulation so we could enforce common sense—not excessive red tape—and passed tort reform to stop frivolous, job-killing litigation. Nearly every measure was passed with bipartisan support in both the assembly and senate. We were off to a great start.
On January 28, 2011, I called my staff together around the large oak table in my office in the Wisconsin state capitol. Since November, my policy director, Ryan Murray, had been working with Mike Huebsch and his staff at the Department of Administration to crunch numbers and develop a list of options for how to close the budget gap. Now the time had come to make decisions.
Democratic governors in New York, California, and Connecticut were announcing layoffs to balance their budgets, but I was adamant that in Wisconsin there would be no more layoffs and no more furloughs. I was not going to needlessly put people out of work in one of the worst economies in our lifetime.
Mike told me he understood why I was determined to avoid layoffs but didn’t understand why I was so adamant that there be no more furloughs. State employees were used to them, and they saved on average about $7 million a day. Over the course of a biennial budget, a dozen furlough days a year added up to a lot of money.
The answer was that furloughs were one-time savings. They were Band-Aid solutions that did not address the underlying condition. I was not interested in gimmicks or temporary fixes. I wanted to solve our budget problems once and for all.
Because we were facing an immediate budget gap of $137 million, we needed to do something to close the gap right away. None of the solutions they put on the table solved the problem. I asked how much we could save if we raised health care and pension contributions right away instead of waiting until the start of the next biennial budget in July.
My staff said that would help solve the problem but asked how on earth we were going to negotiate that with the unions. They had just tried to ram through contracts without the pension and health care contributions. The fight over the contracts in the lame-duck session showed that the unions were not going to let us do it without a fight.
“What if we didn’t have to negotiate?” I asked.
There was silence in the room.
“What prohibits us from raising health care and pension contributions?” I continued. “Collective bargaining and union contracts. Well, what if we just pass a budget repair bill that gets rid of the unions and eliminates collective bargaining?”
It took a moment for everyone to realize I was not just asking a hypothetical question. I had already made up my mind.
I walked them through my plan. If I was going to keep my promise not to raise taxes, and avoid massive layoffs or cuts to Medicaid, then the only way to close the deficit was to reduce state aid to schools and local governments by about a billion dollars. The education cuts alone would be the biggest in the history of our state. Having been a local official, I knew what cuts that large would mean. We would devastate education and the legitimate services that local governments provide unless we did something dynamic to give them an option to backfill the lost money from the state.
Eliminating collective bargaining would give local leaders the tools to do just that. They could increase health care and pension contributions without having to ask union leaders like Rich Abelson for permission they knew would never come. And if teachers and other public workers did not have to pay union dues, they could use that money to offset much of the costs of those increased contributions.
More important, if we liberated schools and local governments from the grip of the unions, they could save tens of millions more by bidding out their health insurance on the open market, eliminating ridiculous work rules, reining in overtime abuse, and implementing other commonsense reforms that unions vetoed. And they could do it all without cutting jobs or public services.
I asked if there were any better alternatives. Everyone agreed that there were none. Someone had to pay if we were to close a $3.6 billion deficit. We could take the money from the taxpayers through higher taxes. We could take the money from middle-class families by throwing people out of work. We could take the money from schools and local governments and devastate education and services without giving them a way to backfill the lost state assistance. We could take the money from teachers and public workers through higher contributions to their health care and pensions without giving them a way to make up the lost income.
Or we could take the money from the unions.
I decided to take it from the unions.
I asked Ryan and Mike to calculate precisely how much our schools, our local governments, and our technical colleges could potentially save if they no longer had to negotiate with the unions. They found that they could more than make up for the loss in state aid. We would cut about $1.25 billion in state aid, but the school districts and local governments stood to save about $1.5 billion—if they fully used the tools we would give them to control their budgets.
By taking on collective bargaining, we had found a way to make everyone whole—everyone, that is, except the union bosses. They were the only ones who would get hurt in the entire process. Which was fine by me.
I was leaning heavily toward this course of action after my meetings with Mitch Daniels. But even after I became increasingly clear in my own mind on my preferred option, I still spent several months having my staff look at all the other options—everything from implementing the increased health and pension contributions to reforming the arbitration system that regularly awards large pay raises to public workers to eliminating collective bargaining in specific areas, such as health care.
Initially, I did not tip my hand as to where I was leaning because I did not want to prejudice their work. I wanted them to exhaust the alternatives. I wanted to see if they could come up with a better answer. Only after every option had been examined, and it was clear to me that there was none close to being better than what I had in mind, did I tell my staff that this was what we were going to do.
This is generally how I approach major policy decisions. I want my staff to keep pushing the envelope and trying new ideas, even when I’m pretty certain which way I intend to go. Sometimes that process allows me to improve my proposal. Sometimes it helps me think through the different roadblocks we might face. And sometimes it produces an alternative that is better than the one I initially had in mind.
Today, my staff can often figure out where I am leaning by the kinds of questions I ask. But back when we were examining how to close the budget deficit, everyone was so new they still had not figured out my “tells.” (I joked with them later that when I stand in front of an open mike at the Milwaukee Press Club and say I’m considering decertifying the unions, that’s probably a pretty good tip-off). So they were genuinely surprised when I told them that I intended to eliminate collective bargaining.
When I finally shared my plan, the answer was so obvious that Mike later told me he kicked himself for not thinking of it. But the solution was only obvious to me because I was looking at the problem through the prism not of state government but of local government.
As a former local official, I knew firsthand the pure frustration of putting forward innovative solutions only to see them constantly thwarted by the unions.
We knew the union leaders would put up a fight. They would rather have seen us take the money from the poor, lay off middle-class workers, undermine education, and decimate government services—just so long as we did not close the automatic spigot of cash that was filling their union coffers.
Normally, they would have succeeded in thwarting our efforts. But two things suggested to me that we had a unique opportunity to do something that might be impossible at any other time: We had the votes, and we had no choice.
Back when I was Milwaukee County executive, there was a liberal majority on the county board. That meant that while I constantly proposed bold reforms, I often did not have the votes to implement the changes I had proposed. Most of the time it was a struggle to muster the one third necessary to stop the board from overriding my veto.
Now I had been elected governor with Republican majorities in both the assembly and the senate. Not only did we have majorities, we also had a stable of newly elected conservatives in both chambers who were eager to shake things up. Instead of fighting veto overrides, I finally had the chance to do big, bold things. I relished the opportunity not only to make tough decisions but also to actually implement those decisions and see the results—because we finally had the majorities we needed to enact true reform.
Second, we were in a fiscal hole with no way out. I didn’t lead our party into this fight when we had a budget surplus. It wasn’t like I was Evel Knievel saying “I wonder if I can jump this canyon” just for the sake of jumping over a canyon. I did it because we had a $3.6 billion deficit and no practical way to close it.
Reforming collective bargaining was the right thing to do, with or without a deficit. But even with a Republican majority, there is no way Act 10 could ever have passed if it had not been for the magnitude of the deficit. If I proposed going after collective bargaining today, when Wisconsin enjoys a nearly half-billion-dollar surplus, there would be a mutiny among senate Republicans. I wasn’t asking them to be courageous for the sake of courage. The only reason we were able to make the changes we did was the lack of any viable alternatives.
Still, we knew the path ahead would not be easy. The unions would put up every roadblock they could to stop us. We had to be prepared for every possible contingency.
So before we took our plan to the legislature, I called a meeting in the Governor’s Conference Room with several key cabinet secretaries and our adjutant general. Among other contingencies, we drew up emergency plans to cover 24/7 operations in prisons and mental health facilities in case workers at these facilities walked off the job. Later, rumors flew around the capitol that I had plans to deploy the National Guard to suppress the protesters. Nothing could be further from the truth. We had a plan to deploy the National Guard to run our prisons if correctional officers went on strike. Our corrections team told us that they could run the prisons for forty-eight hours with nonunion staff, but within two days we would need to call the Guard in. So we put the Guard on standby to cover these essential services.
There was one major issue that still had to be resolved. While we could handle a corrections strike, a strike by police, firefighters, and other law enforcement was another matter. There are over seventeen hundred municipalities in Wisconsin. If police and firefighters walked off the job, there would be no way to fill all the vacant positions in each of those communities. The threat to public safety would be unacceptable. “Fine,” I said, “we’ll just exempt them.”
I made the decision purely for reasons of public safety. At the time, I had no idea how politically fortuitous it would be.
Once we had our legislative and contingency plans ready, we sat down with Scott and Jeff Fitzgerald to brief them on our proposal. Scott had just taken over as senate majority leader, while his brother, Jeff, had become the new assembly speaker.
When we explained what we intended to do, they laughed at first.
“You’re not serious?” Scott said in disbelief.
He soon realized we were. Keith Gilkes, my chief of staff, walked them through the details of the draft legislation, the other alternatives we had considered, and why they were inadequate. He explained why we had exempted police and firefighters. And he laid out our plan to deploy the Guard to keep prisons running in the event of a work stoppage.
It did not take long for Scott and Jeff to get over their shock and realize that our plan was not only feasible, it was also the only way to solve the budget deficit without devastating schools and public services.
So Scott took the plan back to Mike Ellis, the president of the senate. Politically, the majority leader is more powerful than the senate president, but Mike Ellis exercised power by virtue of his legend. He is a forty-year senate veteran, and had stared down plenty of governors before me. If he was with us, our plan was certain to prevail; if he opposed us, he would be a powerful adversary.
Scott came back and reported Ellis’s reaction, which was more colorful than I can describe here, but his basic message was: “Governor Walker has lost his mind.”
So Scott arranged a face-to-face meeting with Senator Ellis. In addition to Ellis, we were joined by Speaker Fitzgerald, as well as by Representative Robin Vos and Senator Alberta Darling, the cochairs of the Joint Finance Committee that would have to mark up the bill.
I walked them through our plan, and when I finished, there was dead silence in the room.
Finally, Robin Vos piped up and asked, “So you mean public workers wouldn’t be able to join a union?”
“That’s right,” I said.
“Wow,” said Vos.
Ellis looked at me and said point-blank, “Governor, you can’t do this.”
He warned that if we went through with our plans, we would unleash holy hell. He even suggested I was trying to curry favor with the editorial page of the Wall Street Journal. He insisted that there had to be another way.
Ellis is a longtime budget hawk, and he liked the idea of doing something big to eliminate our budget problems once and for all. But he was worried that if we got rid of collective bargaining, Republicans would be accused of simply going after the unions.
He wanted to close the budget deficit by enacting a 6 percent across-the-board spending cut. We walked him through what a 6 percent cut would mean in terms of education, Medicaid, corrections, and other vital services. We laid out for him the program cuts and thousands of layoffs that would be involved. As we explained the alternatives, it became clear to Ellis and everyone in the room that unless we took on collective bargaining, there truly was no way to solve the budget deficit—at least without putting people out of work and harming public education and services.
We were not doing this to go after the unions, I explained. We were doing it to protect schools.
It was then that Robin Vos said, “Well, this is kind of the ‘nuclear option.’ What if we talk about ‘nuclear lite’?”
Vos suggested that we keep collective bargaining in place, but place strict limits on it. It would be less controversial to reform collective bargaining than to eliminate it. Ellis liked the idea. The legislators asked for some time to work out the details of what such a proposal would entail. So we left.
A few hours later, my staff got called to the senate president’s office. When they walked in, they found Ellis, Vos, Darling, and the Fitzgerald brothers hunched over a computer, pecking out a counterproposal.
Keith and Eric looked at the screen. On the top of the page, it read: “Nuclear Lite.”
Under their plan, we would institute paycheck protection; take employee contributions to health insurance and pensions off the bargaining table; limit collective bargaining to wages and some other unspecified noneconomic matters; cap any wage increase to something called the Qualified Economic Offer, or QEO (a 3.8 per
cent maximum annual increase which, if offered, would not be subject to binding arbitration); require a referendum for any larger pay increases; limit union contracts to one year; and freeze school aid for two years.
The plan still needed work, but the good news was that we had moved from “Governor, you can’t do this” to discussing how we were going to do it.
The legislators printed out their proposal, and my staff took it back to our offices to work on it some more. The next day, we gave Scott and Jeff our counterproposal, which eventually became the basis for Act 10.
They key elements were:
First, we would limit collective bargaining to base wages capped at the Consumer Price Index, or CPI (which was lower than the Qualified Economic Offer). Any increases above the CPI would have to be approved by the voters in a referendum.
Second, no other issues would be subject to bargaining, including benefits such as health insurance, which meant school districts and local governments would be free to bid out their insurance on the open market for the first time, saving tens of millions of dollars.
Third, instead of barring the unions from negotiating with the government, we would require that they first demonstrate they had the support of a majority of all their members by holding an annual recertification vote.
Fourth, we required teachers and other public employees to contribute at least 5.8 percent of their salaries toward the cost of their pensions, and to pay 12.6 percent of their health insurance premiums—which is about half the average for the private sector.
Finally, we made union membership optional, and ended the state’s practice of automatically collecting union dues (which could be as high as $1,400 a year). By making dues voluntary, we gave teachers and other public workers a free choice of whether they wanted to keep the money to offset some of the increased health and pension contributions, or give it to the unions.