Purple may be the official color of the Service Employees International Union (SEIU), but Andy Stern is leaving the union deep in the red. Last week, he surprised the labor community by announcing his resignation as president of SEIU. Mr. Stern has claimed victories in helping pass health care legislation and getting President Obama elected, but his impact within his own organization shows gaping budget deficits and massive underfunding of pensions.
SEIU has seen its liabilities skyrocket during the past decade. The union’s liabilities totaled $7,625,832 in 2000. By 2009, they had increased almost by a factor of 16, to $120,893,259. Meanwhile, SEIU’s assets barely tripled, growing from $66,632,631 in 2000 to $187,664,763 in 2009. A significant portion of SEIU’s current assets are from IOUs from hard-up locals.
SEIU is $85 million in debt, down from its 2008 high of $102 million, and has been forced to lay off employees. Mr. Stern has led protests against Bank of America, calling for the firing of Chief Executive Ken Lewis. Yet the union owes $80 million to Bank of America and $5 million to Amalgamated Bank, which is owned by the rival union Unite-Here.
SEIU’s pensions are in even worse shape. Both of SEIU’s two national pension plans, the SEIU National Industry Pension Fund and the Pension Plan for Employees of the SEIU, issued critical-status letters last year. The Pension Protection Act requires any pension fund that is funded below 65 percent of what it needs to pay its obligations to inform its beneficiaries of the deficit.
Many SEIU local pension plans are in as bad a shape as the national plans - if not worse. In 2007, well before the financial meltdown, the SEIU Local 32BJ Building Maintenance Contractors Association Pension Plan was funded at an anemic 41 percent, the SEIU 1199 Greater New York Pension Fund at 58 percent, the 32BJ District Building Operators Pension Trust Fund at 56 percent, and the Service Employees 32BJ North Pension Fund at 68 percent.
An underfunded pension plan does not have enough assets to meet its obligations to retirees in the future. Recovery is difficult if plans are significantly underfunded, as is the case with the SEIU plans. The Pension Benefit Guarantee Corp. (PBGC) insures only a portion of promised benefits to retirees in union multiemployer pension plans. If one of those plans goes bankrupt, the PBGC will guarantee only up to $12,870 in benefits.
Do not worry about Mr. Stern and other high-ranking SEIU officials, though. At age 59, he has 37 years of service in the SEIU and is entitled to a full pension and lifetime health benefits. Unlike SEIU’s pension plans for rank-and-file members and union employees, SEIU’s officer pension plan, the SEIU Affiliates Officers and Employees Pension Plan, was funded at 102 percent in 2007.
While SEIU’s pension plans were failing and its liabilities growing, Mr. Stern seemed more concerned with electoral politics than with the internal workings of the union. Indeed, politics can account for much of SEIU’s lavish spending in recent years. “We spent a fortune to elect Barack Obama - $60.7 million to be exact - and we’re proud of it,” he boasted to the Las Vegas Sun last year. In all, under Mr. Stern, SEIU spent more than $85 million to elect President Obama and give Democrats control of Congress. What has been Mr. Stern’s reward?
It is often said that in politics, personnel is policy. By that measure, SEIU carries considerable weight within the Obama administration. Patrick Gaspard, formerly the executive vice president of politics and legislation for the powerful Local 1199 SEIU United Healthcare Workers East, is now the political director at the White House.
Craig Becker, formerly SEIU’s associate general counsel and adviser to the ACORN affiliate SEIU 800 in Chicago, is now on the National Labor Relations Board (NLRB). Mr. Obama made a recess appointment of Mr. Becker after he failed to be confirmed by the Senate. This was a significant win for organized labor. Mr. Becker has hinted at having the NLRB enact card check without a vote in Congress.
SEIU Secretary-Treasurer Anna Burger sits on the Obama administration’s Economic Recovery Advisory Board. Mr. Stern himself was appointed by Mr. Obama to its deficit commission. (Mr. Stern has said he will stay in that post after he steps down from SEIU.)
Mr. Stern’s abrupt resignation has led many to question his motives and ponder his next steps. Whatever the answer, one thing is certain: He leaves SEIU - especially its pension funds - swimming in red ink. Sadly, it will be the union’s rank-and-file members who will be paying for Mr. Stern’s profligacy well into the future.
F. Vincent Vernuccio is an adjunct analyst at the Competitive Enterprise Institute and formerly was an official with the Bush Department of Labor.