July 27, 2005
By Mark Tapscott
If AFL-CIO chief John Sweeney considers the defection of the
Teamsters and Service Employees International Union a "grievous
insult," he'd better hold on. Even bigger news may be coming,
thanks to revised federal rules requiring unions to be far more
specific about how they spend their members' dues.
Unions with annual receipts of $250,000 or more now must file an
expanded "LM2" report within 90 days of the close of their fiscal
year (which means new reports will come due starting this month
from about 5,000 of the nation's 30,000 unions). These expanded
LM2s are like Freedom of Information Act reports about unions that
have, until now, largely escaped public examination.
Unions have been filing LM2s since 1959, but the old form allowed
unions to hide millions of dollars of expenditures in vague
categories such as "other disbursements" and to use only rounded
figures. As a result, journalists who for years routinely pored
over SEC filings by Fortune 500 corporations seeking conflicts of
interest, stock swindles and other business scams rarely paid any
notice to the LM2s filed by unions.
Thanks to a recent federal district court ruling upholding the
Labor Department's expanded disclosure requirements, however,
unions must provide much more detail about how dues are spent on
representation, politics, organizing and contract negotiation, as
well as how much union officers are paid and how much time the
officers devote to those activities.
The expanded disclosure rules come as Big Labor is more divided
than it has been in many decades, and as union membership continues
to plummet. One nearly 35 percent of the workforce (during the
Eisenhower years), union members now make up only 12.5 percent. The
steel, auto and rail unions that once were Big Labor's muscles have
been replaced by government-employee unions, which make up the
largest portion of the splintering AFL-CIO.
Public corporations have long had to file extensive reports to the
Security and Exchange Commission, while non-profit charities have
for years filed annual Form 990 tax returns detailing much of the
same information unions are now required for the first time to
disclose on their LM2s.
Only 33 local and regional unions have had to file the revised LM2s
so far, but throughout the next year Labor Department officials
will receive and make public returns from virtually every major
union organization in the country. For the first time, the
transparency goose for corporations and charities will be good for
the union bosses' gander.
Already, the Labor Department has secured 111 criminal convictions
for deceptive record-keeping and financial reporting abuses
involving union assets found during preparation for the expanded
LM2s. Allowing journalists, congressional oversight committees,
members of the public and, especially, union members to know more
about how unions spend dues money almost certainly will lead to
even more explosive revelations.
But even bigger fireworks are almost certainly in the offing,
thanks to the far more detailed disclosure of how much unions spend
on political activities and on the often-Byzantine financial
maneuverings involved in secretive union trusts.
For years, unions have created trusts, which are little more than
slush funds available only to selected officials who use the money
to pay for campaign activities like fund raisers, candidate
literature and get-out-the-vote efforts. The trust arrangement has
put the detailed expenditures out of public reach. The revised LM2
ends that cozy arrangement.
In the long run, though, the new requirement that the number of
"agency fee payers" among the membership be disclosed may prove the
most explosive revelation. Agency fee payers are union members who
either object to their dues being spent on political causes they
reject or who simply don't like being required to join a union to
keep their jobs.
Among the first filers of the expanded form is a California chapter
of the Communications Workers of America, which reported that 47
percent of its members are agency fee payers. Only 50 percent of a
union's membership, plus one, is required to elect new leaders, or
to decertify the old union and give somebody new a chance to do a
When agency fee payers learn more about how their dues money is
being spent -- and that they can do something about it -- the
ruckus they raise may prompt even more unions to bolt the AFL-CIO.
More "insults" may be on the way, Mr. Sweeney.
Tapscott the Marilyn and Fred Guardabassi fellow at The
Heritage Foundation, is director of Heritage's Center for Media and
Distributed nationally on the Knight-Ridder Tribune wire
If AFL-CIO chief John Sweeney considers the defection of the Teamsters and Service Employees International Union a "grievous insult," he'd better hold on.
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