Special Report

Seeing Red

The Service Employee International Union's shaky finances undermined Andy Stern's protégé.

By 4.30.10

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On Monday in the Washington Times, Service Employee International Union (SEIU) Secretary-Treasurer Anna Burger -- a protégée of outgoing SEIU President Andrew Stern -- defended her and Stern's time in leadership at SEIU, claiming that the union is financially healthy. Burger's letter to the editor was in response to my April 23 article in which I showed the poor state of SEIU's finances -- and the even poorer state of its pension funds for rank-and-file members.

Burger admitted, "While our pension funds -- like all pension and retirement funds -- took a hit last year when the market collapsed, our outside investment managers have developed a plan to address those challenges within the parameters of the Pension Protection Act." However, her implication, that SEIU's pension funds took a hit like that of all other pension and retirement funds, obscures the bigger picture.

SEIU's pensions were in trouble long before the financial crisis hit. Former Department of Labor chief economist Diana Furchtgott-Roth, now with the Hudson Institute, showed in a 2009 study, which compared union-sponsored and private pension funds, that the SEIU National Industry Pension Plan was only 75 percent funded in 2006. Since then, the financial crisis has only made things worse.

SEIU's National Industry Pension Fund and Pension Plan for Employees of the SEIU both issued critical status letters last year. The Pension Protection Act requires a pension fund to send a critical status notice to its participants if its funding drops below 65 percent of that required to pay obligations. Unlike the vast majority of pensions in the United States, these two plans joined only 90 others , mostly union pension plans, in having been required to send out critical status letters. Four of the 90 were SEIU plans.

Notably absent from the critical list was the SEIU officer's plan, which is currently funded at 98.3 percent, according to the fund's Department of Labor Form 5500 filing, available at SEIUmonitor.com. (SEIU Monitor, maintained by Americans for Limited Government, allows users to compare SEIU's pension plan for union officers to that of the national and local plans for rank-and-file members.) Burger, like Stern, can rest easy knowing her pension is safe. Rank-and-file SEIU members do not have that luxury.

Puzzlingly, Burger claims that "all SEIU beneficiaries are whole by law -- no one has lost a dime." The only logical explanation for such a statement is that she is probably referring to the pension protections of the Pension Benefit Guarantee Corporation (PBGC).   Unfortunately for union members, PBGC guarantees only $12,870 in benefits for members of multiemployer plans such as those in the SEIU plans (in contrast to a maximum of $54,000 for private plans).

Burger proclaims that, "In 2009, SEIU grew by 7 percent, doubled its net assets, decreased its debt as a proportion of overall assets by 22 percent and reduced non-real-estate debt by more than 60 percent" (and that what she calls my "misuse of LM-2 figures misleads readers and misses the facts"). Her narrow analysis conveniently omits a decade of liability increases, which skyrocketed by a factor of 16. The union's liabilities were $7,625,832 in 2000 and $120,893,259 at the end of 2009. She also did not account for IOUs from SEIU locals being counted as assets. Much of SEIU's $85-million debt stems from its lavish Washington, D.C., headquarters, purchased in 2003, which required an $80 million dollar loan, as well as from heavy political spending in 2008.

Burger was forced to defend Andy Stern's record. Stern's resignation has resulted in a battle for the leadership of SEIU. Late last week, several SEIU locals swung their support to California nurses leader Mary Kay Henry. Politico and Bloomberg Business Week had all but declared Henry the winner. Burger was forced to drop out of the race

Though it's hard to know for sure why some locals defected, one of the main reasons for Burger's downfall is her ties to Andy Stern. Stern is seen as divisive and some local leaders have bristled at his efforts to centralize power in SEIU's Washington headquarters. No matter who leads the SEIU, the union will have a difficult time bringing its pensions to full funding. Hopefully, the new leadership will focus more on representing its members and ensuring their retirement than in pushing a political agenda.

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About the Author
F. Vincent Vernuccio is Labor Policy Counsel at the Competitive Enterprise Institute and Director of Labor Policy for the Mackinac Center.