Measuring outputs, not inputs

The financial services website WalletHub this week ranked New Hampshire No. 1 in the nation for return on taxpayer investment (ROI). It’s a fascinating ranking primarily because that’s how taxpayer expenditures ought to be ranked but seldom are.

State political and government rankings often tell us how much a state spends on X or how much it taxes X. Those can be useful in the way that price tags are useful. But tags tell us price, not value. (They also can convey social status, sometimes in unexpected ways.)

Value tends to be a better measure. It gets closer to telling you whether the item or service purchased is worth the price. 

Sure, the truck stop has racks full of $3 action movies and $1 hot dogs. The prices are great! But the odds are pretty low that downing a couple of dollar dogs while watching “The Roller Blade Seven” adds value to your Friday night. You’d probably feel better Saturday morning if you spent a little more than $5 on dinner and a movie.

Likewise, getting Derek Jacobi to put on a one-man Hamlet production in your living room would be amazing. But the price would probably be slightly out of reach. Somewhere between these two options — and much closer to the former — is the sweet spot.

The trick is not just to pay more. It’s to find the right balance between inputs and outcomes. The WalletHub report indicates that New Hampshire does an outstanding job balancing costs and services. 

Our neighbors? Not so much. Maine ranks 22nd, Massachusetts 35th, and Vermont 43rd. To put this in scientific terms: LOL, Vermont.

We would quibble with some of WalletHub’s methodology. Hospitals tend to be private-sector institutions and not greatly reflective of public spending, for example. And the research on pre-school “education” shows overwhelmingly that it doesn’t produce long-term educational advantages for students, so pre-school spending is a bad measure of ROI. But a lot of WalletHub’s measures were sensible. 

Interestingly, WalletHub included school choice as a measure. States with school choice programs scored better than states without, indicating that WalletHub’s analysts see a value in giving students alternatives to traditional public schools — even when public schools are of generally high quality. 

Also interesting is that WalletHub measured public school systems by quality, not by expenditures, which is more typical. New Hampshire ranked 4th nationally in its system, which looked more at outcomes than inputs. Spending was not one of the criteria. 

As legislators have busied themselves raising taxes and spending this session, they’d do better for everyone — taxpayers and recipients of government services — if they updated their approach and focused on outputs, not inputs. 

What really matters is return on investment. By that metric, New Hampshire does quite well — precisely because its historical frugality has forced it to focus on spending dollars more efficiently rather than just spending more dollars. 

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Slouching towards Connecticut

The Legislature’s Democratic majority is seizing its opportunity. In control of both legislative chambers for only the fifth time since the Civil War (and one of those times involved a tie in the Senate), they are determined to leave their mark on the state. 

Indeed, businesses are looking at the bills passed so far and saying to themselves, “Son of a…that’s gonna leave a mark!”

Having campaigned on raising business taxes and forcing businesses to comply with the party’s agenda, Democrats are delivering for their base. The tax-and-regulate agenda is similar to the one being pursued in another New England state this session: Connecticut. 

There, The Hartford Courant reports, “at the state capitol, businesses find themselves outflanked.”  

The regulatory agenda in Hartford includes a higher minimum wage, paid family leave and higher taxes. This is on top of Connecticut’s already high tax and regulatory burden. (It’s almost as if the party is trying to enact a national political agenda at the state level.)

Whenever New Hampshire economic policies can be likened to those of Connecticut, the public should be concerned. 

The Legislature’s agenda has included these recent moves:

  • After passing business tax increases last week, the House this week approved the Senate’s entirely unnecessary mandatory paid leave bill.  The bill would cost the state $6.6 million a year to run and would extract untold millions from the economy by forcing employers to offer one specific benefit that might not be the best fit for the company or its employees.
  • The Senate this week passed a minimum wage increase after the House passed a similar bill last week. Both bills would raise the state’s minimum wage to $12 an hour (the Senate’s by 2021 and the House’s by 2022). That represents 60 percent increase in labor costs on entry-level employees for businesses that pay the minimum wage.
  • The House on Tuesday passed bills to ban single-use plastic bags and severely limit the ability of restaurants to serve plastic straws. 
  • On Thursday the House passed a series of energy bills that would put upward pressure on electricity rates by eliminating rebates for price increases associated with the Regional Greenhouse Gas Initiative and forcing utilities to subsidize large-scale solar and wind projects through net metering. 
  • Another bill would double the fines for water pollution. 

All of these bills reflect a dramatic philosophical shift in the State House. The Legislature is signaling that it no longer trusts individuals or market forces to produce the economic and societal results preferred by its majority. It trusts only one entity — the government. 

Only three months into this legislative session, New Hampshire is seeing just the beginning of an aggressive effort to give Concord more control over the state’s economy and prevent individuals and businesses from behaving in ways that are contrary to the will of lawmakers.

This shift moves us closer to the mindset that prevails in Hartford. Here, in one graph, is why that’s a bad move. Below is the Federal Reserve Bank of Boston’s chart showing each New England state’s employment growth rate from Nov. 2017-Nov. 2018. New Hampshire leads New England. Connecticut is in the middle. Vermont, by the way, is last. LOL, Vermont.  

To keep New Hampshire’s economy vibrant and growing, the state needs to continue its light-touch approach. Slouching toward Connecticut will pull us backwards.

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NH House has passed $56.5 million in new spending, $31 million in new taxes per week in 2019 (so far!)

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In the first 10 weeks of the 2019 legislative session, the New Hampshire House of Representatives passed nearly $310 million in tax and fee increases and $565 million in new spending, Grant Bosse reported at New Hampshire Journal this week. That’s $31 million worth of tax and fee increases and $56.5 million in new spending per week. 

“The full House voted to increase the state’s two largest business taxes, accounting for most of the increased tax revenue in Fiscal Years 2020-2023. But the House has also passed several other pieces of legislation that increase state revenues or expenditures.  If all the bills given House approval were to be signed into law, taxes and fees would increase by $108 million in the next two years, and by $202 million in the following biennium, according to official estimates from the Legislative Budget Assistant’s Office (LBAO).

“Other new revenues come from a tax on mutual funds to pay for a new state college savings program, an increase in OHRV and snowmobile fines, and more than doubling environment fees.

All that revenue doesn’t come close to covering the $565 million in new spending the House has passed so far.

“Spending would jump by $319 million in FY 20-21, and $246 million in FY 22-23. These figures do not capture the full increase in the state budget. In many cases, lawmakers have only appropriated funds for the first year or two on a new program, and the LBAO does not assume that spending in one budget will necessarily be carried over to the next.”

New minimum wage regulations

In addition to raising taxes, primarily on businesses, the Democratic-controlled legislators have moved forward bills to mandate that businesses pay their lowest-skilled employees above-market wages. 

The House on March 14 passed House Bill 186 to raise the minimum wage by 60 percent, to $12 an hour, over the next three years. 

The Senate on March 14 passed Senate Bill 271 to mandate that contractors hired for public works projects pay at least the “prevailing wage” for construction work. 

Both are minimum wage bills that force employers to pay entry-level employees rates typically paid to more experienced employees. As we noted in a policy brief earlier this week, such minimum wage hikes harm the lowest-skilled workers. 

As a 2015 Federal Reserve Bank of San Francisco review of minimum wage literature concluded, “the most credible conclusion is a higher minimum wage results in some job loss for the least-skilled workers—with possibly larger adverse effects than earlier research suggested.”

Though these wage mandates are intended to be a forced wealth transfer from businesses to low-income employees, they wind up transferring wealth and opportunities from the lowest-skilled workers to higher-skilled competitors. 

Why would legislators pass a law to move the lowest rung on the economic ladder farther out of reach for the least-skilled workers? 

Politics is a game of stories, not data. The minimum wage story is easy to tell from the vantage point of supporters. They can produce lots of people who tell lawmakers and the press how hard it is to make ends meet doing low-wage work. 

Though opponents have better data, you can’t go to a fast food restaurant and find the employee who wasn’t hired, then bring him to testify to legislators. The data show clearly that minimum wage increases reduce job opportunities for the lowest-skilled workers. But the people who weren’t hired aren’t told that they might have been hired at $8 an hour but not at $12, so they can’t tell that story.

Business owners and managers are being loaded with new expenses (this doesn’t even include the unnecessary paid family leave mandate) that will extract from them hundreds of millions of dollars. If all of these bills become law, it will be hard to see how the state’s jobs boom is not harmed. 

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Minimum wage increases hurt the lowest-skilled workers

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Bartlett Brief:

Minimum wage increases hurt the lowest-skilled workers

Legislators on Thursday are preparing to vote on bills to mandate that employers raise wages to levels some politicians find morally appealing. These mandates will hurt the lowest-skilled workers. They also have the potential to raise costs for consumers and taxpayers.

  • House Bill 186 would raise the minimum wage by $2 to $9.50 an hour immediately, then to $10.75 in 2021 and $12 in 2022. Teens younger than 17 could be paid $1 per hour less than the statutory minimum. 
  • Senate Bill 271 would mandate that contractors on state public works projects pay all their workers the prevailing federal wage for the particular construction project. The federal prevailing wage for construction projects in New Hampshire is $10.60 an hour. 

Though intended to benefit low-wage workers, these bills together are likely to harm Granite Staters who are trying to grab that first rung of the economic ladder.

Minimum wage

  • A 2015 Federal Reserve Bank of San Francisco review of minimum wage studies confirmed that “the most credible conclusion is a higher minimum wage results in some job loss for the least-skilled workers—with possibly larger adverse effects than earlier research suggested.” 
  • The authors of Seattle’s famous minimum wage study reported last fall that the city’s wage hike raised pay for the most experienced workers but produced a significant reduction in employment among the lowest-skilled workers. “The entirety of these gains accrued to workers with above-median experience at baseline; less-experienced workers saw no significant change to weekly pay.”
  • A recent follow-up to the Seattle study found that the higher minimum wage raised the price of day care. “Providers’ most commonly responded to higher labor costs by raising tuition and reducing staff hours or headcount—strategies that may negatively impact low-income families and staff.” 
  • This podcast interview with University of Washington professor Jacob Vigdor provides a great analysis of the negative effects the wage increase had on Seattle’s lowest-skilled restaurant workers and those trying to enter the job market for the first time.  
  • A 2013 study for the National Bureau of Economic Research showed how minimum wage increases harm lower-skilled workers by eliminating many job opportunities for them. It found that “the minimum wage reduces net job growth, primarily through its effect on job creation by expanding establishments.” Businesses hire fewer people in the long run after governments mandate that they pay low-skilled employees an artificially high wage. 

Prevailing wage

Prevailing wage laws mandate that construction companies pay higher hourly wages to low-skilled employees than they otherwise would. Research on the effects of these laws on total construction costs are mixed. But much of the research is consistent with minimum-wage research showing that the mandates lead to a preference for higher-skilled employees. 

  • Some studies find increased costs for public works projects, as did a recent University of Kentucky study on West Virginia’s repeal of its prevailing wage law and a 2005 study of low-income housing construction costs in California.
  • Other studies, however, show that contractors adjust to mandated labor cost increases by hiring more high-skill, high-productivity employees and using capital to reduce the need for lower-skilled workers. Similar findings have been produced in minimum wage studies of specific industries. Many businesses respond to mandatory labor cost increases by hiring more productive workers and finding ways to reduce their need for the lowest-skilled labor. 
  • As automation takes off in the construction industry, government-mandated higher wages could increase the incentives for contractors to replace lower-skilled workers with machines. A study last year suggested that automation could replace 49 percent of America’s blue collar construction workforce. Self-driving graders and brick-laying robots are among the technologies already making their way onto construction sites.  

Summary 

By artificially inflating the price of low-skilled human labor, prevailing wage and minimum wage laws have the unintended effect of reducing employment opportunities for the lowest-skilled workers while artificially raising pay for people who have had the good fortune to have greater workforce experience. 

Though these wage mandates are intended to be a forced wealth transfer from businesses to low-income employees, they wind up creating a forced wealth transfer from the lowest-skilled workers to higher-skilled competitors. 

A pdf version of this brief can be downloaded here: JBC – Minimum Wage Warning.

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The Education Tax Credit: How does it work?

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Serious misunderstandings about the state’s Education Tax Credit Program seem to be driving the effort to eliminate it. At least, they’re driving the narrative behind that effort. Misconceptions are so pervasive that legislators are repeating them in public statements.

Experienced drivers know that it’s dangerous if even a few people wind up going the wrong way. It’s worse if they persuade others to follow. There is too much misinformation circulating about the program to correct all of it here, but for the moment we can offer a quick summary of how it works and how much money is involved.

The Education Tax Credit Program, passed in 2012, allows businesses and individuals to claim a tax credit for donations made to qualifying scholarship organizations. Deductions may be claimed against the business enterprise and business profits taxes as well as the interest and dividends tax. Tax credits are equal to 85 percent of the donation. So a donation of $1,000 earns a tax credit of $850.

Some critics say this credit far exceeds standard practice. It doesn’t. Donors to the Community Development Finance Authority earn a tax credit equal to 75 percent of their donation.

Donations to this Education Tax Credit Program fund scholarships for low-income families to help cover the cost of education purchased outside of the traditional public school system.

In the current program year, donations to scholarship organizations are capped at $6 million, with a maximum available tax credit of $5.1 million. Some legislators, including the sponsor of HB 632, a bill to eliminate the program, have mistaken these legal maximums for an appropriation from the state budget.

“By reversing this unjust carveout, $6 million currently set aside for the education tax credit program would be appropriated fairly, taking into account all Granite Staters’ needs,” Rep. Joelle Martin, D-Milford, said in testimony before the House Ways and Means Committee in February.

Every part of that statement about the program is incorrect. There is no state money set-aside for the program. And the credits do not come close to totaling $6 million.

Here is how it actually works.

Individuals or businesses donate to the scholarship organization. The donors then give their donation receipts to the Department of Revenue Administration (DRA). The DRA then issues them a credit for 85 percent of the amount of the donation.

The credit is like a coupon. It can be redeemed when a donor files his or her taxes. But to claim it, the donor has to have a tax liability against which to apply the credit. Many donors never use the credit because their business or I&D tax liability is too low.

The Department of Revenue Administration’s Tax Expenditure and Potential Liability Report for fiscal year 2018 lists the total tax credits awarded under the Education Tax Credit Program since its start in 2013. The tax credits through FY 2018 have totaled $797,000.

(Note: The Department of Revenue Administration switched from calendar-year to fiscal-year reporting in 2014. It lists no Education Tax Credits claimed in its 2013 report, but notes that the 2014 figure includes the last six months of 2013.)

Education Scholarship Tax Credits Claimed

FY 2014: $20,000

FY 2015: $115,000

FY 2016: $93,000

FY 2017: $188,000

FY 2018: $381,000

The DRA’s latest report on the program shows that tax credits of $1,405,335 have been claimed through February 11 of this year.

So for the life of the program, only $2.2 million in credits has been claimed. That’s a little more than a third of the amount that the sponsor of HB 632 claimed the program cost annually.

There are many additional misperceptions that are coloring the debate about this program. We will address those in future posts. For now, we hope this clears up a few of the biggest misunderstandings.

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Five facts about the minimum wage

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The odds that legislators will vote to raise New Hampshire’s minimum wage this year are significantly better than the odds that sitting through next year’s Super Bowl halftime show will be more entertaining than going to the kitchen for more nachos.

Why?

Ideas like this, as expressed by Rep. Howard Moffett, D-Canterbury:
“If there is more money in people’s pockets, they are going to spend more. That will mean more business and they will go and hire more workers. It is a virtuous circle in the economy.”

Some really people believe that taxing businesses (the minimum wage is effectively a tax on hiring low-skilled labor) and transferring the revenue to the least-skilled employees will make those businesses more profitable than if they had been left alone to use that money in more productive ways.

That theory runs counter to the vast majority of work on minimum wages and, even if plausible, as The Atlantic’s Jordan Weissman pointed out a few years ago , its stimulating effects would be short-lived.

New Hampshire’s minimum wage is pegged to the federal minimum, which is $7.25 an hour. A lot of people believe that people who earn this wage make up a large fraction of the labor force and tend to be primary bread-winners working full time to support their families. None of that is true.

Here are five facts about the minimum wage that ought to inform whatever debate there will be on the topic as the legislature decides how much to tax employers for the practice of hiring low-skilled employees.

Nationally, only 2.3 percent of all hourly wage workers earn $7.25 per hour or less, Bureau of Labor Statistics data show. “Minimum wage workers tend to be young,” according to the BLS. “Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up about half of those paid the federal minimum wage or less.” They also tend to be single. Never-married individuals make up 40 percent of those who earn an hourly wage but 68 percent of hourly wage workers who earn a minimum wage. Married individuals are 44 percent of hourly wage workers but only 21 percent of hourly wage workers who earn the minimum wage or less.

Minimum-wage employees tend to work part-time, BLS data show. Although about 75 percent of hourly wage workers hold full-time jobs, only 35 percent hourly employees with a full-time job earn the minimum wage or less. Only 25 percent of hourly workers hold part-time jobs, but 65 percent of hourly workers with part-time jobs earn the minimum wage or less. Of minimum-wage employees, fully 60 percent work part time.

In New Hampshire, the number of minimum wage workers fell by almost half in 2017, dropping from just over 15,000 people in 2016 to just 8,000 in 2017, according to the state Economic and Labor Market Information Bureau. Forty-nine percent of those 8,000 minimum-wage earners were under age 25, and the same percentage worked part-time.

The minimum wage is an entry-level wage typically paid to the lowest-skilled employees, the vast majority of whom work their way to higher pay within a year. A 2013 study by Texas A&M economists for the National Bureau of Economic Research found that “minimum wage compensation is three- and-a half times more prevalent among new workers than in the entire labor force.” Using data for 3.5 million people from 1979-2012, they found that 77.6 percent of people who earned the minimum wage in one year were still employed the following year, and of those 65.85 percent earned more than the minimum wage.

That last study, by the way, also found that “the minimum wage reduces net job growth, primarily through its effect on job creation by expanding establishments.” That is, the minimum wage doesn’t necessarily always produce an instantaneous reduction in jobs. Rather, it suppresses job growth over time, leading to fewer jobs than would otherwise be available.

In other words, it’s a tax on low-skilled labor. And like any tax, it reduces the supply of what is taxed.

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A costly and unnecessary paid leave plan

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Senate Democrats unveiled their paid family and medical leave bill this week, and the big question was: Why? 

The reasons given — that it will be a job recruitment tool and a family benefit — were hardly enough to justify its cost. 

The bill’s fiscal note predicts that the mandatory 0.5 percent tax would raise $156.6 million a year from private employers. That would make it New Hampshire’s sixth-largest tax, coming in right behind the real estate transfer tax. It would extract from the economy $50 million more per year than the interest and dividend tax does. 

Two years’ worth of revenue from this tax would surpass the entire balance of the state’s employment security trust fund. 

That is a hefty weight upon the economy for a tax that is entirely unnecessary. 

This tax doesn’t have to exist because the program it would support doesn’t have to exist — even if one agrees that some type of paid leave insurance must be created.

Gov. Chris Sununu’s proposal shows that even if creating a paid family leave plan is a top priority, there is no need for it to take the forms of a mandate, a tax and an entitlement. 

Gov. Sununu’s innovative proposal showed — before the Senate leadership released its plan — that state leaders can offer a paid leave program for employers that avoids high taxes and employer mandates. 

Based on testimony given before the Senate Finance Committee on Tuesday, it remains unclear from a policy perspective why a tax-and-mandate approach was taken when less costly and intrusive options were available. 

It is not as though a 12-week program, vs. the six weeks in Gov. Sununu’s proposal, is essential. California’s landmark paid leave program offers six weeks, and a 2015 study by the California Employment Development Department found that most people who take the leave don’t use all of it.

Supporters of the Senate version say it is necessary to attract workers to the state. Although research does show that many workers would prefer additional benefits rather than a raise, paid family leave is fairly low on the list of preferred benefits. In a 2017 Harvard Business Review survey, only 42 percent of employees said they would consider paid maternity/paternity leave when considering whether to take a higher paying job vs. a lower-paying job with better benefits. (The survey did not include an option for paid medical leave.) 

The survey found that the four most attractive additional benefits were 1) better health, dental, and vision benefits, 2) more flexible hours, 3) more vacation time, and 4) work-from-home options. 

This context is important because paid leave is just another form of employee compensation. Employers gauge employee preferences when deciding whether to offer higher pay or more generous benefits. A paid family leave mandate would deny both employers and employees the option of deciding whether other forms of additional compensation would make more sense for them. 

For example, 80 percent of employees in the Harvard Business Review Survey reported that they’d consider foregoing higher pay if they could work from home, and 88 percent said they’d consider foregoing higher pay if they could have more flexible hours. But only 42 percent said the same of paid parental leave. 

Flexible hours and work-from-home benefits could in many circumstances offer people much better long-term options than a mandated 12-week paid leave plan. And about twice as many people would prefer those two options to paid leave. There is no reason to believe that a paid leave plan is such a crucial form of compensation that it must be mandated by the state. Employees don’t think it is, so why should lawmakers?

If there are options for providing a good or service that don’t involve the use of force or coercion, and that good or service is not an absolutely essential one that only government can provide, then there is no justification for using force or coercion to provide it. Paid family leave is a nice benefit, but it fails the test of whether it should be imposed via government mandate. 

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Oscar asks for a handout

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In the last legislative session, this newsletter warned about the dangerous precedent legislators would set if they passed a tax incentive package tailored for a specific industry, in this case a single company, Manchester’s Advanced Regenerative Manufacturing Institute (ARMI). New Hampshire doesn’t do industrial tax incentives, we warned, and if the state starts, other industries will come, hat in hand, to explain how their critically important industry deserves special tax treatment too.

Behold, on Wednesday, before the House Ways and Means Committee, Rep. Tim Lang, R-Sanbornton, presented his bill (House Bill 234) to create a film industry tax credit. To sell it, he noted that it was based on the ARMI bill. 

“The wording is almost identical to the regenerative tissue bill,” he said.

That taxpayer giveaways for the $43 billion (in revenue alone) Hollywood film industry is the first  successor to the ARMI subsidies is a perfect illustration of the bonkers nature of state industrial incentives.  

As if to emphasize that point, Oscar himself came to ask for a handout. 

Oscar is made of bronze and plated with gold. And he wants a subsidy.  

Preceding Oscar were a few people who had been connected to the film industry at some point in their careers. They mentioned the generous tax credits other states offer. They dropped  names of celebrities they had encountered. Then, just as in a movie, a tall, handsome man dressed in black, with flowing silver hair, who spoke with the unmistakable timber of an actor’s voice, stepped up to make an unexpected presentation.

He reached into his black backpack, withdrew its hidden passenger, and placed the well-worn statuette on the desk before him. 

The sounds of soft gasps and impressed whispers floated through the air. 

The man was Ernest Thompson, author of New Hampshire’s single greatest claim to Hollywood fame, “On Golden Pond.” In 1982, that screenplay won Thompson a Golden Globe and the lifelong companionship of the little golden man who accompanied him to Concord on a cloudy Wednesday tucked into the dark hollows of a nondescript hiker’s backpack.

Charming and captivating, Thompson regaled the committee with tales of Hollywood glory, all of which could be New Hampshire’s again if only the state would subsidize film production.  

Production executives tell him, he said, that they won’t film the sequel to “On Golden Pond” in New Hampshire because Massachusetts offers incentives and New Hampshire doesn’t. 

All the while, Oscar glowed in silent, golden testimony of his own.

In a movie, this would’ve been the rousing scene, with soaring music and a closeup of someone brushing away a tear, that preceded a unanimous vote to pass the bill, thus validating the hero’s journey and confirming the value of “investing” in “the arts.”

But Concord is a practical, not a dramatic, place. Instead of cheers and tears, there was only the voice of the committee chair as she interrupted the tales of celebrities gracing New Hampshire’s hills and valleys, cut off the testimony, and firmly braved the cold, golden glare of the little bald man on the desk. 

In the people’s House, even Oscar has only five minutes to testify, and there was one last witness to call. 

That witness was from the Josiah Bartlett Center for Public Policy. Instead of a celebrity, we had data. 

Among the points we made to the committee were:

  • Massachusetts’ own study of its tax credit program concluded that the credit returns only 14 cents on every dollar spent. 
  • A North Carolina study of its tax credit program concluded that it returned only 19 cents on the dollar. 

It’s not easy following Oscar. But someone had to present the case that an industry that hands out gold-plated statues even to the nerds who make cool spaceship sound effects shouldn’t get taxpayer subsidies. 

We presented the only testimony against giving New Hampshire taxpayer money to Hollywood producers. It was Josiah Bartlett vs. Oscar. 

Come to think of it, that might make a pretty good movie, provided “Oscar” is a giant bear or an alien or a sinister British commander during the Revolutionary War. 

A heroic Josiah Bartlett fighting some powerful enemy would be fine with us, just as long as the movie came with the disclaimer: “No taxpayer dollars were harmed in the making of this film.”

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State employees file class action suit against SEIU to reclaim agency fees

Two New Hampshire state employees on Monday filed a federal class action suit against the State Employees Association (SEA) to recoup fees non-member employees were forced to pay the union.

Plaintiffs Patrick Doughty and Randy Severance hope to compel the SEA, a chapter of the Service Employees International Union, to repay all so-called “agency fees” collected over the past three years, which is as far back as the statute of limitations allows, according to their attorneys.

The pair are represented by attorneys from the National Right to Work Legal Defense Foundation. Serving as local counsel is attorney Bryan Gould of Concord. The suit was filed in U.S. District Court in Concord.    

Doughty, an engineering technician in the Department of Transportation, joined the union when he was first hired in 2001, he told The Broadside, but resigned in 2012 over disagreements with the contract and the union’s increasingly left-wing political positions.

“I opted out because at the time the contract that the union voted for was, in my opinion, terrible, he said. “I wanted to try to recoup some of that money that I had to spend out. And they were also becoming so far left.” 

Once out of the union, Doughty was required under the state’s collective bargaining agreement to continue paying fees to the union. Those agency fees were supposed to cover only the cost of collective bargaining, on the theory that all employees benefit from the terms negotiated by the union.

But Doughty and Severance say they didn’t agree with the union’s politics or the contracts it negotiated.

“Being a government employee and being under the contract, you’re kind of held to what you can get under the contract,” Doughty said. “There’s no merit raises or other things you can get when you work for a private outfit.”

Severance, who works in the Department of Information Technology, said the contract actually prevented him from obtaining higher compensation. 

“I’m pretty good at my job,” he said. “I’m above average. And when you’re group-negotiating and you’re above average, you’re being dragged down. In the private sector, I could go to my boss and negotiate according to my skills and my level of work. But I can’t do that here. I’m getting paid the same as the lazy ne’er do well who doesn’t get his work done. The union says, ‘well, we negotiate in your favor.’ I say, ‘that’s not doing me any good.’”

Severance said he started working for the state in 2000 and never joined the union. When the union later began collecting agency fees, he objected. When his complaints were dismissed, he sued unsuccessfully to halt the collection. 

“Every opportunity I had, I put up a fuss, complained about it, but there’s only so much you can do. Then the Janus decision came down and I contacted the National Right to Work Foundation,” he said.

Last June, the U.S. Supreme Court ruled in Janus vs. American Federation of State, County, and Municipal Employees that agency fees were an unconstitutional violation of public employees’ First Amendment rights. 

Though the state stopped collecting agency fees on behalf of the State Employees Association immediately after the Janus ruling came down, Severance and Doughty each contacted the National Right to Work Foundation independently, seeing the ruling as an opportunity to undo an injustice.

“It’s not really that I’m anti-union,” Doughty said. “It’s just the fact that they never really had the right to take fees from people who didn’t want to join.”

Severance gave similar reasons.

“I reached out to them when I read about the Janus decision and I read about other states that were suing to claw back some of the misappropriated paychecks. I got on their website and found the ‘contact me’ button,” he said. 

“Generally speaking, it’s been about $50 a paycheck, and two and a quarter paychecks a month for three years. So about $4,000. There’s no Bermuda vacation in this, and it’s not about the money. It’s about the principle. And the class action.”

The National Right to Work Legal Defense Foundation was not certain how many state employees would be covered if the court grants class action status. But the Josiah Bartlett Center for Public Policy discovered through a public records request last July that the SEA was collecting agency fees from 2,104 state employees when the Janus ruling was handed down on June 27.

Non-union state employees were forced to pay more than $1 million in agency fees to the SEA and the Teamsters in the year before the Janus ruling terminated those fees, state records showed, with almost all of that going to the much larger SEA. If successful, the new lawsuit could cost the SEA millions of dollars.   

Patrick Semmens, vice president of the National Right to Work Legal Defense Foundation, said all non-union employees forced to pay fees to the State Employees Association had their First Amendment rights violated and deserve compensation. 

“We’ve always believed that the idea that you can be forced to subsidize an organization so that they can speak to your government on your behalf is a free speech violation. Finally the Supreme Court caught up.”

The State Employees Association did not have a response to this story by press time. 

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How the FDA can quickly save more NH lives

If foreigners dispersed throughout the United States a poison that killed hundreds of thousands of Americans, and drug makers had a safe, easy-to-administer antidote, would the federal government dare restrict its distribution?

It’s an easy answer — because just that scenario is happening right now.

Drug overdoses are poisonings (they’re officially classified as such). The United States is in the midst of a drug poisoning epidemic, with Chinese fentanyl and Mexican-and-Columbian heroin having driven overdose death rates to unprecedented levels. For these opioid poisonings, an antidote exists, but the federal government insists that you get a prescription first. 

The Food and Drug Administration has approved naloxone, better known by the brand name Narcan, for use by prescription only. You might have read stories reporting that naloxone is available “over the counter” in New Hampshire and other states. That is not precisely true. 

In an October memo on the drug’s availability, FDA Commissioner Scott Gottlieb explained why it remains available by prescription only.

“Although the auto-injector and nasal spray formulations have instructions for use, they don’t have the consumer-friendly Drug Facts Label (DFL), which is required for OTC drug products,” he wrote. 

“Before submitting a new drug application or supplement for an OTC drug product, companies need to develop this DFL and conduct the required studies to show that consumers can understand how to use the product without the help of a health care professional.”

People are dying needlessly because the FDA doesn’t think Americans can safely inhale a nasal spray “without the help of a health care professional.” 

States have managed to save some lives by offering work-arounds. New Hampshire and other states have passed what are called “standing order” laws. Those allow doctors to give a pharmacy a standing prescription the pharmacist can use to dispense the drug to anyone who asks for it.

Many pharmacies in New Hampshire now stock naloxone, but the price remains high, and not all pharmacies carry it. 

Even with standing-order laws, naloxone is not as widely available — or as cheap — as it would be were it classified as an over-the-counter drug. The FDA acknowledges this. 

“We recognized the important public health opportunity to bring naloxone OTC,” Gottlieb wrote in October.

In December, the state estimated that drug overdose deaths in New Hampshire will finally fall below the previous year’s level, but by a small percentage. Had the FDA approved naloxone for over-the-counter sales years ago, a downward trend might have been realized much earlier, saving untold numbers of lives.  

OTC naloxone will not get to the root causes of this epidemic. But it would let a lot of people live while policymakers seek solutions. The governor and legislators can help by formally requesting that the FDA quickly approve naloxone for sale without a prescription. 

If the governor got all other New England governors to join him, it would put pressure on the Trump administration to speed this approval process.

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