As you already know, the National Education Association submitted its 2014-2015 financial disclosure to the U.S. Department of Education and revealed that it spent $131 million last fiscal year on lobbying and other influence-buying activities. In the days since Dropout Nation reported on the disclosure, the union’s president, Lily Eskelsen Garcia, found herself under fire for comments she made about children with disabilities and those condemned to the nation’s special education ghettos. The comments came during a speech at an event held by Campaign for America’s Future, a group which received $100,000 from the union last fiscal year. [As you would expect, in exchange for the money, Eskelsen Garcia received an award for being a “progressive champion”.]
Eskelsen Garcia apologized for the statement and clarified that she wasn’t talking about kids in special ed, but about kids who were “chronically truant” (who, by the way, are often withdrawing from school because of educational malpractice by the laggard teachers her union protects). But the gaffe was another reminder that the nation’s largest teachers’ union will do anything to oppose the kind of strong accountability measures that have helped shed light on how American public education and many of the adults who work within it damage our most-vulnerable children academically, economically, and socially.
But the nation’s largest teachers’ union’s efforts extend beyond Eskelsen Garcia’s talking points before the nation. One of its key goals is propping up the growing number of virtually-busted and financially-troubled state affiliates who do the day-to-day work of opposing systemic reform on the ground. And the dollars spent this year are considerable.
Over the past five years, NEA’s affiliates have found themselves struggling to keep up rank-and-file numbers. Efforts in Wisconsin, Tennessee, Michigan, and Alabama to end collective bargaining and compulsory dues payments into NEA coffers have put considerable strain on the finances of the union’s affiliates. In the Dairy State, in particular, Gov. Scott Walker’s successful move to abolish collective bargaining has led to the union’s Wisconsin Education Association Council losing 59 percent of its membership between 2011 and 2015; the unit is now merging with American Federation of Teachers’ affiliate there.
As a result of the losses in those states, NEA’s rank-and-file declined by 6.3 percent (from 3.3 million to three million) between 2010-2011 and 2014-2015; this includes a 7.5 percent decline in the number of classroom teachers in the rank-and-file (from 2.3 million to 2.1 million). This decline is one reason why NEA’s dues collection declined by 2.2 percent (from $371 million to $363 million) within the past five years.
But even before the abolition of collective bargaining in those key states, NEA was dealing with struggling affiliates. Shortfalls in defined-benefit pensions and retiree health plans have long-damaged the balance sheets of some key affiliates. Michigan Education Association’s pension liabilities increased by a two-fold (from $41 million to $137 million) between 2006 and 2015 alone, according to Dropout Nation’s analysis of the NEA affiliate’s filings with the U.S. Department of Labor. Add on the $150 million in retiree healthcare liabilities, and MEA must deal with $287 million in retirement obligations, none of which it can cover with $74 million in assets.
Another problem for NEA affiliates: The Voluntary Employee Benefit Associations, or multi-employer healthcare insurance trusts, that they operate. Years of fiscal mismanagement of those trusts, along with refusals to raise premiums charged to districts and teachers to cover increasing expenses, have done damage. In Las Vegas, for example, NEA’s Clark County local shut down its VEBA after after blowing through most of its $7.3 million in reserves within a two-year period.
For NEA national, the financial difficulties and membership woes of its affiliates have forced it into the unenviable position of putting some of them under receivership. And those takeovers are weighing heavily on the union’s balance sheet.
During 2014-2015, the NEA propped up the Indiana State Teachers Association to the tune of $1.7 million, 42 percent more than it subsidized the unit in 2013-2014. Based on ISTA’s revenue of $23 million in 2013-2014 (the latest year available), NEA subsidies likely account for 7.3 percent of inflow dollars. The national union took control of ISTA six years ago after its VEBA went insolvent amid a $67 million deficit and spectacular financial mismanagement. Over the past four years alone, NEA has poured $5.6 million into the Indiana unit in order to keep it afloat; none of this includes the $17 million the union had lent to ISTA over that period or the millions more spent by NEA to buy the unit’s headquarters in Indianapolis across the street from the state’s capital building. [NEA Properties, which controls the building, finally earned $380,896 in surplus in 2013-2014 after three straight years of losses.]
The good news is that ISTA reduced its debt to the mothership by $1 million, thus owing $12.5 million in arrears; but given how much NEA is subsidizing the affiliate, the parent union would have been better off applying the subsidies to the debt in the first place.
NEA also poured $3.7 million into another affiliate under receivership, Alabama Education Association; that’s 13 percent less than in 2013-2014. Based on AEA’s revenue of $15 million for 2013-2014 (the latest year available), NEA subsidies likely account for a quarter of its inflow dollars. The once-powerful affiliate, which dominated Yellowhammer State politics, fell under national’s receivership earlier this year after the unit’s former top executive, Paul Hibbert, revealed that the union blew through half of its $12.7 million in reserves within just three years. The affiliate has lost $12 million over the last two years, according to its filing with the Internal Revenue Service. Like its counterpart in Wisconsin, the union is now reeling from Alabama’s abolition of forced dues payments by teachers into its coffers.
Additionally, AEA owes national an additional $716,170 in the form of accounts receivable; just $474,967 owed by the affiliate would have any value to NEA if it had to immediately liquidate it.
Meanwhile NEA subsidized its South Carolina Education Association to the tune of $893,392, a 9.7 percent increase over the previous year. The union took over the affiliate five years ago after it lost half of its membership over 15 years and needed NEA subsidies just to stay afloat. Based on SCEA’s revenue of $2.1 million in 2013-2014, the latest year available from the IRS, NEA subsidies likely account for 43 percent of the affiliate’s revenue. The good news for the South Carolina unit? It doesn’t owe NEA any loans or accounts payable.
As for other affiliates? NEA subsidized Michigan Education Association to the tune of $6.5 million in 2014-2015, a four percent increase over the previous year. The subsidies now account for 5.2 percent of the union’s 2014-2015 revenue of $124 million, versus 4.8 percent of $130 million in revenue during the previous fiscal year. Even with the Michigan affiliate’s efforts to circumvent the Wolverine State’s move to end forced dues collection (including negotiating contracts with districts that attempted to force teachers to pay those dues for several more years), its revenues has declined for the third straight year.
As for Wisconsin Education Association Council? NEA provided $1.9 million in subsidies to the affiliate in 2014-2015, a 21.7 percent increase over the previous year. Based on WEAC’s revenue of $13.2 million in 2013-2014 (the latest year available), NEA subsidies now account for 14.4 percent of WEAC’s revenue. The affiliate itself has seen revenue decline by 30 percent (from $18.8 million to $13.2 million) within the last year; it lost $3.2 million in 2013-2014. WEAC also owes NEA $949,470 in the form of accounts receivable; if the union had to liquidate that position, it would be worth just $29,781.
Then there is Illinois, where the NEA’s state affiliate, along with other traditionalists, have spent the past few years battling against efforts by Gov. Bruce Rauner and his predecessor, Pat Quinn, to overhaul the Land of Lincoln’s busted teachers’ pension. Oddly enough, the affiliate has its own retiree woes, having to address $32 million in pension liabilities and other post-retirement benefits it must repay to its staffers. NEA poured $4.9 million into the affiliate in 2014-2015, a slight increase over the $4.8 million in subsidies in the previous year. The subsidies account for 6.3 percent of Illinois’ $77.5 million in revenue in 2014-2015, versus 6.1 percent of $78 million in revenue during the previous year.
Finally, there is Pennsylvania, where NEA’s affiliate (along with those of AFT) made political gains last year thanks to their backing of Tom Wolf’s successful gubernatorial campaign. The national union backed Pennsylvania State Education Association to the tune of $5.3 million in 2014-2015, little changed from the previous year. NEA’s subsidies accounted for 5.5 percent of revenue in 2014-2015 versus 5.6 percent a year earlier. Like so many of its sister affiliates, PSEA will need every dollar of NEA money it can get; its pension and retiree health obligations have increased by 71 percent (from $32 million to $55 million) within the last year.
As for NEA itself? The union’s defined-benefit pension is virtually insolvent to the tune of $111 million, according to the plan’s 2013 announcement to retirees. This is a 37 percent increase in unfunded liabilities over the previous year, and 82 percent more than liability levels two years ago. The union has $364 million in assets that could be liquidated in order to cover those liabilities today. But with shortfalls increasing at a fast clip, the union may end up in dire straits itself. NEA’s retiree health plan, on the other hand, is well-funded, with $67 million in assets to cover $246,824 in liabilities (as of 2013, the latest year available), according to the plan’s filing with the IRS).
The woes of NEA’s affiliates, as well as the parent union itself, could become even worse if the U.S. Supreme Court abolishes compulsory dues laws nationally with a ruling next year in Friedrichs v. California Teachers Association. [Dropout Nation, Editor RiShawn Biddle, and Contributing Editors Gwen Samuel and Dmitri Mehlhorn, are parties to an amicus brief filed in the case.] If the court rules in favor of the plaintiffs, as it is likely based on Justice Samuel Alito’s majority opinion in last year’s ruling in Harris v. Quinn, NEA could lose at least a quarter of rank-and-file, taking a $66 million hit to its coffers (based on 2014-2015 dues and agency fee collections).
Dropout Nation will provide additional analysis of the NEA’s financial filing later this week. You can check out the data yourself by checking out the HTML and PDF versions of the NEA’s latest financial report, or by visiting the Department of Labor’s Web site. Also check out Dropout Nation‘s Teachers Union Money Report, for this and previous reports on NEA and AFT spending.