One of the bigger stories with the National Education Association is the loss of rank-and-file. Thanks to efforts by governors and state legislatures in Wisconsin, Tennessee, Michigan, Indiana, and Alabama to end collective bargaining and compulsory dues payments, the nation’s largest teachers’ union and its affiliates has seen declines in rank-and-file, putting strain on its finances in the process. As a result, NEA’s rank-and-file declined by 6.3 percent between 2010-2011 and 2014-2015 (from 3.3 million to three million), resulting in a 2.2 percent decline in dues collection within that same period.
But as the union reported in its 2015-2016 financial disclosure to the U.S. Department of Labor, the declines have stopped, at least for the time-being. The bad news? The finances of its affiliates, along with the long-term loss of rank-and-filers to come, continue to weigh heavily on the union’s future prospects.
NEA sustained no declines in rank-and-file this past fiscal year. That’s the good news. But it didn’t significantly increase them, either. NEA added just 8,804 rank-and-filers and agency fee-payers to the rolls in 2015-2016, which led to a mere two-tenths of a one percent increase over the past year.
As a result of stemming those losses, as well as a $1 average increase in annual dues (from an average of $119.05 per member in 2014-2015 to $120.05 in 2015-2016), NEA collected $367 million in dues last fiscal year, a 1.1 percent increase over the previous period.
NEA’s overall revenue of $388 million was a slight decline from levels in 2014-2015. This included $8.4 million in revenue from NEA Member Benefits Corp. the financial scheme the union runs to peddle annuities to its rank-and-file (which also gets kickbacks from the Wall Street firms that sell through it); that is 13.6 percent more than revenues generated from the outfit last year.
Meanwhile the union generated a surplus of $1.4 million for 2015-2016. That’s a 95 percent decline from the $27 million in surplus generated in the previous period. Why? A 30 percent increase in general overhead costs (from $51 million to $66 million), and a 65 percent increase in asset and investment purchases (from $8.3 million to $13.7 million) offset declines in benefit expenditures. A five percent increase in payments to its pension (from $19.7 million to $20.7 million) also led to the lower surplus. At least none of the lowered surplus can be blamed on poor internal controls or embezzlement.
But the good news on rank-and-file numbers, such as it is, doesn’t hide the reality that NEA’s future, financial as well as political, is quite bleak.
The union’s affiliates affected the most by the abolition of compulsory dues are still taking hits. The union’s virtually-insolvent Michigan Education Association, for example, had just 127,785 rank-and-file in 2015-2016, according to its filing with the Department of Labor, a 2.5 percent decrease over the previous fiscal year; its rank-and-file declined by 16 percent over the past five years. Meanwhile a 59 percent decline in rank-and-file has forced the Wisconsin Education Association Council into a merger with the American Federation of Teachers’ hard-hit affiliate as well as pushed it to sell its sweet headquarters in Madison.
But the problems lie not only with NEA’s state affiliates in right-to-work states. The end of class size reduction regimes in many states, the lingering effects of the last decade’s economic meltdown, the virtual insolvencies of defined-benefit teachers’ pensions, and the retiring of Baby Boomers from classrooms, has resulted in growth being slim to none for many affiliates.
Rank-and-file numbers for NEA’s still-influential units in Illinois, and Ohio barely budged between 2014-2015 and 2015-2016 — and almost no growth at all for either within the past five years. Rank-and-file numbers for union’s Florida affiliate (which is also affiliated with AFT) barely budged; in fact, membership declined by 5.6 percent between 2011-2012 and 2015-2016.
One of the few bright spots for NEA is its Education Minnesota unit, whose rank-and-file numbers increased by 2.7 percent between 2011-2012 and 2015-2016. But it barely added members during this past fiscal year. If Republicans who just took control of the Land of Nice’s legislature have their way, the union’s ability to forcibly collect dues will eventually go into history’s ashbin. But thanks to the presence of Democrat Mark Dayton in the governor’s office, that’s not likely for now.
The lack of rank-and-file growth is troubling for NEA because the long-term financial woes of many of its affiliates are worsening.
Unfunded defined-benefit pensions and retiree health liabilities have long-damaged the balance sheets of some key affiliates. The union’s Michigan affiliate, for example, reported $296 million in unfunded pension and retiree healthcare liabilities in 2015-2016, a 3.1 percent increase over the previous year. If the affiliate was forced into bankruptcy, its $67 million in assets (a 9.8 percent decline over 2014-2015) couldn’t cover these and other liabilities.
The NEA’s Illinois unit reported $46 million in unfunded pension and other retiree liabilities in 2015-2016, a whopping 44 percent increase over levels in the previous fiscal year. [Its $63 million in overall liabilities is a 25 percent increase over 2014-2015.] If it ever landed in bankruptcy court, the Illinois unit’s $53 million in assets couldn’t cover any of what it owes to retired employees and other creditors. The union’s Pennsylvania State Education Association reported $75 million in pension and retiree health liabilities in 2015-2016, a staggering 37 percent increase over the previous year; the only good news is that the unit’s $102 million in assets can cover those and other liabilities.
Even NEA’s most-influential and wealthiest affiliate, the California Teachers Association, is struggling with pension and healthcare liabilities. In a memo to its staff union CTA revealed that its Retirement Trust has unfunded liabilities to the tune of $105 million. While CTA can cover those shortfalls with $183 million in assets (as of 2013-2014, according to its filing with the Internal Revenue Service), the growth in those liabilities (along with reasonable long-term fears that it will no longer be able to forcibly collect dues from classroom teachers) has forced the affiliate to play hardball with its staff union during its most-recent contract negotiations.
[As Dropout Nation reported last month, the virtually-busted New York State United Teachers (which is an NEA affiliate despite being controlled by AFT) has $503 million in unfunded pension and other retiree healthcare liabilities, a 31 percent increase over 2014-2015.]
For these affiliates, along with three under NEA receivership — Indiana State Teachers Association, Alabama Education, and South Carolina Education Association — the subsidies from NEA are more-welcome than ever.
NEA subsidized WEAC to the tune of $2.1 million in 2015-2016, an 11 percent increase over the previous year; based on the affiliate’s reported revenue of $13.2 million in 2013-2014 (the latest year available), NEA subsidies likely account for 16 percent of its money stream, and given the unit’s flailing finances, likely more than that. NEA also poured $5.5 million in subsidies into its Michigan affiliate, a 15 percent decline over 2014-2015; even with those declines, NEA dollars accounted for 4.9 percent of the unit’s revenue of $111.8 million.
The union subsidized its Illinois affiliate to the tune of $4.5 million in 2015-2016, an 8.2 percent drop from the previous year; the subsidies accounted for six percent of the unit’s revenue of $75.5 million. As for Pennsylvania? NEA provided $5.3 million in subsidies to the unit, barely budging from levels in 2014-2015; those dollars account for 5.2 percent of PSEA’s revenue stream.
What about ISTA? NEA provided $1.3 million in subsidies to the busted Indiana affiliate in 2015-2016, a 24 percent decline from the previous year. ISTA also managed to whittle down its debt to national by another $1 million in the last year, leaving it with $11.5 million in arrears. The national union has subsidized ISTA to the tune of $6.9 million in the last five years alone, not including the millions it has had to pour into the Hoosier State unit since 2009, when its VEBA went insolvent amid a $67 million deficit and spectacular financial mismanagement.
As for NEA national? The union’s defined-benefit pension plan reduced its insolvency by 18 percent to $91 million (as of 2014, the most-recent year reported), according to its annual notice to retirees. The good news is that NEA could liquidate some of its $377 million in assets to address that insolvency if needed. On the other hand, the union’s retiree healthcare trust remains well-funded, with just $55,480 in liabilities compared to $117.6 million in assets (as of 2015, the latest year available, according to its filing with the IRS).
Meanwhile the long-term threats to NEA’s clout and finances loom larger and more-immediate than ever. The union’s big bet on Hillary Clinton to win the presidency blew up badly, while its support for Senate and Congressional Democratic candidates also went pear-shaped. With the incoming administration of Donald Trump being hostile to public-sector unions and an even less-sympathetic Republican-controlled Congress, NEA has even less influence on Capitol Hill than it did two years ago. The institutional Blanche DuBois will have to depend on the kindness of outfits such as National School Boards Association (whose ties to Republicans are cozier thanks to suburban districts in its membership) and that’s not a great place to be.
Trump still has to fill the Supreme Court spot vacated earlier this year through the death of the legendary Antonin Scalia. This likely means that the next justice will finally overturn Abood v. Detroit Board of Education, the five decade-old ruling that allows NEA and AFT affiliates to force teachers to pay into its coffers regardless of their desire for membership. The union likely already expects a version of Friedrichs v. California Teachers Association (which the court shot down in a 4-4 ruling after Scalia’s demise) to work its way through the courts.
Based on the struggles of NEA’s state affiliates in Wisconsin and Michigan, it is clear that neither national nor its other affiliates are ready to adapt to the end of compulsory dues laws and workplace monopolies. The union hasn’t even followed AFT’s steps and hired staffers from the Service Employees International Union, which has long been the nation’s most-successful labor organizer, in order to prepare for the future.
In short, long days ahead for NEA’s guitar-slinging president, Lily Eskelsen Garcia, and the rest of the union’s leadership.
Dropout Nation will provide additional analysis of the NEA’s finances down the road. 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 previous reports on NEA and AFT finances.