With the previous 5 UAW Finances pages, you should by now have a decent handle on the machinery of how the UAW finances work. Now it is time to discuss what various changes in the constitution would have on finances. Before proceeding to the next paragragh though, I need to ask you a question. I really don’t care what the answer is, but you should take some time to think about it and be honest with yourself. The question is, “Would you be willing to raise dues in order for the UAW to build an endowment of $500 million dollars?” In this case, what I mean by an endowment is a large sum of money invested, and the UAW would use the interest and investment income generated from it to finance operations, with the principal (the amount invested) remaining the same or growing.
Now that you have the answer to the question above, I would like to argue that we already raised dues to have an endowment of $500 million. And our strike fund is really about ~$300 million instead of the ~$800M or so the UAW says. I say this because the UAW is going to avoid the strike fund going below $500 million to keep the rebates to locals and the UAW Int’l flowing (see UAW Finances 5 page). The UAW Int’l is dependent on those rebates for regular operations, and so are many locals. And now, under President Fain, the UAW is dependent on the interest from the strike fund just to maintain operations. Further, the UAW invests the money in the Strike Trust such that a large block of these is invested in investments that are either volatile selling prices or not able to readily sell on the open market. This money can’t be depended on to fund a large strike, say, a few months in advance. So in effect, that money is in an endowment, not a strike fund, even though on paper it is in a strike fund.
I like the idea of the UAW having more money to fund operations, and I certainly see the value of maximizing the returns on those investments (within prudent risk parameters), and having a plan to harvest those investment returns. On the other hand, I just find it misleading that the UAW has raised dues to maintain this “endowment”, while selling it to members as a strike fund increase.
So, if you like the idea of raising or keeping dues raised to fund an endowment, then policy changes you might consider for the next convention might be as follows. 1) Raise the $850 M limit for when the dues revert to 2.0 hours and raise the $500 M for when the rebates stop. This would make the endowment larger and depending on the numbers, keep the strike fund as is or grow it. 2) Eliminate the $850 M limit for when the dues revert to 2.0 hours, and let the strike fund (er, um, endowment)keep growing indefinitely at 2.5 hours of dues per month.
If you are on the other side of the fence and don’t like the idea of the endowment, or raising dues for it, you might consider: 1) Lowering the $850 M trigger for reverting dues to 2.0 hours, or just voting to lower the dues to 2.0 hours regardless. This would keep the strike fund lower (it is already the nation’s largest by far, on a per-member basis) and require more liquid, less risky investment to be ready for big strike(s). 2) Lowering or eliminating the $500 M trigger for stopping the rebates. This would make the strike fund to endowment ratio larger, again encouraging investments with higher liquidity to fund strikes. 3) An amendment that prohibits the IEB from budgeting the investment gains for operations. This would lessen the temptation for higher returns in riskier, less liquid assets, and at the same time encourage safer, more liquid investments, like the UAW did prior to 2015. Although for this option, I’m sure however it would be worded, the IEB can find a way around.
BUDGET
Another item that might come up in the convention is about the budget. I have long been critical of the UAW for not having a formal budget, and this is one of the Monitor’s recommendations. A year ago, the IEB had a budget all ready to go. This was a bottom-up budget, where each department reports up what it takes for them to do their jobs. But then President Fain didn’t like it and insisted on throwing out the year of work putting it together and instead make a top-down budget, where the President/IEB just tells departments how much money they’ll get. The implications is there are likely to be more political considerations in the budget. I won’t take a stance on whether the top-down or bottom-up budget process is better for the UAW, but this change after working on it for a year raises the question if this change was simply a power grab by the President (and compliant IEB) and/or meant to delay being financially accountable for another year without a formal budget in place. I suppose it also raises the question if President Fain really understands finances.
Another aspect of the budget that deserves consideration is whether to budget in the interest and investment income from the Strike Trust for operations. This has long been a non-no, in fact, on May 3, 2011 then-Secretary-Treasurer Dennis Williams listed not budgeting this income for operations in a “UAW Financial Planning Principles” resolution adopted by the IEB. Unions run on a modified cash accounting basis because the annual DOL LM2 report demands it. And few unions have the kind of investment income the UAW has, because they just don’t have as large of strike fund as the UAW has. So unions generally avoid budgeting this investment income for operations. The measure most commonly used yardstick for unions is “Operating Capacity”, which is Member-Based Income (dues + per capita taxes + fees) divided by Operating Budget (Representational activity + political activity + contributions activity + general overhead + union administration + sale of supplies). Please refer to “Trade Union Finance: How Labor Organizations Raise and Spend Money” by Masters & Gibney for further information. This number is about 1.18 for the UAW in 2025. The higher above 1 this number is, the better the union activities are financed by members. Masters and Gibney report this number was 1.37 for all unions for 2018-2019. So I’d suggest the UAW is a bit low, but not extremely low for this measure, meaning that it will depend more on investment income just to keep the lights on.
The implication of this is that financing regular operations with investment income might be a factor in deciding whether or not the IEB would allow a strike or force settlement in the event of a large strike. Because if investments are sold and future investment income dips, the UAW would likely have some painful personnel cuts or selling/mortgaging of assets or cutting of operations (and organizing?). And another argument against is that if the members want the UAW to do something, they will be glad to pay for it. Having a large source of regular income the membership isn’t paying for might allow the UAW to engage in activities the membership isn’t behind. Of course, another argument against budgeting investment income is that one can’t really predict how the market will be in the future (remember 1981-1982? 2008?).
So there are folks on the IEB who believe this investment income is necessary for the UAW, and should be budgeted in with a regular plan for harvesting this income. In fact, that is what the IEB has recently done. But there are also opposing voices on the IEB, a minority, who believe that investment income should not be budgeted for operations. A related question is to ask what the UAW is spending its money on?
UAW SPENDING
So the UAW