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Teacher Union's Missing Funds: A Pattern of Stonewalling?

By RiShawn Biddle - November 21, 2011

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By RiShawn Biddle

Who stole more than $227,000 from America's public school teachers? And how did the National Education Association fail to notice this for five years? These are among the questions that the nation's largest teachers union refuses to answer.

Last year, the NEA reported to the U.S. Department of Labor that it lost $227,626 over a five-year period "due to the actions of two former employees." The union didn't discover the money was lost until April 2010.

After learning of the problem, the NEA let the two employees go. It didn't press charges but rather "secured commitments from the two individuals to make full restitution." According to its report to the Labor Department, less than half of those funds were recovered and the NEA may have had to file a claim with its fidelity bond carrier to recoup the rest. The union also took "an array of corrective actions," it assures us.

Few of the NEA's 3.2 million rank-and-file members have heard about this bit of news because the union buried it in a hard-to-find addendum to its Department of Labor-mandated 2009-2010 LM-2 filing. They most definitely won't be able to find out which former employees stole the money, why the union took so long to discover the problem, or what specific steps have been taken to prevent this in the future.

They won't find out because the NEA isn't talking. Pressed for information by RealClearPolitics, the union phrased its "no comment" as a matter of privacy rights.

"The National Education Association is a private organization. As such, the NEA faces no obligation to make financial or employment records public beyond meeting the reporting requirements as provided for by law or subject to the governance documents under which the Association operates," wrote senior press officer Sara Robertson in response to several queries.

For critics of the union such as Larry Sand, a former NEA member who now runs the California Teacher Empowerment Network, that isn't nearly good enough. Sand argues that the union owes its members more than a perfunctory statement. "I would think that they would give more disclosure. These are forced dues. In 28 states, [the NEA] is taking their money," he says.

When it comes to collecting rank-and-file cash, the NEA has few rivals. The union collected $397 million during its 2009-2010 fiscal year, more than the American Federation of State County and Municipal Employees, Service Employees International Union, or the International Brotherhood of Teamsters.

A lot of what comes in gets spent quickly. Besides the $29 million it spends annually on political activity -- on top of the $64 million it ladled out to political campaigns during the 2009-2010 election cycle -- 433 NEA staffers earned at least $100,000 in annual compensation.

And the union will spend more. In June, members voted to increase annual dues by $10 in order to beat back school reformers and governors looking to curtail the union's influence.

The NEA can be quick to accuse critics of imperiling the economic interests of its members. Earlier this year, the president of the NEA New Jersey chapter accused Gov. Chris Christie of trying to "raid the pension checks of retirees and the paychecks of middle-class workers" after he, along with the Democrat-controlled legislature, made teachers and other civil servants contribute more to their nearly free health care plans.


Has the union proved less than forthcoming about its own handling of members' money? Sand says that the revelations about lost union funds are "in keeping with their modus operandi" of stonewalling and control.

He may have a point. Over the past two years, three NEA state affiliates have filed bankruptcy or been placed under the national union's trusteeship. In 2009, the union aroused the ire of rank-and-file members in Indiana after it took control of the Indiana State Teachers Association, which collapsed after the health insurance program it administers became insolvent.

Members were particularly put off that ISTA waited until the day the NEA takeover was announced before disclosing that its mismanagement of the insurance fund -- including investing as much as 87 percent of its portfolio in hedge funds -- led to the collapse.

Nor were teachers happy with the $40 increase in their annual dues of $449 just to cover the insurance plan's $67 million deficit. "[ISTA] always talked about how careful they were with that money, so I just can't believe it," Indianapolis teacher Brenda Wiley, who collects long-term disability benefits from the fund, told the Indianapolis Star.

Last year, the NEA seized control of its South Carolina affiliate. Members only got official word of the takeover in a column inside Emphasis, the union's in-house publication. "Better late than never," declared Mike Antonucci, whose Education Intelligence Agency reported on rumors of the takeover a month before the union quietly announced it.

Other financial management scandals have been percolating, including revelations that the NEA Member Benefits Corp. had been collecting fees from financial services firms to peddle those firms' insurance plans and annuities to members. Two NEA dues-payers, Jerre Daniels-Hall and David Hamblen, filed suit when they learned the NEAMBC may have "improperly received" as much as $2 million from two firms to push an annuity plan on members.

The federal 9th Circuit Court of Appeals tossed out the case on a technicality. But the union suffered an avoidable PR black eye by coming clean about the fees only grudgingly, when its hand was forced. As with annuities, so too with the missing funds.

The NEA relies in part on its credibility to help beat back cuts to teacher pay and benefits, and even to defend its threatened legal monopoly on collective bargaining in some states. Stonewalling on lost union dues doesn’t enhance the NEA’s persuasive powers. 

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RiShawn Biddle

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