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AFL-CIO Has Money Problems
Labor Federation Could Be Forced to Lay Off Staff, President Acknowledges

By Thomas B. Edsall
Washington Post Staff Writer
Friday, April 29, 2005

AFL-CIO President John J. Sweeney, who is facing challenges from some of the labor federation's largest member unions, yesterday acknowledged that the organization is financially squeezed and may have to lay off a quarter of its workforce.

Sweeney, who was first elected in 1995 as an insurgent who promised to increase the percentage of the workforce represented by unions, has presided over a decade of union decline. Signs of the AFL-CIO's precarious financial condition could make Sweeney more vulnerable to challenges to his leadership at the federation's July convention in Chicago.

Sweeney's goal in a teleconference with reporters was to focus on efforts by the AFL-CIO to halt the decline in union membership. "We must increase the size of our membership and restore union density -- especially in key industries -- or no other strategies to strengthen our movement will work," the federation said in a report released yesterday.

In the nearly 50 years since the AFL-CIO was created by a merger of two labor federations, union membership fell from about 33 percent of the workforce to 12.5 percent. The decline of organized labor has a ripple effect in the economy because union members usually receive higher pay and better benefits than unorganized workers in their industries. Labor's weakness has damaged the strength of its ally, the Democratic Party, and weakened the lobbying muscle of labor in Washington and in state capitals.

But the focus of the news conference shifted from organizing to questions about financial weakness and layoffs at the federation, highlighting the growing rift within the AFL-CIO.

"The labor movement needs new direction and new leadership," Bruce S. Raynor, president of Unite Here (the result of a merger of unions representing textile and hotel workers) and one of Sweeney's most outspoken detractors, said yesterday. Raynor, who is on the AFL-CIO finance committee, said "assets have declined dramatically." From 1995, when Sweeney took office, to the present, the AFL-CIO's reserve fund has dropped from $61 million to $31 million.

In addition, Raynor said, the AFL-CIO funds an employee retirement health care program out of general revenue. The cost of the program is rising significantly and would grow even more with layoffs, while the total number of union members who pay dues for operating expenses is declining, Raynor said.

Sweeney became increasingly testy during the question-and-answer period of the teleconference, dismissing warnings of deteriorating finances that have begun to appear on union Web sites as "rumors . . . ridiculous and irresponsible."

Sweeney said reluctantly that he will meet with unions representing AFL-CIO staff members to discuss layoffs. "We are looking at every department and every program of the AFL-CIO," he said.

"I really can't be too specific about reorganization plans," he said, and when pressed further, he declared: "The bottom line is I will not give you any more information."

Six union presidents, including Raynor, said in a statement issued after Sweeney's teleconference that "there remain many unanswered questions."

"We continue to call on the Sweeney Administration to provide complete information regarding its programming and operational budget," the statement said.

The five presidents, who together with Raynor form the anti-Sweeney wing of the union movement, are Joseph T. Hansen of the United Food and Commercial Workers, James P. Hoffa of the International Brotherhood of Teamsters, Terence M. O'Sullivan of the Laborers International Union of North America, Andrew L. Stern of the Service Employees International Union, and John W. Wilhelm, Unite Here's president for the hospitality industry.

Sweeney was president of the SEIU before winning the AFL-CIO presidency. In recent years, Stern, who took over the SEIU from Sweeney, has been the harshest in his comments about Sweeney's leadership.

Hoffa and the other dissident presidents sought approval of a mandate to sharply reduce the size of the AFL-CIO and to shift $35 million into organizing campaigns, but they were rejected by a 15 to 7 vote at the federation's executive committee meetings this year in Las Vegas.

A proposal by Sweeney that was approved in Las Vegas calls for boosting spending on political and legislative mobilizing and organizing by about $15 million, split between the two activities.

In a policy statement released yesterday, Sweeney, Secretary-Treasurer Richard L. Trumpka and Executive Vice President Linda Chavez-Thompson defended spending more money to get out the vote: "We reject the notion that we should concentrate on one of these paramount goals [organizing] at the sacrifice of the other [political mobilization]."

Wilhelm is considered a probable challenger to Sweeney, but he has not said whether he will run. Yesterday, he continued to decline to comment. O'Sullivan is another possible candidate for the AFL-CIO presidency, but he is known to be reluctant to challenge Sweeney, who is a friend.

Denise Mitchell, AFL-CIO communications director, said the federation "is not in bad shape at all." She said the reserve fund is smaller than it was a decade ago. But, she said, one of the major criticisms of Sweeney's predecessor, Lane Kirkland, was that he refused to spend money while organized labor was in decline, and Sweeney is committed to using resources to stop that decline. She noted that the reserve fund is to be used when labor faces difficulties, and "George Bush is a rainy day."

AFL-CIO financial reports available on the Labor Department Web site show that from the start of 2000 to June 30, 2004, the AFL-CIO's net assets fell from $66.1 million to $29.1 million. Much of the difference results from a $25.4 million mortgage that Mitchell said was taken out to finance needed repairs and upkeep of the headquarters building.

The AFL-CIO gets its operating budget by assessing a per capita tax paid by the 58 member unions. The unions pay 53 cents for each member. The per capita tax has been raised twice, from 47 cents to 50 cents in 2000 and to 53 cents in 2001.

Washington Post researcher Lucy Shackelford contributed to this report.

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