Throwing Open the Books! On Economic and Political Justification

Red Star -

The National Political Committee (NPC) has been working to balance DSA’s income and expenses to protect it from the existential threat of insolvency. Red Star would like to explain the reasoning that has informed our affiliated NPC members, both with regard to our financial situation and the politics necessarily involved in our work on this matter. An economic justification presentation prepared by the NPC (slides used in this piece for illustrative purposes, and a link can be found at the bottom) has already been shared privately with DSA’s Staff Union. We’re sharing it because we think it provides a good overview of our situation. 

The NPC has been discussing a Memorandum of Understanding (MOU) with the staff union to finalize details on the reduction of seven unit positions the NPC finalized earlier this year. Out of a desire to avoid misleading or potentially damaging statements in a delicate time, Red Star have communicated less actively on the budget in recent weeks. But we think it’s important to bring members into the conversation, and want to make sure that members do not lose sight of the important questions this process has been raising.

This piece intends to address two misconceptions about the politics involved in budgeting decisions.

The first is that the decision by the majority of the NPC to cut staff is political, but that defunding chapters – the alternative proposed and repeatedly affirmed by Socialist Majority Caucus and that NPC members of both Socialist Majority and Groundwork voted for – is not. Any proposals may be more or less rooted in financial reality, but all budget decisions are political, especially in an organization like DSA. Throughout financial deliberations on the NPC, Red Star has prioritized two things above all else: ensuring DSA achieves financial solvency with decisions based upon the facts, and preserving DSA’s character as a member-driven organization rooted in strong chapter organizing.

The second misconception is that reductions to staff must be justified to the point of satisfaction of the Staff Union. On the contrary, the NPC is empowered to determine priorities and allocate resources. If this were not true, it would mean that effectively the Staff Union, not the NPC, directs political decision-making in DSA. In fact, the Staff Union is not allowed to organize for nor against any political tendency or perspective in DSA in the collective bargaining agreement (CBA) between DSA and the union. Despite this, the union has consistently used its meetings with the NPC to advocate for more and deeper cuts to member organizing. For DSA to be a vehicle for working class power, decisions must be made by membership and their democratically-elected political representatives – not unelected staff.

DSA’s Financial Reality

The origins of the crisis

DSA has been deficit spending since 2022, when dues revenue from an externally-driven membership surge and artificially low pandemic-year expenses combined to create a deceptive budget surplus. Based on this surplus, DSA expanded operations and hired staff with the erroneous expectation that this would fuel further membership growth. As a result, in the intervening years, as dues revenue decreased with declining membership totals and staffing levels increased, we substantially depleted our cash reserves.

In 2023, the organization ran a deficit of $1,054,490. After a comprehensive budget-cutting process and a strong, ongoing Solidarity Income Based Dues (SIBD) drive, which increased projected income for 2024 by $420,000 [1], DSA was still projected to run a deficit of $581,631. This projected deficit has been reduced further to $261,545 based on staff departures including an Organizing Manager, Field Organizer, Data and Tech Manager, and Communications Director. The Field Organizer and Communications Director positions are frozen or accounted for in the layoff reduction, but the Data and Tech Manager and Fundraising Director positions may be refilled. The projected deficit additionally does not account for the hiring of a replacement National Director, contingencies or additional crises that may strike, or the pay raises scheduled to be negotiated in December 2024.

As of April 2024, we had $2,790,837 in our combined bank accounts and CDs and a year-to-date deficit of $170,225. While opposing members of the NPC have charged that the departure of a handful of non-unit personnel has reduced the anticipated shortfall for 2024, effectively eliminating the need for further layoffs, these departures have not resolved the financial crisis or its fundamental cause. The core issue is that DSA hired staff believing that membership would continue to grow – but instead, membership contracted tremendously. 

Starting in 2022, DSA’s expenses have exceeded our income.

Like nearly all other organizations with recurring financial obligations, DSA’s longstanding policy is to keep 6 months of operating reserves on hand. The NPC also passed a resolution specifying an emergency budgeting process which will essentially shut down the organization when we reach 4 months of operating reserves on hand; these funds would be needed to cover DSA’s remaining financial obligations. We are simply too close to our reserve floor [2].

Staffing costs represented a significant, disproportionate portion of our spending. Before the NPC passed a reduction of 7 unit staff and 1 director, over 70% of our expected income in 2024 was allocated to staff. Unlike other expenses such as organizing expenses cut earlier this year, staff salaries are recurrent and non-negotiable. Ensuring staff receive their paychecks is critical, even if it means dipping into reserves. DSA is still expected to be running monthly deficits throughout the rest of 2024.

Lack of adequate reserves exposes us to existential risk in the event of unforeseen costs like large fines or litigation. It would be financially irresponsible – and likely lead to further layoffs or organizational crises, like defunding chapters – if the current NPC didn’t leave their successors with 6 months of reserves and a balanced monthly budget.

Dues and fundraising

At EOY 2022, we had 61,358 dues-paying members. At EOY 2023, we had 53,835 dues-paying members. So far in 2024, we have lost an average of 305 dues-paying members per month. We have not had a net upward trend in membership since mid-2021. Despite the continual drop in membership over this period, DSA recklessly continued to expand staff. This includes hiring three staffers right before the 2023 Convention despite the previous NPC having been aware of the seven-figure deficit.

From the NPC’s presentation to the Staff Union. In 2020, DSA had an income of $5.3 million, 73,000 dues paying members, and 20 staff. As of March 2024, DSA has a projected income of $5.4 million, 52,920 dues-paying members, and 34 staffers.

We are now seeing further lapses as the two-year anniversary of the Recommitment Drive approaches. We have put efforts into fundraising and the Solidarity Income-Based Dues drive, and we have already incorporated optimistic projections for both into the budget projections. However, fundraising is sluggish and uncertain in the current political climate – in fact, progressive organizations across the country are struggling financially. Because we believe in DSA, we believe that the long-term viability of the organization is of paramount importance. To safeguard it, we must align our costs with our current income. Despite prioritizing deep programmatic cuts and implementing solidarity income plans, before layoffs, we were still projecting monthly deficits until 2025.

From the NPC’s presentation to the Staff Union.

While SIBD drives have brought in additional revenue, the results are insufficient to resolve the crisis. We have already seen progress slow dramatically in new SIBD sign-ups as we repeat calls through the same member lists. We have averaged 100-300 new SIBD payers per month, and as a result have reduced our dues drive goal from 5,000 to 4,000 by the end of May. Even this is likely optimistic, continuing to reflect our highest hopes (from when the SIBD drives took off shortly after the 2023 convention) rather than the results thus far. Additionally, new SIBD payers are existing members switching from another dues system to SIBD. While this is an increase in revenue, it is not an increase in membership, which is the foundation for DSA’s work and costs. We cannot claim easy victories.

We will be trying other fundraising avenues, and our 2024 income projections optimistically assume that 2024 non-dues general donations will be double that of 2023. The Fundraising Committee has recently expanded with a number of new, experienced members, but these initiatives move slowly and will find themselves in competition with chapter-level fundraising for political candidates and local work. Donations to DSA’s associated but not connected 501(c)(3) The DSA Fund are tax-deductible, unlike donations to DSA itself, and thus DSA must also compete with the Fund for high-dollar donations.

Reducing expenses

The NPC, working with staff and the Budget and Finance Committee, has gone through three main rounds of cuts. The intention was to stabilize finances, maintain operations, and minimize layoffs. In all, $1.3 million were cut from programs and staff, including the following.

  • $268,000 in cuts were made per the Budget & Finance Committee’s recommendation to committee funding, including travel, merchandise, and other expenses.
  • In January, the NPC cut $823,798.91 by freezing hiring, downsizing the office, eliminating leadership stipends, and moving events online.
  • In February and March, the NPC engaged in a consensus process to cut another $273,295.75 from publishing, merchandise, leadership stipends, and committee phone banks.

These cuts have bought valuable time for DSA to avoid hitting the reserve floor and helped minimize how deep layoffs would have had to go to address our deficit. However, this means that we now only have $326,602 in programmatic expenses left after staff, overhead, and dues share expenses. Of these programmatic expenses, $154,731 is earmarked for the Labor Solidarity Fund and Matching Funds for Chapter Offices, and $29,500 is allocated to YDSA [3], which is currently at the forefront of DSA's presence in the wave of pro-Palestine protests at universities. Our organizing work will suffer because of these cuts, and additional cuts to organizing work – which must be effectively permanent in order to offset recurring staff costs – are not a realistic avenue to reduce the number of layoffs.

We cannot avoid the difficult reality that our finances have presented us: we need to acknowledge our actual base of dues-paying members and allocate resources toward staff and other expenses with our reasoning rooted in reality. The NPC’s original resolution to reduce staffing levels in order to reduce recurring operating expenses aimed at reducing these recurring costs by $1.2 million, approximating the cost of one staffer at $100,000/year including benefits. 

Our initial proposal of 12 layoffs was reduced to 8 to reflect a modest increase in 2024 dues income projections. A reduction in force of 8 positions (7 unit, 1 non-unit) roughly corresponds to an $800,000 annual reduction in expenses. We are aiming for a revenue-positive budget in 2025. The change from 12 to 8 positions carried a significant measure of risk for the organization, based on projections that may not end up being accurate. Any further reduction in the number of layoffs would lengthen the amount of time that we would remain dangerously close to our reserve margin, increasing organizational risk, and would likely necessitate a correction in the form of additional layoffs or cuts to chapter funding.

On the Politics of Budget Decisions

Financial decisions are political

Some of our opponents have described these layoffs as "politically motivated." This is true: budgeting decisions are inherently political. When DSA’s elected leadership allocates member funds, we're deciding where our limited financial resources go, which inherently reflects our priorities, theories of change, and vision for the future of the organization. The role of the NPC, as the highest elected body of the organization, is to carry out political decisions, acting on behalf of the membership between conventions. This leaves responsibility with the NPC to weigh complex factors and make political decisions that are best for the organization's growth and wellbeing. Previous DSA leadership made the political decision to fund staff and contractors at a level which exceeded the organization's recurring income, leaving the consequences to fall to the current NPC. To hire at unsustainable rates was a political decision; to reduce staff expenses is a political decision as well.

After our previous programmatic cuts earlier this year, the only reasonable remaining areas to cut in recurring expenses are staff and chapter dues share. Anyone proposing reduced staff cuts must be willing to defund chapters or spend deeper into our reserves, prolonging our financial precarity. Our position throughout has been that preserving chapter spending and dues share is our highest priority. As we have argued previously, defunding chapters rather than reducing staff is itself a political choice that would have disastrous consequences and move DSA further from Red Star’s vision of a member-led socialist party. Chapters are the principal location for robust member-led social practice within the organization, and it is no coincidence that our strongest national campaigns have been born out of chapter-level organizing.

Our actions throughout this process have reflected our belief in the primacy of strong chapters as the foundation of a member-led party: we voted for extensive cuts to national committees and organizing during the first round of budget cuts. When that area of cuts had been exhausted and we had to consider staff or chapters, we prioritized continuing funding chapters through our dues share.

Repeated criticisms from the Staff Union have revolved around whether the NPC has provided sufficient “economic justification.” Under the Collective Bargaining Agreement (CBA) that the union has negotiated with DSA, and to which both parties are now bound, DSA must provide economic justification and consider any alternatives offered. Having done both in formal meetings, the NPC has satisfied this responsibility. The NPC has carefully considered the numerous factors in this situation, and communicated straightforwardly with membership and staff while engaging in fact-finding and deliberation. Continuing to try to find the “right” number of layoffs is not an appropriate use of the NPC’s limited time. There is no purely objective formula that will reveal a mathematically correct number of layoffs because budgeting is a balance between political, logistical, and operational considerations.

A member-driven DSA

Attempts to flatten the dispute over layoffs into a typical conflict between management and the union have stretched the analogy to the breaking point. The “company” in this case is a socialist organization which extracts no surplus value and receives no profit. “Management” is a group of unpaid (or poorly-paid, in the case of co-chairs) members who are democratically elected by other members. Mapping these archetypes onto DSA and declaring unqualified support for the union gives a dismal and unrecognizable picture of our shared organization as a capitalist firm composed of 18 managers, 55,000 customers, and 35 workers who are trying to seize the means of production. 

The reality is that DSA is an organization of and for workers. It consists of thousands of workers collectively carrying out the historical mission of socialists to win power for the working class. It is not class struggle unionism to fight against a worker’s organization, and the union should remember that when it uses anti-capitalist tools against democratically-elected member-leaders.

In a typical nonprofit, staff taking power from the board represents a step towards working class democracy. In DSA, staff wielding power represents a step back from the existing working class democracy that we’ve built. In our context, the efforts by staff must be understood as an ongoing attempt by a political faction within it to secure their vision for the org.

While staff might want to frame their demand for no layoffs as a purely economic one, in our current economic state it is equivalent to a demand to defund chapters. To enforce this political demand, staff has brazenly used political methods – barnstorming chapters to give presentations on the “union perspective,” denouncing the NPC and calling on members to join their opposition – and tried to use their leverage to bind not only this NPC but subsequent ones to forgo layoffs regardless of economic circumstances. In its barest form it is an argument that decisions about how much of your dues go to unelected staff should be made, in the final analysis, by unelected staff.

All of this has been cheered on and facilitated by a few factions of NPC members who have turned a difficult but necessary process to secure DSA's future into a prolonged and highly public spectacle, one that has almost by design drawn the attention of DSA's political opponents outside the organization. Having failed to achieve their political vision democratically, these factions are acting against the broader interests of the most viable socialist organization this country has seen in nearly a century. In doing so, they imply that staff, rather than the democratic will of the membership, should have the final say over the financial – and thus political – direction of the organization.

It’s a well-understood principle of rank and file unions and political parties that paid staff have a special obligation not to use their privileged positions to influence the political life of the organization that employs them. United Auto Workers (UAW) has fought bitter internal battles to win member control. The United Electrical, Radio and Machine Workers of America (UE) has a clause outlining the role of staff in their constitution, which we will quote here in full:

The UE staff, except as they are dues-paying members of a local union and exercise the rights of all other members of the local, are not a part of the rank and file structure of UE. Proper staff conduct reinforces rank and file unionism and makes staff a vital part of UE democracy. 
The UE staff is employed by the membership through the national officers and general executive board and implements the leadership’s decisions to build the union membership, to assist the locals and regions in solving their problems, and to effectuate UE programs and policies. Staff members have no right to interfere with UE rank-and-file control, including election processes, at any level of the union. To deviate from this policy would lead to a staff-controlled union.

DSA has language in the staff CBA that states “Employees may not use their role as staff to organize for or against any political tendency or perspective in DSA. This includes organizing internally to DSA or negotiating with outside organizations without written authorization of their supervisor.” Despite this, the principle is not so firmly ingrained in DSA. We hope that if nothing else, this episode has helped clarify its importance for membership.

One talking point from the union and its supporters has been that the NPC is “union-busting”. Far from this, we want to work with the union to improve working conditions – past NPCs and directors have pushed overwork onto our staff and stifled the development of members as organizers and protagonists, all norms which must be aggressively fought against. The ideal outcome of this process is a sustainable budget that prevents a crisis like this from occurring again, and provides structural support for member organizing and development. We believe these goals are achievable, and we are actively working to develop reforms to get there. This course correction involves ensuring that we have sustainable hiring practices and that our finances are transparent. Our budgeting must be participatory, democratic, and transparent, and we are proud of our work this term to surface these important political questions to the members.

As our democratically elected organizational leadership between conventions, the NPC has the right and responsibility to allocate resources. The bottom line is that current and past spending on staff makes up an unacceptably large portion of our income. This is the source of the budget crisis. The NPC has made a decision on this issue, and has appointed a group of members to attempt to form an MOU with the staff union on some details of the seven-position reduction in force. If an MOU cannot be reached, the original decision about impacted positions will stand, and the membership should focus on the important political issues facing DSA, the socialist movement, and the international working class.

For full transparency, we are including the presentation made to DSA’s Staff Union explaining the economic justification for layoffs.

Further Discussion

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Footnotes

  1. This recalculation of projected income was based on the growth of SIBD from August 2023 to January 2024. (back)
  2. As of April 2024, recalculated to be $1,930,051. Previous calculation was over $2.3 million. (back)
  3. This figure excludes YDSA stipends. (back)