I can't pretend to have read up adequately to address all the issues going on with protests over state budgets and public unions. However, I believe a few remarks on conceptual issues related to public unions are needed.
A labor contract in a private business is essentially a partnership arrangement between two businesses. Think of it this way: Business #1 produces product X. Business #2 provides laborers to produce product X. #1 can negotiate for #2's product, the same way they can negotiate for the other factors of production, such as raw materials, equipment, and capital finance. For example, the Coca-cola company has to negotiate with one source to purchase sugar, with another source to purchase bottles, another source to purchase mixing equipment. If they were unionized, all that means is they now have to negotiate to purchase hours of needed to operate the equipment and produce Cokes. In fact, even without a union, they still have to negotiate to purchase labor, they just do it on an individual basis, rather than with a single collective representing all the laborers. So, the purpose of the union is to leverage greater negotiating power by monopolizing the sources of one factor of production.
Without getting into whether that is good, bad or indifferent, I want to point out what is fundamentally different about a public union. Where a private business union is one private business negotiating with another, the Government is not a business. It is a sovereign political power. It can only negotiate apples to apples with another sovereign entity. When it negotiates with a private entity, it is inherently unequal. Thus, constitutional protections are required to ensure that the public entity respects the rights of the private entity, such as the rules surrounding eminent domain. We take for granted in the U.S. that if the State purchases goods, they have to pay for them. Throughout much of history, and even today in much of the world, that is not necessarily the case; often, what the government wants, it simply takes.
Why do I point this out? Because with the inherent inequality between the Government and any private business entity, the only way to give a public union true negotiating power is to cede governmental authority. Remember, a union exists to produce a monopoly on something that a business needs to produce a product. But how can their be a monopoly on something necessary to govern the state? It is impossible that a private right could exist that is more fundamental than the right of the government to govern. Therefore the only way to give a public union rights to monopoly is to give it, not private bargaining power, but government bargaining power. It must become, in effect, another branch of the government.
The problem is, we thus produce a new branch of government that is not elected, not appointed, and not subject to constitutional limitations, because it does not derive from the constitution, it simply is. The public union must have government-like power in order to negotiate with the government, but it has none of the government's own limits to power. It is autonomous.
Let me come at this another way. When the government hires labor, whether at the federal, state, or local level, it is really the People who hire them. Lest we forget, we have a government "of the people, by the people, for the people." The 'government' is really just a proxy for the people. As a consequence, all the members of the potential labor force (the legal labor force, anyway) are already members of a 'union' of sorts: the Voters. Unlike the labor force of a private enterprise, the employees of the government actually already possess the highest power over their employer. Are you a federal employee who doesn't like your pay? Vote for a new president and congress. State employee who doesn't like your benefits? Vote for a new governor and legislature. You already have that power.
What the union confers, then, is not control over the government (the People already have that). Instead, it confers an added, extra measure of control over the government for only some of the people. In other words, it produces a special class of people who have more rights than all the other people. It denies the equality of the electorate. Like the old days when voting rights were restricted only to free people (not slaves), or only to property owners, or only men, or only whites, the public union creates a privileged class who has the power to dictate what the government can do above and beyond what all other people are able to do through the right to vote and the constitutional protections of due process.
Am I exaggerating? Doesn't the government negotiate with private entities all the time without producing privileged classes or new branches of government? No. When the government negotiates with private industry to purchase medical services, or textbooks, or road construction, they don't deal with a monopoly. There are multiple providers. And if there were not--if there truly were only one possible source of a product, and if that product were truly essential to the functioning of government, the State would have the power to take it by force without negotiation.
For the clearest example, consider the quintessential government employee: the soldier. Suppose that the members of the armed services determine that they have insufficient pay. They can negotiate privately; they can ask for a raise or promotion. They can threaten to not renew their enlistment if not given what they demand. But more than private negotiation, they also have public rights: as citizens, they may lobby their legislators for a pay increase, and failing that, they can vote for new legislators. But suppose that is not enough. Suppose they decide that they can leverage the negotiating power of every soldier, sailor, airman and marine if they can simply form a union. If they can convince everyone to join, they will have a monopoly, and with that collective bargaining power they will be able to force the issue.
What would the outcome be? De facto, a new branch of government. An entity within the government, providing an essential function of the government, but not under the control of the government, nor the constitutional courts, nor answerable to the people. It would, in fact, be a form of military coup, even if no violence was used. An army that does not answer to the government is a rebellion.
Obvious enough when talking about the army. Why isn't it obvious when talking about public school teachers? Maybe because we don't consider teachers as essential to the function of the government as soldiers. Or maybe, because we've decided to accept rebellion.