Competing Wisconsin protests peaceful, draw thousands

* Tea Party-backed rally outnumbered

* Atmosphere friendly despite confrontation fears

By James Kelleher

MADISON, Wis., Feb 19 (Reuters) - Supporters of legislation to reduce public employee union bargaining power and benefits in Wisconsin were far outnumbered by opponents on Saturday, as the two sides shouted competing slogans but did not clash.

Tens of thousands have demonstrated throughout the week against Republican Governor Scott Walker's proposed legislation, which supporters say is needed to bring spending under control and opponents contend would break the back of state worker unions.

Wisconsin is the flashpoint for a U.S. struggle over efforts to roll back pay, benefits and bargaining rights of government workers. If the majority Republicans prevail, other states could be emboldened to take on the powerful unions.

Both sides drew thousands to the state capital Madison on Saturday -- unofficial estimates put the total near 40,000 -- but opponents appeared to have several times as many as those backed by Tea Party groups, the first appearance by members of the conservative, limited-government movement this week.

The bill's opponents marched counter-clockwise around the state Capitol, encircling the legislation's supporters and chanting "kill the bill."

The supporters countered with "Recall them all," referring to Democratic state senators who fled to Illinois to deny Republicans the quorum needed to consider the proposal.

In addition to sharply curtailing union bargaining power, the Republican legislation would make state workers contribute more to health insurance and pensions.

FRIENDLY ATMOSPHERE

"I've been working in a factory for 26 years. We pay 15 percent for the cost of our healthcare. The state workers get Cadillac insurance and pensions. They have no God-given right to collective bargaining," said bill supporter Anthony Thelen, 46, who works in a nonunion factory outside of Milwaukee.

Although there had been fears of a fight, the atmosphere was generally peaceful and friendly, with organizers on both sides urging followers to be courteous and police needing to do little but stand by.

Margaret Derr, a high school math teacher and union member, said she didn't dislike the governor personally.

"I'm just opposed to the bill. I have no problem contributing more to my healthcare and pension. I understand about the deficit, but some of the proposals are just about union busting."

Walker estimates the state budget deficit for the rest of this fiscal year at $137 million and for the next two fiscal years under its biannual budget at $3.3 billion.

He wants state workers to increase contributions to pensions to 5.8 percent of salary and double contributions to health insurance premiums to 12.6 percent.

The proposal would limit collective bargaining to the issue of wages and cap increases to the rate of inflation, with a voter referendum needed for bigger increases.

It also would end government collection of union dues, allow workers to opt out of unions, and require unions to hold recertification votes every year. Walker said the alternative is to lay off more than 10,000 public employees.

Public sector workers are the backbone of the union movement in the United States.

Only 12 percent of U.S. workers were represented by unions in 2010, the federal Bureau of Labor Statistics says. While just 7 percent of private sector workers belonged to unions last year, 36 percent of public workers were organized, the bureau said. (Editing by Jerry Norton and Philip Barbara)