State Budgets and Public Employees
http://thedianerehmshow.org/shows/2011-01-05/state-budgets-and-public-employees
State and local government workers have reason to feel somewhat besieged. Declining revenues in many states have compelled politicians to take a hard look at expenses, and increasingly, the focus has been on salary and benefit packages promised to public employees. Research suggests that compared to the private sector, some state and local workers do earn more, but critics argue targeting public employees' wage and benefit packages and their collective bargaining power is an easy way to side step more basic issues such as the need for economic growth. Join us for a discussion of state budgets and public sector employees.
Guests
Lee Saunders
Secretary-Treasurer, American Federation of State, County, and Municipal Employees,
David Leonhardt
columnist, New York Times
Kim Rueben
public finance economist, The Urban Institute, Washington, D.C.
Fred Siegel
senior fellow, Center for State and Local Leadership at the Manhattan Institute
Comments
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I worked for the state of Maryland for 32 years and then retired. When i was hired i was promised an unlimited cost of living when i retired. After 15 years of working they reformed the pension system and said if i wanted to keep the unlimited cost of living i would have to increase my contribution from 5% to 7% of my pay from that point thereafter. I did.
Does the state have the ability to deny a COLA under these circumstances when there is an increase in inflation?
My Wife is a High School teacher in North Carolina, our family is under her health plan policy, or rather was up until December.
Our Wonderful Governor a former School teacher her self, has made it a point to save her budged, and has out sourced a third party company to back ground each state school employee's health benefit program to ensure that each Employee wanted to know how many family members where on the employees health plan policy, each family members SS#, whether or not they wanted any changes to the policy.
We submitted our form in a timely manner, and our paper work got lost or never was checked, long story short they dropped both my self and our son from my wife's policy, Simply because they some how deem that we no longer exist, died, divorced or what ever excuse they feel to come up with.
I have just been diagnosed with diabetes and am in desperate need of medication and health care, and as far as I am concerned with out this health care, I see this as a potential death sentence.
All because my Governor want's to cut corners to save a buck.
My wife and I have attempted to fight and appeal to reclaim her benefits, the State has bluntly and coldly denied our request.
WHAT DO WE DO, WE NEED HELP NOW!
I'm also a Maryland retiree in plan A of the old retirement system. We are very fortunate in that when the Maryland legislature created the new (and far less generous) pension system for new employees, it wrote into law that our retirement plan is a contract. Moreover, in requiring us to pay an extra 2%, it effectively made sure that we paid a special consideration as part of that contract. And Maryland still has an AAA bond rating. The bond rating agencies know that we have the same right to receive our pensions and COLAs as a holder of a general obligation Maryland bond has to be paid. As a result, the bond rating agencies a few years ago required Maryland to begin making up for years of underfunding the State Retirement System in order to keep the AAA rating. Although because of the recent great recession, our pensions are not fully funded, we are in far better shape than most states. So don't worry too much. Our state health benefits may be a different story.
Here on Long Island- it's big news about public employee pensions and benefits. the tax rate is crippling the local homeowners and we can't contribute to our own retirement. We have the average policemen retiring at full salaries of $150K tax free after 20 years of work with free benefits for life! We have Parks Department supervisors retiring with $200K pensions and teachers making over $100K. (pension incomes are based on regular salaries plus overtime- not just salary)
I've worked in the private sector my whole 30 year career and NEVER made that kind of money. I have less than 50K saved for retirement and my health insurance costs me $1700 a month! How can I justify paying 1/3 of my salary and 18K per year in property taxes to provide a 40 year retirement for someone who got their jobs through nepotism and cronyism when I will never be able to retire myself?
It's not scape-goating as much as it is cost-cutting. When my boss needs to cut back, he cuts my salary and my benefits and my job- that's life! I wish I had a union to fight for me, but most of us don't.
Why should public employees enjoy guarantees the rest of us never had?
Virginia state employees haven't had a raise in more than a decade, are generally paid less than private sector employees, and are now being told they'll be paying substantially into their health insurance program. The governor has ordered that unpaid furloughs must be taken periodically due to the poor financial condition of the state. All this while trying to do the Commonwealth's business at the level we expect to be served.
My whole work experience has been in public service. I have never worked for private industry. Public service is barely a sustainable living. My salary is $2 to $3 less per hour than in the private sector, but I enjoy my work and believe in what I do. Benefits were good, but I state "were". I chose to invest my retirement benefits and I will have very little when I retire in 3 years.
In my 30 years as a state employee:
* I was never part of a union
* I was generally salaried, which meant I received no compensation for overtime (of which there was plenty), and I was employed "at will" which meant that my employer could fail to renew my contract at any time, regardless of my performance
* My salary was substantially below that of my peers in the private sector, mostly because my state has been fighting budget battles for years and my employer received most of its funding from the state
* During those 30 years, I contributed 8.5% of my salary and my employer contributed 12.5% of my salary to the state retirement system
Yes, I retired early after 30 years of service, mainly so that I could work in the private sector to supplement my pension. Believe me, the average state employee is not living off the fat of the land. There is no fat. There never was any fat. I'm extremely tired of hearing that we're somehow causing, or are immune from, the economic woes of this country.
I retired recently after 31 1/2 yrs with a large Ohio City. I would not consider a career in government in today's environment. Public employees pay and benefits are under attack. There are never any rewards for success at your job; there are only negatives and punishments for lack of success. Government fail to keep their side of the bargain and does not make required pension contributions. I saw the effect of this in the lesser abilities of the young employees that joined my city in the last years of my career. They weren't up to the level of those who joined 20 yrs ago!
But in 31 1/2 yrs, I never encountered any citizens who wanted fewer services or slower/less response by government. And I never encountered any that wanted to pay more taxes for the greater services or quicker response that they demanded.
Public employees have become the scapecoat for legislative and elected officials failure.
I am thinking about R Reagan's quote of "...governments is the problem."
Is it easier to attack public employees since they are not usually your neighbor and are therefore seen as "the other?" Please relate this to the dismissal of airline controllers in the 1980's.
Thank you
What about corporate welfare? They are on the public take coming with incentives and going with tax breaks.
The discussion of how to take from the poor is just one more manipulation of the media.
The poor listen up when someone attacks them and the media get listeners.
what bothers me is the cookie cutter notion that everyone can be cut across the board. not everyone who works for the state makes more than private sector. i work part time for the VA state government and i make a little over half of what i make as contractor in the private sector. i get no benefits. i take the work because it's steady and i like the work. i think they need to be careful about how they make the cuts. oh and i didn't get the 3% bonus nor have i received a raise in 4 years. thanks.
Why not cap their salaries at 50 or 100k? Doesn't the average American make about 50k or less? There are so many unemployed people who are VERY smart who would Love to work for 50k. And since public sector employees so often seem to not know what they're doing or seem to not care or worse seem to be criminals, why not consider it an honorable job in which one serves the public with dignity and integrity knowing that it will come with a salary cap that's no more in general than what the average private sector worker makes?
Dean, from Rockford, IL.
Dancing on the Head of a Pin --
Public employees don't cause the economic problems --
1. US no longer extracts natural resources to sell around the world -- we buy resources from other countryies -- see OIL, see LUMBER.
2. US no longer mills cotton for cloth, and clothes making -- see the lable on any shirt you buy to find out where our money is going.
3. US letting large corporations leave the country and NOT pay taxes.
and on and on.....
Public employees did not creat those situations.
Where did all the money go that the public employees have put into their pensions? New York State put money into Bernie Madoff schemes or used it for other budget issues. Don't blame the workers for poor decisions of the legislature. Most public employees aren't getting wealthy. They deserve what was promised when they started their employment. I am not a state or public employee.
In the private sector there is a final arbiter in the employer - union contracts. It is the market place. If the union contract becomes too expensive the market place will force the employer to change. In the public sector, there is no real arbiter. The voters are forced to select one of two paths (Dems or Reps). In the market place there are a variety of choices.
Cost of Labor, Benefits, Retires:
Please have your panel comment on the effect of health care reform (the ACA) on the issue of the cost of labor and retires. Health care benefits are a major driver of the cost of labor and a massive legacy cost to business for retirees.
The present ACA will impact the cost of labor and retires.
Real reform (universal tax payer supported private health care) would require everyone to pay an equitable amount for health care financing (through taxes rather than high insurance premiums). Real reform would result in "Medicare for Everyone" financed directly by everyone's taxes rather than a subset of American's paying high premiums to pay for everyone's health care (due to cost shifting).
Lower cost of health care financing would lower the benefit portion of the cost of labor. This will only be achieve through universal health care coverage. Please have your panel comment on this issue.
In college, my husband chose a teaching career knowing that he would never make a lot of money, but would have a stable pension and good health care. Now, 25 years later, his health care is being cut and his pension is under attack.
For the first 15 years of teaching, Michigan law prevented him from contributing to a 403b to help his retire beyond his contributions to his state pension. So his contributions are beginning well behind mine, because I chose a career with no stability and no retirement plan beyond my own savings. My salary has been significantly higher at all stages of my career, so that contribution has not been a hardship. Even contributing 15% of his salary to a 403b now, he will never catch up to my steady 10% since I began working.
People make decisions based on what they are promised and what their contract says when they accept that agreement. Now, teachers and public employees are horrible for expecting the state to live up to that agreement. That is just wrong. If changes need to be made, it should be made when a teacher or public employee is hired, so they can plan their life. Waiting until someone has worked at a job for 15-25 years and then changing the agreement is just wrong. Where is the integrity?
My school board, city, county and state government have all had recent and significant controversies regarding waste and fraud. Examples of expense account abuse, nepotism, pay-to-play ... show that public employees are as corruptible as anyone else and should therefore be subject to the same realities of an economic downturn.
Flat wages in a recession, higher co-pays, lost holidays ... all private sector workers have had to deal with this, why should public employees be immune.
Hank
Public employees do not make more than their private sector counterparts. And, they have given up pay raises and have agreed to pay more for healthcare in order to obtain a secure retirement. The problem is not our sanitation workers, our bridge inspectors or our police officers. The problem is that politicians did not make the tough choices that they should have made to fulfill their promises. Why should the working classes suffer now for mistakes the political classes made because they couldn't make tough choices?
No matter what DR and her guests say, the truth is they and NPR have refused to talk about National Hiring Day in January, a real solution to help joblessness.
This is a day that corporations are encouraged to hire new employees. The day suggested is Wednesday JANUARY 19, 2011. Corporations are called on to put patriotism ahead of excess profits and help their country in hard times. Those corporations that cannot hire, are asked to stop firing for that month.
At present, most state and local governmental plans have a systemic problem, which results from the interest rate that is being used to value the plan liabilities -- which becomes politicized. If a higher interest rate is used to "value" the plan's liabilities (which allows the government to more aggressively discount future liabilities, thus making the overall liability figure more politically palatable), the plan's actuaries will force the plan to "assume" an investment rate of return somewhere near that same figure --- which forces the plan's investment advisers to seek out riskier investments.
So in a sense, when state pension systems are politicized (which in most cases is inevitable), it sets them up for failure. Until this cycle is broken, and more realistic liability and rate-of-return figures (and investment strategies) are used, most states' pension systems will continue to flirt with disaster.
John McGowan
Cleveland, Ohio
Although some of your guests are making good points, the issue of public employees vs private sector employees is, to my mind, so simple. The issue, as a caller said, is that private employers are not paying workers livable wages. The greed of employers is at the real issue. Behind this is the obvious issue of the US becoming a country of the haves and have nots.
Having been both a Federal and a State employee, it amazes me that people actually believe that Federal or State employees have a wage that is higher than an equivalent position in the private sector. Until the recent economic downturn, private sector employers paid much better and actually had better benefits packages. Private sector employers could more easily direct wage increases and decreases. Over the last 3 years in NC, not only was there no cost of living increase (which should not be considered a raise in pay), but have seen increases in insurance premiums AND sustained unpaid furlows (which contribute to DECREASES in take home pay). Now some of these elected officials in there infinite wisdom want to cut even more?
If we are going to have these types of cuts, then public sector employees need to have the ability to have gains in the same way as private sector employees...based on production, profitability, and output!
In any business, including state and local govts, the biggest expense is payroll. The fact is on a local, state, and federal level, we're broke. The federal taxpayer has been propping up the states, and in turn the towns and counties, for the last several fiscal years. This cannot continue, we have to cut somewhere. Here in the Wash DC area, approx 80% of Montgomery County's budget is payroll. Think of the savings that could be achieved with a 10% across=the-board paycut. No layoffs, no school closings, just shared sacrifice.
Last summer I heard a story on THIS AMERICAN LIFE about Jamaica and Barbados, both similar places w similar fiscal problems. Barbados decided to do an across the board 8% cut and over several yrs fixed the problem, and now is doing fine. Jamaica refused any such measure and continues to hurt and struggle as a nation.
Don't talk to me about employee contracts and "rights." I estimate that (so far) my private sector husband and I are owed approx $400,000 by Social Security, yet people have no problem talking about cutting Social SEcurity. How is that fair?
I am a 9 year County employee in Indiana. We have not had any raises for the last three years. We have had three paid holidays taken away from us. Our insurance deductibles have risen. Please don't cut my wages and or benefits any more!
Unions collective intelligence told them to negotiate for benefits to help them thru future economic crises. Now that the payoff for being farsighted comes into play they're instead being blamed for the problem. All these economic problems are simply due to a failure in the economy. 30 years of letting the marketplace provide for all - with little or no regulation - has predictably led to lower wages and capital and wealth rising to the top. Now all these people who claimed that the free market would provide for all want to cut wages and benefits, across the board, in both the private and government sectors. Doesn't the free market mentality say, "stay the course, the market will correct and provide for all"? You can't have it both ways. The market either does or doesn't provide.
Not all Public Sector workers can be compared to the teachers. I have worked for local government for 35 years. When I started, I took a pay cut from my private sector job. However, I did get additional benefits so it was a wash. Through the years, whenever there was budget problems, we were the first to get hit. When times were good, we were told not to be greedy so raises were minimal. I have been furloughed several times. Had wages held in abeyance and then it was changed into vacation time (read - a layoff where you picked the days off so the government could still provide services) I don't know how many years out of the 35 there were wage freezes. We never get bonuses like in private industry. Yes in some ways there is a monopoly. I worked for Social Services. You can't do that for a profit, the job is to disburse funds to people who are eligible. We get threatened, cursed at, are in risk of physical injury, all for doing our job. Half the time I bought my own office supplies. I have even had to buy my own toilet paper at times.
So you're saying this 1 day of hiring is supposed to be a realistic solution?! How is this related to the issue of public sector versus private sector employment and benefits? I don't know that they've decided not to talk about it or if they have not found a reason to believe that this one day job fair is a solution.
It's the same old story, and how many times have we heard it? When a government entity has financial problems and we blame the public employees, not the elected officials who allowed financial collapse, not the very high income persons who make a career of avoiding taxes.
Generally government employees accept lower wages for a structured retirement program. What is wrong with that? Government employees are the first to have salary increases frozen for any fiscal crises. It's been that way for decades.
The US Federal, State & Municipal system of taxation places the burden of taxation on the 'Middle Class.' And, Federal, State & Municipal employees are middle class, often lower middle class. They have specific restrictions on outside employment and political activities.
The Bush & Obama administrations tripped over themselves protecting the ULTRA WEALTHY, the finance, banking and hedge fund managers and partners. But, when there was an initiative to protect the weakest but providing health care, the chosen few couldn't walk away quick enough.
Yes, there needs to be reform to correct reported issues where school administrators, police or fire fighters salaried at $75K are able to work overtime before retirement and boost their pensions to >$100K. But how often does that occur? That problem should be addressed locally by the government entity responsible. That is an easy solution.
It's the same old story, and how many times have we heard it? When a government entity has financial problems and we blame the public employees, not the elected officials who allowed financial collapse, not the very high income persons who make a career of avoiding taxes.
Generally government employees accept lower wages for a structured retirement program. What is wrong with that? Government employees are the first to have salary increases frozen for any fiscal crises. It's been that way for decades.
The US Federal, State & Municipal system of taxation places the burden of taxation on the 'Middle Class.' And, Federal, State & Municipal employees are middle class, often lower middle class. They have specific restrictions on outside employment and political activities.
The Bush & Obama administrations tripped over themselves protecting the ULTRA WEALTHY, the finance, banking and hedge fund managers and partners. But, when there was an initiative to protect the weakest but providing health care, the chosen few couldn't walk away quick enough.
Yes, there needs to be reform to correct reported issues where school administrators, police or fire fighters salaried at $75K are able to work overtime before retirement and boost their pensions to >$100K. But how often does that occur? That problem should be addressed locally by the government entity responsible. That is an easy solution.