Employee Compensation and State/Local Governments
Stateline, a non-profit online news site funded by the Pew Charitable Trusts reported on state budget gaps in a late December 2009 news report, writing specifically:
“Mid-year budget gaps have opened in dozens of states, brought on, in part, by overly hopeful revenue projections. According to the National Conference of States Legislatures (NCSL), 36 states are still facing shortfalls in the current fiscal year, even as governors are putting the finishing touches on their budget proposals for fiscal year 2011, which for most states starts in July.
”Continuing job losses and anemic consumer spending have depressed tax collections and opened gaps ranging from tens of millions of dollars to the billions. All told, the new gaps total almost $28.2 billion, according to NCSL. That’s on top of the $145.9 billion that state policymakers cut from their fiscal year 2010 budgets during legislative sessions earlier this year.”
Come Chris Edwards, director of Tax Policy Studies at the Cato Institute, who writes in the January 2010 Tax & Budget Bulletin (requires Adobe) that “with employee compensation representing half of total state and local spending, large savings could be found by freezing wages and overhauling excessive benefit packages.”
In a table of average compensation in 2009, Edwards shows that total compensation in state and local government is $39.66 per hour worked while it is $27.42 per hour in the private sector (a ratio of 1.45:1.00), and then adds:
“The table shows that public sector workers have the largest advantages in health insurance, defined benefit pension plans, and paid leave.”
There is also greater availability of benefits in the private sector. For example, 90% of state and local government workers are offered retirement benefits while only 67% of private sector workers are offered retirement benefits, or paid sick leave is offered to 89% of state and local government workers, but to only 61% of private sector workers. There are also significant regional variations in compensation with unionization being a driving influence.
The last factor Edwards writes about is the excessive retirement benefits available in the public sector, primarily because “state and local workers have very generous defined-benefit (DB) pension plans compared to private sector workers." He adds the public sector pension plans “have been overpromised and underfunded.”
A discussion of Arlington County’s handling of pension benefits is contained in Management’s Discussion and Analysis of the of FY 2009 Comprehensive Annual Financial Report, Arlington’s audited financial statement, which is available at the Department of Management and Finance’s website.