What's Round on The Ends and High in The Middle? Ohio's Public Sector Salaries, That's What

"Ohio," writes Matt Mayer, president of the Buckeye Institute, "is facing an estimated $8 billion deficit for fiscal years 2012-2013. As our State of the State report found, state workers today are paid much more than their private-sector neighbors in 85 out of 88 counties."

How much more? About 34 percent more in total compensation (wages, benefits, retirement). Which is cheap: Similar figures for Michigan found public sector workers pulling about 47 percent more than private sector ones. And federal workers earn about 45 percent more than their private sector analogues in total comp.

The Buckeye Institute has a solution for retiring more than one-quarter of the state's gaping deficit hole:

Simply realigning state government worker compensation packages to match those of their private-sector peers would save taxpayers over $2.1 billion in the next two years, which is nearly 28 percent of the $8 billion budget deficit we need to eliminate.

Go here to read "The Grand Bargain is Dead," which details multiple ways to slice the numbers on wages and benefits to pull down costs. It's worth looking through because it gives concrete ideas on how to pull states back from the economic precipice. The idea that governments at all levels can simply keep paying employees the way they have been is simply unsustainable (not to mention unfair to the private-sector citizens who foot the bill).

While the evidence is overwhelming that, with the exception of a few fields such as medicine, public-sector employees are better compensated than their private-sector counterparts, there is still some explaining to do. Meaningful straight-up comparisons are difficult to make and groups such as the Center for State and Local Government Excellence and the National Institute on Retirement Security argue that public-sector workers have more edjumication and degrees than private-sector drones; when you account for that, the public-sector workers make less (about 7 percent less in total compensation).

Such comparisons, needless to say, don't bother to figure out whether degrees lead to productivity gains or are necessary for the work at hand (that would be virtually impossible to do, I think). Given the number of hours worked in public vs. private sectors and the reliance on schooling as a proxy for skills and promotion in the public sector, it seems as likely as not that government workers have more time and reason to get more degrees.

More important, such comparisons don't dispute the fact that the public sector workforce is increasingly expensive as measured by its own baseline. Rather, they contend that the public sector workers deserve even higher compensation because they are older or more educated or do more complicated tasks. Which is another way of saying that it's a damn shame that these gigantic deficits punching through virtually all state budgets like Columbus' own Buster Douglass are getting in the way of paying government workers even more.

Are state workers getting more costly? As the Buckeye Institute, since 1986, state employee annual raises have averaged 3.5 percent. And that doesn't include yearly step increases between 1 percent to 3 percent, and longevity increases for folks working five to 20 years between 2 percent and 10 percent. All that adds up, clearly, as does the massive expansion in the workforce itself (over 90,000 new positions created in the past 20 years).

Many folks don't want to hear that the reason governments are broke is because they spend too much. Cue this article last month from Amy Traub in The Nation:

The budget crises engulfing American cities and states stem from one cause: as Nick Gillespie of Reason repeats ad nauseam, "They spend too much!"—especially on the supposedly lavish compensation of public workers. This simplistic narrative ignores how the nation's deep recession has shrunk city and state tax revenue and omits the fact that plummeting stock markets have decimated government pension funds. To the extent that conservatives succeed in reducing fiscal woes to a case of runaway spending, politicians find it easier to address budget shortfalls with public sector furlough days, wage freezes, layoffs and benefit cuts than with progressive tax increases that, many economists conclude, would cause the least harm to the recovery.

Actually, my simplistic narrative doesn't ignore shrunken tax revenues. It accounts for massive increases in spending during flush years, including on government workers. "From 2002 to 2007, overall spending [by the states] rose 50 percent faster than inflation." What part of "they spend too much!" don't you understand? If your pal went from making $10 to making $15 but then spent $20 and so had to bum money off you, you would tell him he spends too much, right? And to go to hell the next time he's needs a loan.

Traub is right that the stock market crash has put states and municipalities on the hook for cash infusions into their pension funds (which incidentally, have more forgiving governance rules than private-sector ones). Which is, among other things, a great argument for getting government workers out of defined benefit plans and into defined contribution plans (like an increasing number of us toiling in the non-public sector have). It makes it easier to budget into the future and insulates governments from getting socked with bills just as their money has vaporized in a down economy. Which is one reason why the Buckeye Institute suggests just that sort of shift to save Ohio taxpayers a bundle of cash.

To recap: 1. Government workers overall are expensive, both compared to their private-sector counterparts and to their past selves. 2. States can save a lot of bread by bringing government compensation into line with private sector pay. 3. States spend too much, certainly relative to their revenue. 4. It'll Be a Beautiful Day When the Pentagon Has All the Money It Needs and Bombs Schools Having Bake Sales.

Lots of previous posts on the coming war between public and private sector workers.