Think fast: Who gets better compensation — state government workers or their private-sector counterparts? Those who answer the private sector would be incorrect.
While many people believe that government employees make significant financial sacrifices, they are, in fact, doing quite well compared to the private sector. A new study commissioned by Citizens Against Government Waste found that in 22 major job categories, state governments, on average, pay 6.2 percent more per hour in wages and benefits, including pension benefits, than their counterparts in the private sector. Even worse, unfunded pension liabilities for all state and local governments are estimated to range from $2 trillion to $4 trillion, or an average of $40 billion to $80 billion per state.
This combination of excessive wages, pensions and other benefits at the state and local level is wreaking havoc on public finances across the country. It helps explain why cities and states from coast to coast are either bankrupt or heading in that direction, and why governments are struggling to provide basic services, from police protection to paving potholes. Despite this dire fiscal situation, there has been a great deal of backlash by public-employee unions and their supporters against efforts to normalize what are often extravagant government compensation packages.
The Citizens Against Government Waste analysis compared state employee wages to private-sector wages and benefits for the same occupations across all 50 states, utilizing state government data from the National Compensation Survey of the Bureau of Labor Statistics (BLS).
Some states are out of control. Texas has the largest difference in pay for state government employees versus the private sector. California has the highest weighted average hourly wages, and not just because of higher costs of living. Public-employee pension plans in California are largely responsible for the bankruptcy of Compton, Mammoth Lakes, San Bernardino and Stockton. More cities will follow.
Some states are better than others. Utah and Montana compensate state government employees closest to the private sector, but still pay higher wages and benefits than those paid to private-sector workers. In fact, no state on average pays public employees less than their private-sector counterparts.
The study also uncovers some big surprises. For example, an architect employed by a state government makes roughly 40 percent more in salary, retirement pensions and health care benefits than an architect working for a private company.
Generally speaking, the crisis in public pension liabilities has occurred because politicians have agreed to exorbitantly high wages and pledged unrealistic retirement benefits that taxpayers cannot meet. Meanwhile, state employee unions have fought, at the expense of taxpayers, alterations to wage and benefit packages. Warren Buffett has described the money owed to public-sector retirees as a “time bomb.” Once it goes off, we will find ourselves in the middle of a crisis that rivals the current situation in Greece.
If that crisis occurs sooner rather than later, it could end up being directly related to a dangerous ballot initiative in Michigan this November. The Protect Our Jobs Amendment, or Prop 2, “would add the right to collective bargaining for public and private sector employees to the state Constitution.” This would make collective bargaining a constitutional right, giving unions the unprecedented ability to override all past, current and future state and local laws, including long-standing pension reforms that have helped save taxpayers more than $4 billion. If Prop 2 wins, other states will follow, setting off a nationwide avalanche of bankrupt cities, counties and states.
Hard-working Americans who are struggling to pay their bills, find a job or set aside enough for retirement are being forced to pay for extravagant state government employee compensation. These employees are supposed to be public servants, not a privileged class. Taxpayers know it is unfair, it is unaffordable and it cannot continue. Someone needs to cry, “Enough!” A good place to start is by holding elected officials accountable for this massive waste of tax dollars.
Tom Schatz is president of Citizens Against Government Waste.