Public Sector Pay Driving State Budget Deficits

Discussion in 'Politics' started by boedicca, Mar 28, 2010.

  1. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    Very interesting. It turns out that John Edwards was right. There really are Two Americas. The Over Paid Unionized Public Employees - and those of us who are being bled out to overpay them.

    It turns out there really is growing inequality in America. It's the 45% premium in pay and benefits that government workers receive over the poor saps who create wealth in the private economy.

    And the gap is growing. According to the U.S. Bureau of Labor Statistics (BLS), from 1998 to 2008 public employee compensation grew by 28.6%, compared with 19.3% for private workers. In the recession year of 2009, with almost no inflation and record budget deficits, more than half the states awarded pay raises to their employees. Even as deficits in state capitals widen and are forcing cuts in services, few politicians are willing to eliminate these pay inequities that enrich the few who wield political power.

    Let's walk through the math. In 2008 almost half of all state and local government expenditures, or an estimated $1.1 trillion, went toward the pay and benefits of public workers. According to the BLS, in 2009 the average state or local public employee received $39.66 in total compensation per hour versus $27.42 for private workers. This means that for every $1 in pay and benefits a private employee earned, a state or local government worker received $1.45.

    The BLS study breaks down where that 45% premium comes from. It turns out that public employees earn salaries that are about one-third higher on average than what is provided to private workers per hour worked. But the real windfall for government workers is in benefits. Those are 70% higher than what standard private employers offer, as shown in the nearby table. Government health benefits are twice as generous as what workers employed by private employees earn. By the way, nearly this entire benefits gap is accounted for by unionized public employees. Nonunion public employees are paid roughly what private workers receive.

    What if government workers earned the average of what private workers earn? States and localities would save $339 billion a year from their more than $2.1 trillion budgets. These savings are larger than the combined estimated deficits for 2010 and 2011 of every state in America.

    In a separate survey, the federal Bureau of Economic Analysis compares the compensation of public versus private workers in each of the 50 states. Perhaps not coincidentally, the pay gap is widest in states that have the biggest budget deficits, such as New Jersey, Nevada and Hawaii. Of the 40 states that have a budget deficit so far this year, 28 would have a balanced budget were it not for the windfall to government workers.

    But these current fiscal problems are a picnic compared to the long-term benefit commitments that state and local politicians have made to public retirees. A 2009 study by economists Robert Novy-Marx and Joshua Rauh, published in the Journal of Economic Perspectives, estimated that these government pensions are underfunded by $3.2 trillion, or $27,000 for every American...


    The Government Pay Boom - WSJ.com
     
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  2. Dante
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    Dante On leave Supporting Member

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  3. Baruch Menachem
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    Baruch Menachem '

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    This doesn't even scratch the surface. The real budget killer is PERS. Here in Oregon it is a budgetary black hole that the legislature can't touch even if they had the nerve. The more disgraceful parts of it are regarded as contractual by the courts, and untouchable by either initiative or legislative action, as the US Constitution forbids states from messing with contract by statue. Even though this 'contractual' problem is created by state constitution and state statute.
     
  4. sole survivor
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    sole survivor Member

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    Just leave the FED outta this discussion. Ronald Reagan saw this shit coming in 1984 and corrected it before it became a problem. The states in the worst shape are dem strongholds Mich, cali, NY, mass
     
  5. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    It's getting to the point where cities, counties, and states are cutting programs just to cover excessive retiree benefits. The real answer is to restructure the pensions.
     
  6. Dante
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    Dante On leave Supporting Member

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    :eusa_eh:
     
  7. Baruch Menachem
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    Baruch Menachem '

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    Short of bankruptcy, it won't happen. And my understanding is that even in bankruptcy, Pension obligations are at the front of the line, right behind the IRS and employee wages.

    I mean, what could Oregon do in bankruptcy? There are no assets the state can sell.
     
  8. sole survivor
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    sole survivor Member

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    Short line then
     
  9. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    Can't you read?

    It's an opinion piece regarding specific facts on public sector compensation and state finances. If you disagree with it, so be it. But your comments and smilies don't address the content.
     
  10. Care4all
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    Care4all Warrior Princess Supporting Member

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    so, i guess the republicans in the majority in congress for 9 of those 10 years of astronomical growth in government employee pay, were not as ''conservative'' as you all would like to think or claim? :confused:

    thank you for not trying to blame obama or democrats for this.....:D

    a bit surprised there was not a little more pointing the finger at WHO did this....

    i see a very unbiased opinion (outside of your john edwards comment)....which i agree with, for the most part.

    edit....federal gvt expansion as well.
     
    Last edited: Mar 28, 2010

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