Traverse City Record-Eagle


January 9, 2011

Jack Lessenberry: The state employee compensation problem

New Michigan Gov. Rick Snyder is facing a $1.8 billion deficit that has to be eliminated by the end of September, or the state will shut down. So how does he do that?

Many observers think he is likely to start by going after public employee pensions and benefits, if not salaries.

For years, conservatives have been insisting on the need to "get state worker pay and benefits in line with those in the private sector."

New Senate Majority Leader Randy Richardville, R-Monroe, and Speaker of the House Jase Bolger, R-Marshall, said Thursday that state employees would have to make new concessions, or indicated they'd be forced on them by the Legislature.

James Hohman, a fiscal policy analyst at the conservative Mackinac Center for Public Policy, says "there's a way to save Michigan taxpayers $5.7 billion without cutting a single program."

The solution is, he argues, scaling back public-sector benefits, which, he argues, "far outpace" those most private sector workers get.

His dollar figure is considerably higher than other studies.

But the idea that government workers are too lavishly compensated is now widely accepted, in Michigan and elsewhere.

Many politicians also talk as if there were far too many government workers, and have called for massive layoffs.

Yet — is all this true?

Maybe not. Remarkably, a number of studies indicate that what everybody thinks they know about worker compensation may be just wrong. Two years ago, Charles Ballard, an economics professor at Michigan State, and Nicole Funari, now with the Federal Aviation Administration, made a detailed study of the Michigan work force.

Their conclusions? The number of state employees in Michigan has fallen sharply since 2001, and their salaries and benefits haven't kept pace either — especially for the highly skilled.

"State employees with a high-school education receive salaries that are roughly comparable with their counterparts in the private sector," they conclude. However, that changes dramatically for workers with at least a bachelor's degree.

"In terms of salaries, on average, these highly educated state employees fall substantially short of their private sector counterparts."

State workers do have benefits that are better than some private sector workers. But even these are contracting; state workers have had significant "increases in their health-insurance premiums, co-pays and deductibles."

In a shift that will save the state billions in the long run, Michigan moved in 1997 to switching new state employees from its old, highly expensive "defined benefit" pension plan to a "defined contribution plan."

What's been most dramatic, however, is the considerable drop in the sheer number of state workers.

The study found that Michigan's state employee work force peaked in 1980.

In the seven years beginning in 2001, it declined rapidly, mainly through attrition, falling by 18 percent, or 11,000 total workers.

During that same time frame, their wages barely kept pace with inflation. Michigan was not an isolated case.

Other studies by the non-partisan National Institute on Retirement Security and the Economic Policy Institute reached much the same conclusion about government workers nationally.

While they had a little more job security, they tended to be at least slightly undercompensated.

None of this is likely to sway many Republicans, who now firmly control every branch of Michigan government. They have a massive deficit to eliminate, and many, perhaps most, of the GOP legislators vowed not to increase taxes when running for election last fall.

Roger Martin, a former award-winning reporter now with Martin Waymire Advocacy Communications, a lobbying firm in Lansing, is scarcely a neutral party. He represents Citizens for Accountability in Reform, a coalition of state and local public employees who, understandably, want to hang onto as many benefits as possible.

Even he acknowledges that sacrifices are likely. But he maintains that "Our goal here is to make sure the debate is honest. If they are going to cut public employees even more, the politicians can't be allowed to get away with positioning it as 'bringing compensation more in line with the private sector.' It already is.

"The problem is that too many politicians argue perception when they lose on facts," he added.

Hard to argue against that.

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