State employees... overcompensated fat cats?

Jan 14, 2011

Over the last decade, factories have closed.  People have lost their jobs. Some have had their hours cut.  Some have had their wages cut.  It’s been hard for many Michigan families. 

With so many people hurting, it’s easy to look around and get a little resentful when people who work for the government still have their jobs. 

More than 53,000 state workers --from the people who sweep the floors in the capitol to lawyers in the Attorney General’s office to engineers in the Department of Transportation-- still seem to be doing okay.

And some people think of them as fat cat government workers: over-paid and weathering the Michigan recession storm just fine.

During the election campaign, in the midst of a lot of voter resentment, politicians hinted those state government salaries and benefits needed to be cut.  Candidate Rick Snyder was among them… although he seemed empathetic for the government workers who could be facing those cuts.

“It’s an extremely difficult issue because you’re talking about people and their families,” candidate Snyder said in an address before the Detroit Economic Club.

Snyder said the next governor had to look at two things:  is state employee compensation comparable to the private sector and can the state afford those salaries and benefits?

“If you can’t check those two boxes, we have to do something.  We’re in an environment where I believe we have to do something,”  Snyder said.

Since then, Rick Snyder has often talked about “shared sacrifice” which seems to imply the private sector has already sacrificed; now the public sector should sacrifice more.

Conservative groups have been cranking out studies that argue government workers are over-compensated when compared to their private sector counterparts.

Since the election, Republican leadership in the legislature has been hinting cuts to state government workers’ pay and benefits are coming.  During the public television show Off the Record, Speaker of the House Jase Bolger talked about it.

“Those who receive government payments (paychecks) need to live within the means and they need to be sure we’re comparing that to those who are paying those bills.  Today, I think that that is not lined up,” Speaker Bolger explained.

He wouldn’t say that state employees across the board are over-compensated, but he did indicate it the legislature would be looking at cuts in some places.

“It depends on the classification, it depends on the position.  However, I do think there are significant dollars that need to be saved through our compensation models –and that’s the entire compensation, not just the salary--  and compare those to those who are paying the bills, those who-  our taxpayers, those in the private sector,” Bolger said.

Business groups are also suggesting state employee pay is out of synch with the private sector.  Charlie Owens is the State Director for the National Federation of Independent Business, a small business advocacy group.  It’s calling for a number of changes in state government to create a better business climate and among them is a cut in state employee compensation.

“We cannot sustain the level of government of the size that we had with the population and the economic climate that we’re in right now,” Owens said in his office near the capitol.

He notes the state has lost jobs, it’s lost people, it’s lost tax revenue.  He insists state government needs to cut.  Although, he’d rather not see more state workers lose their jobs.  But he says a cut in pay or benefits is one way to help the state plug its $1.8 billion budget hole in the coming fiscal year.

“ We don’t view the state employees and the ‘be all,’ ‘end-all’ to solving the budget problems in the state.  They are one component of it.  But they’re a big component and it has to be looked.  And how we do that is going to be challenging for legislature and the governor, but it has to be done.  It is not sustainable the way it is,” Owens says.

State workers say they’ve already made sacrifices.  There are far fewer state workers today than there were in years past.  From a high 30 years ago around 80,000 state workers to today about 53,000.   Just since 2001, the state employee workforce has been cut more than 18%.  State workers say their pay has not kept up with the private sector, that they’ve been making concessions to help the state get through these bad economic times.

So which is it… state workers are over-compensated… or they’re paid less than the private sector?

There’s a lot of room for debate  --and we’re going to hear plenty of it over the next few months--  but an economist who’s researched the issue says too often the comparisons are flawed.  Charles Ballard is a professor at Michigan State University.

“A lot of the state employees are doctors, engineers, attorneys and those folks tend to be compensated not as well as their private sector counterparts.  So, if you just look at the average,  the state employees look better compensated than the private sector, but the average is silly,” Ballard said.

He says if you lump state workers together and compare the average to the private sector, you have a problem.  That’s because the private sector workforce is heavy with fast food workers and retail store shelf stockers and others who are not as well educated or as skilled as the bulk of the state employees.  So it’s an apples and oranges comparison.

"If you compare apples to apples, most state employees are not highly compensated compared to their private sector counterparts,”  Ballard explained.

The MSU economist says, yes, there might be some clerks or secretaries who are doing better than their private sector counterparts because they have better benefits than someone working at a struggling business.

Overall, though, that's not the perception of the voters and taxpayers.  And last year when a three-year contract gave many state employees a 3% raise, when so many in the private sector were standing in the unemployment line, some people were shocked and angry. 

Ray Holman is with the United Auto Workers Local 6000, the union representing the most state workers.  Holman says you’ve got to look at the whole picture. 

“State employees have stepped up to the table, year after year and given concessions.  In fact since 2003, we’ve given $750-million in concessions—

LG:  “But that’s not what people see.  They see the 3% increase last year.”

"Well, the 3% increase is a bit of a--  you know, it’s not that clear cut.  It was part of a three-year contract.  The first year we got zero-percent increase.  The second year we got a one-percent increase.  During that contract period, our premiums and deductibles went way up and we’re protecting our collective bargaining rights because they wanted to violate our contract two or three years later and take away a negotiated raise.”

Legislators did try to stop that raise.  It didn’t work.  But, some legislators say if that can’t get what they want at the bargaining table, they will try to get it on the legislative floor.  The unions have shown they’ll fight that.

Legislators have a tough job ahead of them in cutting the budget.   While state workers’ pay and benefits are a relatively small portion of the overall budget, cutting them seems to resonate with the voters back home regardless of whether state employees are really over-compensated or not.