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How much can we blame on state pensions?

Wondering why New Jersey isn't finishing its much-needed commuter tunnel to New York? Easy, says David Brooks. Blame public employees, their pensions and their pay. "States across the nation will be paralyzed for the rest of our lives because they face unfunded pension obligations," he writes.

State pension systems are a problem. But they're not the problem right now. And they're certainly not what's standing between New Jersey and its tunnel. After all, Christie didn't fund the pension system this year. He simply skipped the $3.1 billion payment, saying he wouldn’t add money to a "broken" system. If I didn't buy lunch today, you can hardly blame the cost of my lunch for the fact that I don't have bus fare.

Brooks's column doesn't do much to put the pension obligations of the states in context, so we'll do it here. Just today, Alicia H. Munnell, Jean-Pierre Aubry and Laura Quinby released a paper (pdf) tallying up the pension problem. "Public plans are substantially underfunded," they conclude, but "in the aggregate, they currently account for only 3.8 percent of state and local spending." Roll that around for a minute. Pension obligations currently account for 3.8 percent of the average state's spending. That's not where the current crisis is coming from. If you want to see where the state fiscal crisis is coming from, turn to this graph from the Milken Institute:

statetax.jpg

"The problem in this moment," says Betsy Zeidman, director of the Center for Emerging Domestic Markets at the Milken Institute, "is revenue." The word "revenue," incidentally, doesn't appear in Brooks's column.

But that's what changed. In the months before the financial crisis, in fact, states had built up record rainy-day funds and were starting infrastructure projects. Then Wall Street collapsed, and so too did the revenue states got from taxing property, incomes and sales. At the same time, the need to spend on social services went up rather than down. The result? A terrible strain on state budgets. But not one you can blame public employees for.

If you look forward 10 years, of course, pensions become a much bigger problem. But not the biggest one. "Assuming 30-year amortization beginning in 2014, [pensions] would rise to only 5.0 percent [of total state spending] and, even assuming a 5 percent discount rate, to only 9.1 percent." Just like for the federal government, it's health-care spending, not pensions, which poses the greatest long-term threat to the states:

statehealthexpenditures.jpg

Brooks also attacks public-sector employees from another angle: "Nationally, state and local workers earn on average $14 more per hour in wages and benefits than their private sector counterparts," he writes. This relies on a loose definition of the word "counterpart." It doesn't mean "compared to the workers like them." It means "compared to the average worker."

If you compare workers (pdf) of like education, experience, etc., you'll find that blue-collar workers in the public sector do a bit better than blue-collar workers in the private sector, but white-collar workers do a lot worse. The calculations that compare average wages neglect to mention that public-sector jobs tend to be white-collar positions, while most positions in the private sector aren't. More than half of all public employees have college degrees, compared to about 35 percent of private-sector employees. What's that? You want a table?

blog_public_private_pay.jpg

This shouldn't be too much of a surprise. Ever talked to a lawyer who works for the government, or a teacher? Have they ever told you they signed up with the public sector because the money is so good? Meanwhile, would that we'd offered more money, and attracted more talent, to the regulatory agencies in the run-up to the crisis. That investment would have paid for itself a thousand times over.

Then Brooks takes one final turn: "This situation, if you’ll forgive me for saying so, has been the Democratic Party’s epic failure," he says. He's forgiven, but he's also, well, wrong. As any expert can tell you, most every state is facing these problems over the next few decades. Are we really to believe that Democrats are dominant in every state legislature in the country?

Moreover, state budget problems have a spending side and a revenue side. Democrats (and some Republicans) and the unions have increased spending on public employees. But Republicans (and some Democrats) and business interests have passed massive unfunded tax cuts that turned pension programs into ticking time bombs. See California for more on this play. There's plenty of blame to go around.

There are real challenges facing states in the coming years. But these are serious, complex challenges, not a simple morality play in which we just need to get tough with state employees and all will be well. In the short-term, the problems facing states -- the problems that are forcing them to stop construction of ongoing projects -- are not driven by pensions or public employees, but by the financial crisis.

The challenges facing them later are not nearly so simple as greedy state employees or runaway pension spending. Health care is a major player here, as it is everywhere else. And while states are facing serious pension problems because they still offer defined-benefit pensions, we're also going to see the retirement of millions of private-sector workers who don't have defined-benefit pensions, and either haven't contributed enough to their 401(k)s or saw their wealth wiped out in the recent turmoil. We're facing a pension crisis in the public sector, but we're also looking at a retirement crisis in the private sector.

These problems aren't going to be easy to fix, and there's going to be plenty of pain to go around -- including for unions. But before we can start working on solutions, we need to describe the challenges clearly.

By Ezra Klein  | October 12, 2010; 5:00 PM ET
Categories:  Budget  
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Comments

This article is pure BS in the case of New Jersey.

1. The great governor Chris Christie has worked towards and passed laws making those entitled asshats at the NJEA begin paying their healthcare costs.

2. The Democrats and the Republican union water carriers have been in power for 30+ years.

3. There has been no fictional massive 'unfunded' tax cuts.

Income taxes are higher than they were 30 years ago.

Sales taxes are higher than they were 30 years ago.

Property taxes are MUCH higher than they were 30 years ago.

4. We have a ridiculous, activist, spread the wealth supreme court which commandeered the treasury to redistribute it to rotten inner cities like Camden and Newark.

The state spends billions propping up failing school districts.

Posted by: krazen1211 | October 12, 2010 5:29 PM | Report abuse

Here's the actual budget.

http://www.state.nj.us/treasury/omb/publications/11bib/BIB.pdf


Note the massive increase in spending from 2002 to 2008.

And of course page 76..

Employee benefit cost are $4.5 billion out of a $29 billion budget. Enough to pay for this tunnel.

And of course nearly $2 billion in payments to the teachers retirement and health care systems. $8 billion in cash giveaways mostly to failing Abbott districts.

Posted by: krazen1211 | October 12, 2010 5:36 PM | Report abuse

I have simply stopped reading Brooks' op ed pieces. I do read the 'conversations' he has with Gail Collins, but those are seldom about serious topics. Thanks, Ezra, for pointing out when Brooks is full of it.

Posted by: ctnickel | October 12, 2010 5:37 PM | Report abuse

I can't speak for state pensions, but Federal workers have not had a pension since 1983. The Federal retirement systems (FERS) ain't bad, but it also is most definitely not a pension. The large number of people still expected to collect pensions from the Federal government speak more to the age of the workforce than they do to lavish lifestyles of the federally-employed. Well, outside of the erstwhile Minerals Management Service, anyhow.

Posted by: klautsack | October 12, 2010 5:42 PM | Report abuse

"But Republicans (and some Democrats) and business interests have passed massive unfunded tax cuts that turned pension programs into ticking time bombs. See California for more on this play"

And this, in bizarro world, where a refusal to raise taxes somehow = a tax cut.

Never mind that spending went up 6% a year in California over the last 20 years, partially because some morons wanted a high speed train.

Posted by: krazen1211 | October 12, 2010 5:42 PM | Report abuse

Budgeted at $2 billion and coming in at over $14 billion, the shadow of the abortion that was Boston's "Big Dig" will be cast over any large construction project for the next century. Think that's more what's going on here than anything else.

Posted by: Hieronymous | October 12, 2010 5:52 PM | Report abuse

"Employee benefit cost are $4.5 billion out of a $29 billion budget. Enough to pay for this tunnel."

That sounds about right - <20 % of the total state spending goes toward employee benefits. So, in other words, you could cut benefits entirely for the whole state workforce and still have a $25 billion budget. But something tells me if you did that, a commuter train would seem somehow less pressing.

Posted by: klautsack | October 12, 2010 6:08 PM | Report abuse

"That sounds about right - <20 % of the total state spending goes toward employee benefits. So, in other words, you could cut benefits entirely for the whole state workforce and still have a $25 billion budget. But something tells me if you did that, a commuter train would seem somehow less pressing."

Hmm? Why would it be less pressing?

That commuter train is critical to the private sector economy.

Thousands of man hours are lost every day because those damn trains get delayed in the existing tunnel trying to enter Penn station.

We have an excess of state employees anyway. 70k were hired in the 00s, compared to 11k in the 90s.

Posted by: krazen1211 | October 12, 2010 6:19 PM | Report abuse

Has anyone explained why, as Brooks pointed out, Buffalo has the same number of public employees with half the population? I thought that was the most interesting (and perhaps salient) point in his whole column.

Posted by: Hieronymous | October 12, 2010 6:32 PM | Report abuse

Interesting analysis, but you should also mention that pension plans depend on a certain rate of return (7% or so, I think) in addition to the annual funding requirement. When the markets decline, the funding requirement goes up. This has exacerbated the public pension problem.

Posted by: RZ100 | October 12, 2010 6:33 PM | Report abuse

"We have an excess of state employees anyway. 70k were hired in the 00s, compared to 11k in the 90s."

So seeing how large a number $5B is to state employees (i.e. it covers ALL of their benefits, so I'm guessing maybe 25 % of the whole workforce), cutting that amount would be a huge burden on them and would probably create a much larger unemployment problem. At that point, the need for a tunnel would seem small in comparison to the unemployment problem.

Posted by: klautsack | October 12, 2010 6:50 PM | Report abuse

The income of most government employees includes both a legitimate base salary as well as illegitimate revenue (derived from insider trading, gifts in kind, contributions, campaign-related work, work for think tanks like Center for American Progress, etc.).

Congressional staff salaries are particularly interesting, as most staffers receive both a federal paycheck and one or more campaign/PAC paychecks: the insider trading aspect has been a hot topic recently (http://online.wsj.com/article/SB10001424052748703431604575522434188603198.html -- "Congressional Staffers Gain From Trading in Stocks")

As Klein states, government blue-collar employees definitely do significantly better than equivalent private sector employees: government white collar employees also do better... but only if you count the "unspeakable" income.

Posted by: rmgregory | October 12, 2010 6:55 PM | Report abuse

ezra should better understand NJ like Krazen does. Everyone knows that the Democratic controlled legislature and the unions which wield way too much power in NJ would never let NJ enact real pension or benefits reform.

krazen is 100% right.

Ezra you're right too to blame healthcare costs. Good thing Christie wants employees to pay 30% of costs as opposed to a measley 1.5% of their pay. I'd think you'd be praising him for that, no?

Posted by: visionbrkr | October 12, 2010 7:00 PM | Report abuse

Ezra, you are a simple man... Wouldn't another comparison be the NUMBER of public employees, ie, necessary downsizing has not occurred because of absurd union contracts, to determine the burden versus the private sector?

There is also a model specification problem in the study you cite. Public employees, notoriously public school teachers, are guaranteed extra pay by achieving further certifications and degrees. It is likely that the data set is comparing public school teacher pay to highly educated professionals who achieved beyond bachelor's degrees.

Unions and their water carriers have no credibility on this issue as even the most simple reforms, like having all new public employees in 401ks rather than pensions, are met with jihad cries from the unions.

It's so simple to find examples of a broken system. The Left is going to be eviscerated on this issue. Are you going to tell me the Muni bus drivers in San Francisco clearing $100k ,even $200k, annually are not overpaid? That their work rules, prohibiting part-time workers, and thus paying out OT up to wazoo why they sit on their duff, are fair? That there isn't fluff in San Francisco City government worker benefits? Guess what, even in San Francisco, there are competitive propositions to limit this pillaging of the taxpayers that are likely to pass... what do you think this means in the rest of the country?


http://articles.sfgate.com/2010-04-26/news/20868777_1_city-workers-city-controller-ben-rosenfield-overtime

Posted by: cdosquared5 | October 12, 2010 7:13 PM | Report abuse

I am not sure why I bother commenting, but that study continues to bother me.

Specifically, the study utilizes mean earnings rather than median earnings.

For example, the study lists average earnings in the private sector for a professional degree at $152k and for a bachelor's degree at $71k, while in the public sector it is only $88k and $48k respectively. These numbers for the private sector are so high because they are using mean earnings, rather than median earnings.

I am sure that someone more informed than I could provide even more recent numbers, but a quick google search turns up 2006 census data that reveals that median personal income for full time employed persons 25+ (who will usually be earning more than someone younger) with a professional degree is $100k, and with a bachelor's degree is $50k.

Now I, admittedly, am out of my element here, but it seems to me that the study completely ignores the fact that average income in the private sector is skewed by extremely high income individuals that drive the mean up. This is a factor that simply is not present in the public sector. For example, MBAs and BAs getting paid multi-million (or more) dollar bonuses could skew the average.

I also think that more granularity is needed for any sort of meaningful study. I would be very curious as to the breakdown between entry level positions, mid-level postions, and high-level positions. Note that this is more directly correlated to how many years of experience are required to do a job, rather than how many years of experience a person has at a job.

Posted by: jcdoerre | October 12, 2010 7:26 PM | Report abuse

To simplify: I am positing that the top 1% of the private sector makes so much more than the top 1% of the public sector so as to overall make the average private sector income be higher than the average public sector income, but that this has absolutely no bearing on whether most public sector employees are under compensated.

I also note that this theory would suggest that this is only a factor for workers having a bachelor's degree and above, and this is exactly where the huge disparities in average income are seen in the study.

I take no position on whether most public sector employees are, in fact, over or under compensated; instead, I merely think that using mean income poses problems.

As an aside, I also think that much more granularity is needed, as it makes little sense to treat a b.s. or b.e. equivalently to a b.a. Similarly, there is a big difference between a masters or Ph.D in computer science and a masters or Ph.D in literature.

Posted by: jcdoerre | October 12, 2010 7:31 PM | Report abuse

"Meanwhile, would that we'd offered more money, and attracted more talent, to the regulatory agencies in the run-up to the crisis. That investment would have paid for itself a thousand times over."

The "if only we had better bureaucrats theory".

The best talent is never going to be attracted en masse to the regulatory agencies. Nor would it matter if the best talent did fill the regulatory agencies to the brim. The great recession would have occurred anyway.

Many of the experts didn't see the financial crisis and the great recession until it was upon them (or even later - many didn't think we were even in recession as late as summer 2008).

No individual or small group of individuals - no matter how bright - can fully understand the financial system and fully appreciate the risks. It is far too complex (for that matter, there are individual securities too complex for any one person to perfectly understand).

The least bad solution is to let the various firms participating in the market to feel it out, and manage the risks they face independently. Over time, the survivors will have fairly balanced risk profiles - not too conservative but not too aggressive either. Any institution which drifts towards either extreme for too long is likely to risk failure.

Posted by: justin84 | October 12, 2010 10:35 PM | Report abuse

It looks like you hit a nerve, Ezra. The contrast between the tone, argument, and evidence in your post and the rebuttals it provoked is striking.

But you're a better man than me. To wit:

People, think. If all you Randian supermen are playing the economic game right, why aren't you working for the great benies in the public sector? Either the public sector isn't as you describe it or the free market isn't or you're having to settle for a poorly remunerated private sector job.

Posted by: dfhoughton | October 12, 2010 10:39 PM | Report abuse

""The problem in this moment," says Betsy Zeidman, director of the Center for Emerging Domestic Markets at the Milken Institute, "is revenue." The word "revenue," incidentally, doesn't appear in Brooks's column."

But revenue isn't the problem.

Look at that chart (fig 3). Revenue grew rapidly during the 2001-2007 economic expansion. In the 2003-2006 time frame the average annual growth appears close to 10%. More rapid than the late 1990s even.

A single year decline of 10% is a huge drop by historical standards, but keep in mind the preceding seven years of rapid revenue growth. Given that context, state and local governments shouldn't be having so much difficulty balancing their budgets.

Posted by: justin84 | October 12, 2010 11:00 PM | Report abuse

"So seeing how large a number $5B is to state employees (i.e. it covers ALL of their benefits, so I'm guessing maybe 25 % of the whole workforce), cutting that amount would be a huge burden on them and would probably create a much larger unemployment problem. At that point, the need for a tunnel would seem small in comparison to the unemployment problem."


That doesn't make sense though.

New Jersey has about 4 million employed people.

New Jersey only has about 120k teachers. This link shows 600k total state employees, rightfully getting rid of 10-20% will barely make a dent in unemployment.

http://www.bls.gov/eag/eag.nj.htm

A tunnel is far more useful than cutting classrooms from 17 to 15 students.

Posted by: krazen1211 | October 12, 2010 11:56 PM | Report abuse

Meanwhile, NYT says bill for state of NY employee health benefits alone is $200B and includes quote saying cost "will be astronomical, with the potential of bankrupting municipalities."

Posted by: bdell555 | October 13, 2010 2:34 AM | Report abuse

jcdoerre--interesting point about the mean/median issue. You're certainly right that there aren't the super-high salaries in the public sector pulling up the mean the way there are in the private sector. Including that would probably shift the numbers some and make public sector employment look better.

In my experience (I'm a technical/scientific white collar federal worker), government salaries for professionals start out lower than private sector ones, but the early raises catch you up and, assuming you stay in a non-management position), probably get you close to or equal to private sector pay, especially if you factor in the benefits. (Vacation time is the biggest plus for federal workers comapred to private sector.)

On the other hand, once you start moving into management at all, private sector salaries pretty quickly outpace public sector ones, by more the higher up you go (as you note.)

Regarding rmgregory's note, congressional staffers may get some outside perks (and have the ability to cash in with lobbying firms once they've been around for a while.) But it's absurd to consider those couple of thousand workers at the center of power to be representative of the much larger federal white collar workforce.

Posted by: dt4211 | October 13, 2010 8:53 AM | Report abuse

Thank you, Ezra Klein! You have neatly summed up the difference between perception and reality when it comes to the discussion of public servants and their pensions; in fact, when it comes to the public's view of public servants, in general. Somehow it's not surprising that many of the same people who support the infrastructure that enabled the financial crisis would now be heavily invested, pun intended, in pointing fingers in another direction, which allows them to advocate for more of the same deregulation, corporate welfare and coddling. Unfortunately, it appears that simply pointing the finger at the public sector is not enough for ideologues like Christi, who has sought to demonize all public servants and projects to a degree that borders on sadistic.

In other words, it's perfectly reasonable to suggest that states tackle all of its financial issues across the board, including devising ways to reform the pension and entitlement systems and insisting on budgetary control of public projects, but to insist that the buck stops there is an extremely convenient and misguided cop out.

Posted by: Koko3 | October 13, 2010 8:57 AM | Report abuse

"People, think. If all you Randian supermen are playing the economic game right, why aren't you working for the great benies in the public sector? Either the public sector isn't as you describe it or the free market isn't or you're having to settle for a poorly remunerated private sector job."

dfhoughton,

In other words, why don't the "Randian supermen" join (as they would put it) the looters? I'm certainly not an expert on Rand's philosophy, but I think the answer here should be obvious.

Who do you consider to be self proclaimed "Randian supermen"?

Posted by: justin84 | October 13, 2010 9:10 AM | Report abuse

Strange how we never see Mr. Brooks and others complaining about over-generous military pensions adding to the Federal deficit.

My father retired from his government job at age 38 with a pension that provided more than half his salary, full health care, and subsidized groceries. He was allowed to take a second government job (with its own cushy pension) while still receiving the first pension. Now 83, he makes more than I do on the combined pension payments.

If Dad had worked for state government, Mr. Brooks would be screaming. But Dad earned his pension benefits through the Military-Industrial Complex (the Navy and then NSA)...and there's not a peep from the conservatives.

(Personally, I think Dad earned his pension, as I think most government workers do.)

Me? I've worked for the public library for the last 36 years, and I'm looking forward to a munificent pension of $23,000 each and every year. In another ten years, when my mortgage is paid off (at age 62), I'll probably be able to afford retirement. Then I suppose I'll keep busy by counting my tremendous ill-gotten fortune.

Posted by: DonSakers | October 13, 2010 9:32 AM | Report abuse

"Strange how we never see Mr. Brooks and others complaining about over-generous military pensions adding to the Federal deficit.

My father retired from his government job at age 38 with a pension that provided more than half his salary, full health care, and subsidized groceries. He was allowed to take a second government job (with its own cushy pension) while still receiving the first pension. Now 83, he makes more than I do on the combined pension payments.
"

Entirely logical.

The federal goverment can print money to satisfy its debts.

The states cannot.

Posted by: krazen1211 | October 13, 2010 9:41 AM | Report abuse

"In other words, it's perfectly reasonable to suggest that states tackle all of its financial issues across the board, including devising ways to reform the pension and entitlement systems and insisting on budgetary control of public projects, but to insist that the buck stops there is an extremely convenient and misguided cop out. "

Too late. The previous governor didn't insist on budgetary controls on pensions or on public projects, and he made the deals and signed the contracts.

And of course, that is the biggest issue.

Some boorish moron like Jim Mcgreevey can be in office for 3 years and saddle the state with 30 years of contractual obligations.

Posted by: krazen1211 | October 13, 2010 9:43 AM | Report abuse

"government white collar employees also do better... but only if you count the "unspeakable" income."

This is absurd. I don't know any federal employees who get some sort of "quid pro quo" from private counterparts for work that they do. There may be a few very well publicized accounts of Congressional members doing this sort of thing. And the now-notorious Minerals Management Service certainly had its share of problems (beginning under Bush, mind you). But the normal working scientists, policymakers, and regulators don't even have any avenue for this sort of thing, nor do they care to drag down their entire career and families engaging in these sorts of shenanigans.

Posted by: klautsack | October 13, 2010 9:44 AM | Report abuse

"A tunnel is far more useful than cutting classrooms from 17 to 15 students.

Posted by: krazen1211 | October 12, 2010 11:56 PM"

Okay, so by that same logic, raising taxes in NJ by $5B to cover the cost of the bridge would also have a negligible effect on the economy. And in that case, you'd be using the money to employ construction workers and at the end of it you'd have a tunnel which promotes economic activity. This seems smarter than creating 24k unemployed people just to show 'em.

Posted by: klautsack | October 13, 2010 9:56 AM | Report abuse

krazen1211 -

One other point. If there are 4M employed people in NJ and the unemployment rate is 7%, then there are 280k adults looking for work. If you layoff 24k teachers, that implies that you would have 304k adults looking for work and the unemployment rate would jump to 7.6 % overnight. Do you really think that's not a big deal? Think of it the other way, if the unemployment rate is 7% and then suddenly dropped to 6.4 %, that would be news.

Posted by: klautsack | October 13, 2010 10:02 AM | Report abuse

"Okay, so by that same logic, raising taxes in NJ by $5B to cover the cost of the bridge would also have a negligible effect on the economy. And in that case, you'd be using the money to employ construction workers and at the end of it you'd have a tunnel which promotes economic activity. This seems smarter than creating 24k unemployed people just to show 'em."

Raising taxes by $5 billion a year isn't even a possibility.

The entirity of income tax revenue isn't even $10 billion.

Even in 2004-2006, the government had to borrow and not fund their pension liabilities just to 'balance' the budget. There's simply too many state and local employees no matter how you slice it, that never should have been hired.

The last Democratic administrations hired them anyway, so we have to get rid of them.

"One other point. If there are 4M employed people in NJ and the unemployment rate is 7%, then there are 280k adults looking for work. If you layoff 24k teachers, that implies that you would have 304k adults looking for work and the unemployment rate would jump to 7.6 % overnight. Do you really think that's not a big deal? Think of it the other way, if the unemployment rate is 7% and then suddenly dropped to 6.4 %, that would be news.

"

The actual numbers are about 10%, and 450k. The unemployment rate went from 3% to 10% during the last governor's term; adding another .5% has to happen one way or another.

People are already being taxed out of their homes.

Posted by: krazen1211 | October 13, 2010 10:17 AM | Report abuse

How can we get this excellent riposte to David Brooks to appear in the NYTimes to counter Brook's piece?

Posted by: mimanancy | October 13, 2010 10:32 AM | Report abuse

I am convinced that people who like small government also like bad government. Either
a) the government competes on wages and hires competent people to run programs well. This includes DMV, teachers, etc.

or

b) the government pays bad wages and depends on people less competent people and or only those who are born rich and donating time.

Which situation do you prefer?

Posted by: ideallydc | October 13, 2010 10:35 AM | Report abuse

What is the breakdown of State and Local government employees by occupation? For instance, how many are teachers, law enforcement, prison guards, clerks etc?

Posted by: ideallydc | October 13, 2010 10:38 AM | Report abuse

ideallydc -

I believe the term is "moral giants, mental midgets, and trust-fund babies". i.e. Colin Powell, Michael "Brownie" Brown, and George W. Bush.

Posted by: klautsack | October 13, 2010 11:19 AM | Report abuse

It's telling that the Milken report doesn't include a similar year over year graph of state expenditures.

The Milken report does note, interestingly, that Illinois is currently paying 16.8% of general fund revenue into its pension system.

Posted by: tomtildrum | October 13, 2010 11:50 AM | Report abuse

Glad to see this detailed rebuttal of Brooks. I was angry when I read it yesterday morning, only to follow it up by reading an editorial in the Des Moines Register advocating a cut in benefits for state employees. :(

I was a state employee for 8 years. I was one of those white-collar employees who was getting paid far less than the private sector. I graduated with honors from a top ten law school. When I started in government (after 9 years in the private sector), I did so at a 50% pay cut from my previous position. I was given no credit for my previous experience. By the time I left state government, my salary still did not equal what I had been making in the private sector a decade previous to that. I had no outside income -- no stock investments, no private contracting, nothing. I took the job and I stayed because I felt I could make a difference, and I believe I did. But I never felt valued. I put in as many hours as I did in the private sector (considerable uncompensated overtime), but could never be considered for any kind of bonus pay or merit raise. It was a rare occasion when someone even said "thank you" for going the extra mile for them. Any attempts to increase pay or benefits were looked at as ungrateful whining, even when it was demonstrated that the private sector opportunities were more lucrative. I was happy to escape that attitude.

There are a few public sector employees who are highly compensated. At least in Iowa, the coaches at the state university earn multi-millions, although most of that is funded by donations to the athletic department and their outside contracting. Doctors at the state university hospital/medical school earn hundreds of thousands, but I'm sure they'd earn more if they were in private practice. Other professors also fall in this category. But no one actively involved in running government makes that much.

The key point is that you can't pick on the benefits offered to government employees and claim those are too generous without considering how they fit in the total compensation package. The EPI report shows that on average, state employees are still undercompensated compared to the private sector when benefits are considered with salary. You shouldn't have to give up good healthcare or retirement just because you believe in public service. Nor should the public want to make public employment so unattractive that most white-collar workers won't consider public service. You want smart, educated people involved in important government decisions, believe me. And you want them to feel like what they do is valued.

If my benefits had been cut while I was still a state employee, that would have been the last straw, especially knowing I was already being underpaid. I know what is movtivating this current push against state benefits is anti-union animus, but be very careful, or you'll send all the non-union white collar state employees to the private sector in the process.

Posted by: reach4astar2 | October 13, 2010 1:37 PM | Report abuse

It amazes me that now the private sector who has been ripping off the public for years and getting bonuses and hugh salaries ,while state and city workers have been under paid & paying into there pensions.Now they cry about the state workers since the economy is not doing well I am sure they too could have had a low paying state job with a low pension instead of there hugh 401k that are not doing to well now.

Posted by: ec6079 | October 13, 2010 10:08 PM | Report abuse

As a former MN state employee I can assure you that my wages as a professional behavior therapist were barely above the real poverty lie of 200% of poverty. If you look at professionally educated public employees they make on average 22% less than comparable private sector workers. This discount in effect accounts for the additional benefits paid public sector workers.

My pension was (and is) a key part of my compensation package. I contributed roughly 6% of salary to my retirement which was matched with 5% by the state. The reality is that defined benefit pensions are less expensive and a more efficient way to fund retirements for workers. MN public employees have already seen pension reductions through increased employee contributions, delayed inflation adjustments and reduced multipliers. I invite critics of public employees to take jobs working in prisons, schools and so on. It is neither easy nor financially rewarding.

Posted by: hm2vikingrn | October 14, 2010 1:22 AM | Report abuse

Asset performance like this isn't going to help:

http://statehousenewsonline.com/2010/10/13/biggest-state-local-public-pensions-lose-58-billion-in-2nd-quarter/

Posted by: jjmilt | October 14, 2010 1:59 PM | Report abuse

This kind of pension performance shows the why assuming 8 percent return is insane:

http://statehousenewsonline.com/2010/10/13/biggest-state-local-public-pensions-lose-58-billion-in-2nd-quarter/

Posted by: jjmilt | October 14, 2010 2:04 PM | Report abuse

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