As the Michigan Legislature pushes forward with plans to require public employees to  pay more of their own health insurance costs, lawmakers need to be equally  diligent in doing away with their own overly generous retirement perks.

>>Read the entire Battle Creek Enquirer editorial.

A proposal in the Legislature to require all public employees to pay 20 percent of their health premiums fans the popular furor over public workers’ benefits but is ripe with potentially problematic consequences.

Mandating that standard for city, county, township, village, college, university, public school district and state workers in Michigan goes too far.

Collective bargaining creates a process for agreeing to wages and benefits. It’s a process with advantages and disadvantages for both sides. The compromise reached in agreeing to a contract, by its very nature, forces the sides to split the difference. Nobody wins or loses everything. Indeed, collective bargaining is a way to create “shared sacrifice.”

Those favoring controls on the costs of public employee benefits have tools available to meet those needs without undermining collective bargaining. Gov. Rick Snyder was on that path when he advocated additional state aid for communities that meet “best practice” guidelines, for example.

One size fits all seems like a simple solution, but it’s not.

Start with the fact that the state Legislature and the governor can’t mandate this requirement on state employees or university employees. Those benefits have protections under the state Constitution. The package includes a ballot proposal for constitutional amendments that would allow the changes. Putting those on the ballot requires a two-thirds vote of the House – an uphill battle.

At a hearing this week, an official with the Amalgamated Transit Union told lawmakers that hindering collective bargaining could result in severe cuts to federal funds for the state’s public transit systems because of U.S. Labor Department and Transportation Department rules.

University representatives reminded lawmakers that only about 20 percent of university budgets are funded by the state, which makes such mandates tenuous.

And officials from the Michigan Association of Counties pointed out that counties – and other units of government – ultimately will have to address added costs to employees through negotiations over wages and other benefits.

This mandate would not be a panacea. The dire status of public finances will force parties at bargaining tables across the state to face frugal realities in ways that fit their communities. These bills are unnecessary.

An LSJ editorial

March 29, 2011

Making all Grand Rapids Public Schools employees pay 20 percent of their health care premiums wouldn’t come close to making up all the proposed budget cuts the district is facing, Superintendent Bernard Taylor told lawmakers.

Taylor today testified before the state House K-12 Appropriations Subcommittee, which is considering Gov. Rick Snyder’s proposed budget.

>>Read more.

Nathan Triplett
For the Lansing State Journal

In Michigan, we are often reminded of the various hunting seasons that are a treasured part of our heritage – deer season, wild turkey season, etc. Unfortunately, legislators have added another hunt: an open season on public employees, the hard-working men and women who serve our communities.

Legislators would have you believe that public employees are the problem. They argue that public sector workers earn more than their private sector counterparts. That claim is simply untrue. The preponderance of credible, nonpartisan studies of relative compensation clearly show that when education, skills, and credentials are taken into account, public sector pay and benefits lag behind similarly situated private sector employees.

For example, a study conducted in 2008 by the nonpartisan House Fiscal Agency concluded that “Michigan state employees with college degrees tend to earn appreciably less than their counterparts in the private sector” and that “(t)he difference in earnings between Michigan state employees and private-sector employees grows significantly as the level of educational attainment rises.” This study is by no means an outlier. Its results were substantially confirmed in studies by MSU economist Charles Ballard in 2009, by a team of University of Wisconsin economists in 2010, and in a study by the Economic Policy Institute released only days ago.

Public employees are vital to the solutions that will put Michigan back on the road to prosperity. My experience as a member of the East Lansing City Council has been that when asked to help find innovate solutions to our financial challenges, our employees rise to the occasion. Many of the reforms being advocated by the Legislature have been standard operating procedure in East Lansing.

More than 15 years ago, we stopped making promises of health care upon retirement for most new hires. More than a decade ago, we began substituting defined-contribution retirement plans for more costly defined-benefit plans. Nearly 10 years ago, we created a Health Care Task Force to control the rapidly escalating costs. The group has held our annual increase in health care costs to 3.5 percent – less than a third of the national rate of health care inflation.

We issued a challenge to city employees and they delivered. These changes required real sacrifices by city employees. At a time when Gov. Rick Snyder is calling for “shared sacrifice” to address Michigan’s ailments, the public employees who stepped to the plate to innovate in East Lansing should be praised, not pilloried. Moreover, the wholesale indictment of local governments as backward and inefficient detracts from the many communities that follow the same best practices as the private sector.

These are tough times for Michigan. We must leave no stone unturned as we work to put our fiscal house in order. But taxpayers deserve a frank debate about sensible reforms based on accurate information. Vilifying public employees and local governments based on bad data is a disservice. Let’s roll up our sleeves and get to work on real solutions – and stop making dedicated, hard-working public employees out to be public enemy No. 1.

Additional Facts

Nathan Triplett is a member of the East Lansing City Council.

One of the most scathing critiques of former Gov. Jennifer Granholm was the fact that her numbers didn’t add up.

Her critics savaged her claims of how many jobs were created with Michigan Economic Growth Authority (MEGA) tax credits, how many were generated by the 21st Century Jobs Fund to diversify the economy and that Michigan is the No. 2 state for wind energy.

By the end of her term, Granholm looked desperate — someone who would bend the data to match her happy talk, so she wouldn’t go down as one of the worst governors in Michigan history.

All that was supposed to change with Rick Snyder, a CPA and former CEO who knows his way around a balance sheet. But the “Citizen’s Guide” to the state’s finances he released this week should give everyone pause — particularly the section on public employee pay and benefits.

Look, it’s clear that compensation cuts are coming. The budget is $1.8 billion in the red and Snyder’s business tax cut will push that to over $3 billion.

According to the guide, however, the average public worker pulled down $85,076 in 2009 while the average private sector employee’s package was $39,986. The study was done by the Anderson Economic Group.

On the surface, this doesn’t pass the smell test. Most people, including economists, buy the idea that government workers have better benefits than those in the business world.

But arguing that their pay is grossly out of whack is a much harder sell, even though lawmakers like Sen. Mark Jansen (R-Cutlerville) and Sen. John Pappageorge (R-Troy) are convinced that public workers are overpaid. Pappageorge has a constitutional amendment to cut all government employee pay by 5 percent.

To put this in perspective, you can’t even find leaders at the free-market Mackinac Center for Public Policy or the Michigan Chamber of Commerce who will argue that public employees are paid too much. Neither Chamber President Rich Studley nor Mackinac Center Legislative Affairs Director Jack McHugh would go there when I interviewed them for a Center for Michigan story last month.

It should be stressed, however, that both Studley and McHugh strongly believe that public worker benefits need to be scaled back. They support both cuts and bigger changes, like stripping away unions’ collective bargaining rights.
Snyder, himself, acknowledges the big problem with his numbers. The analysis “was not an apples-to-apples comparison” — it did not compare private and public sector employees with similar jobs, years of experience or education.

No less than seven studies have been released in recent years that refute Snyder’s claim about public employee compensation. Some of them are national studies and at least one Michigan study has been done for labor groups, which obviously have a vested interest in showing that pay and benefits are not sky high.

But a 2008 study by the nonpartisan House Fiscal Agency, in particular, clearly lays out the facts. Michigan state employees with a college degree, on average, are paid less than they would be in the private sector, whereas those without a college degree earn more. State employees are far more educated than their private-sector counterparts. Almost 55 percent of state workers hold college degrees vs. just 27 percent in the business world.
That’s a much more cogent analysis than throwing up raw data like Snyder has.

No one would question the new governor’s intellect (nor should anyone do so with Granholm). So maybe it’s just the job itself, presiding over a state pummeled by a decade-long recession, that makes the pull of using unreliable numbers to make your case irresistible.

But I worry that there’s something else at work with the Citizen’s Guide.

After all, Snyder has made no secret of the fact that a key part of his agenda is pushing through cuts to public employee pay and benefits — he announced it to great fanfare last year at the Republican Governors Association.

“I would hope you wouldn’t draw any conclusions,” Snyder said of his guide. “What we’ve done is set a baseline of facts.”
On first blush, this looks to be the height of political cynicism. Of course, the public is going to jump to conclusions as soon as they read the headlines. Public employees are fat cats. I just got laid off. Sock it to them, Rick.

I hope that’s not the case. That would really make Snyder look like the typical politicians he campaigned against.
For now, the administration is sloughing off the other studies, including one released Thursday.

“Reports reach different conclusions if they have different intents,” said Snyder spokeswoman Sara Wurfel. “The governor’s Citizen’s Guide was intended to create a whole new level of transparency, to clearly show money coming in and going out the door, and give a realistic view of the state’s fiscal health.”

If that’s the governor’s only intention, great. But Snyder owes it to the public to give them better numbers than he has so far. We should ask for nothing less from our CPA-turned-state CEO.

Susan J. Demas is a political analyst for Michigan Information & Research Service. She can be reached at sjdemas@gmail.com.

New EPI study finds public employee compensation lags private sector

A new study (released Feb. 3, 2011) by the Economic Policy Institute (EPI) and  a Rutgers University researcher finds total compensation — pay and benefits — is already comparable for public and private sector employees in Michigan. The study, “Are Michigan Public Employees Over Compensated?,” is the fourth report issued since 2008 to find public employees in Michigan are not “over paid” compared to private sector workers.

The EPI study uses complete data and important methodological controls to make the most accurate comparisons of private and public sector compensation.  The study controls for like jobs, education levels, and years of experience. The study also uses the most reliable and complete database used by social scientists to measure and compare private versus public sector compensation on a micro level. The study uses a database produced every month by the U.S. Census Bureau and the Bureau of Labor Statistics called the Integrated Public Use Microdata Series of the March Current Population Survey (IPUMS-CPS).

To his credit, Gov. Rick Snyder has acknowledged that two other studies released late last month comparing public to private sector compensation do not make “apples-to-apples” comparisons. Gov. Snyder invited others to contribute data that makes more accurate comparison. The studies were produced by respected researchers but were misleading because they failed to use complete data and did not control for education levels.

Read other studies that have reached similar conclusions as the EPI report about public and private sector compensation in Michigan.

BY BRIAN DICKERSON

Detroit Free Press Columnist

Four days after Gov. Rick Snyder convened an economic summit to explain to business leaders (and anyone else who cared to watch from the virtual bleacher seats) precisely how dire our state’s fiscal outlook is, I’m still scratching my head over Snyder’s decision to highlight the gap between public- and private-sector worker compensation.

In a state where Republican politicians seldom pass up a chance to demonize government employee unions, the new governor has been careful to avoid suggesting that public-sector compensation is primarily responsible for Michigan’s growing budgetary deficit.

And he warned reporters covering the summit not to leap to that conclusion, pointing out that data suggesting the average public-sector worker earns twice as much as his or her private-sector counterpart had not been adjusted for differences in the education, experience levels and job responsibilities of the two worker groups.

In other words, the only epiphany here may be just that full-time workers who obtain college degrees, perform demanding work and have acquired decades of on-the-job experience tend to earn more than part-time employees who have neither comparable expertise nor job responsibilities. Some unskilled private-sector workers might consider that an injustice, but most of us recognize it as a fact of life.

“These are not apples-to-apples” comparisons, Snyder conceded after this week’s summit. “It’s what I call macro-data.”

So why bother?

That strikes me as a pretty disingenuous disclaimer for a man whose party is champing at the bit to cut teachers, public safety workers and bureaucrats of every stripe down to size. If the comparisons between private- and public-sector compensation aren’t relevant, why bring them up at all — unless you’re hoping to stoke taxpayer resentment of government workers?

But there are a number of reasons why vilifying public-sector employees is a bad strategy.

The first, as Snyder has already tacitly admitted, is that relevant numbers don’t support the government-workers-are-eating the-taxpayers’-lunch narrative some GOP demagogues are peddling. Studies that compare workers with similar education credentials and job responsibilities reveal far smaller disparities between public- and private-sector compensation levels — just as any economist who studies job markets would expect them to.

The second reason why focusing on what workers make is a bad idea is that it diverts public and legislative attention from more significant inefficiencies in the provision of employee benefits.

Snyder’s treasurer, Andy Dillon, likes to point out that some municipalities pay more than 10 times as much as top-tier private-sector employers to administer their employees’ health benefits. That doesn’t mean public-sector health benefits are 10 times as generous, it means only that local units of government have been far less successful than private employers in exploiting economies of scale, and that slashing employee benefit levels may yield little savings, especially if Michigan’s myriad units of government fail to leverage their collective bargaining power more effectively.

Who’s he gonna call?

But the best argument against demonizing government workers — and the one that ought to be the most obvious to a former CEO like Snyder — is that any enterprise, public or private, is only as good as the people who work for it. The new governor’s ambitions to conjure a smarter, more efficient government are doomed if those he’s counting on to execute his game plan become convinced their boss wants to single them out as scapegoats.

Most of the goodwill Snyder currently enjoys arises from the public’s hope is that he is a pragmatist who prefers hard numbers to soft-headed ideology. That makes it especially important that he choose numbers that illuminate Michigan’s plight, not those that merely inflame his constituents.

Contact Brian Dickerson: 313-222-6584 or bdickerson@freepress.com

It is a distraction to compare the average state employees’ pay with the average in the private sector. Not the least of the reasons is that state employees are almost uniformly full-time workers with retirement benefits and health insurance. The private sector has both full- and part-time workers, many with meager benefits or none at all (not usually by choice, of course).

What may matter more is the trend over time. That, unfortunately, does not favor public employees, either, and may help explain as well why taxpayers — even those who are also unionized, even those who are also well-educated — are running out of sympathy.

To be sure, an average annual gain of about 2% in pay and benefits is hardly the road to wealth. But many workers in Michigan have gone backward since 2000. Older workers who have lost their jobs often cannot find work at any wage, and new hires in many places must start at a lower pay rate than their predecessors did.

Most studies show that, job for job, state wages are not — or at least were not — out of line with wages paid for comparable education and experience in the private sector. What appears to be growth in the average pay package also may reflect seniority more than actual wage gains, and may fall back once last year’s early retirements are factored in.

But state employees surely will need to at least hold the line for a while until the rest of Michigan workers feel as if they’ve caught back up.

Michigan workers, teachers already have given roughly $4.7 billion in pay, benefit cuts

Roger Martin

For the Lansing State Journal

Editorial pages and elected officials often contend compensation – wages and benefits – for Michigan’s teachers, social workers, firefighters, police officers, biologists, engineers and other public employees must be slashed to bring it “more in line” with private sector workers to help solve the state’s budget crisis.

They base their call on the perception public employee compensation is excessive compared to the private sector.

That perception is false. Those who claim it is true don’t know the facts, know the facts and ignore them, or are cooking the numbers to advance a political agenda.

The only way to draw an accurate conclusion is to compare the pay and benefits of like private sector and public sector workers. In recent years, six different studies have done that.

Three specifically focus on or mention Michigan: a November 2008 study by the non-partisan state House Fiscal Agency commissioned by then-Speaker Andy Dillon, an April 2009 study by Michigan State University economics professor Charles Ballard, and a national report titled “Out of Balance” issued in April 2010.

Each reached the same conclusion: public sector workers are not overcompensated compared to private sector workers in jobs with like education qualifications. Some of the research concludes public sector total compensation now lags workers in the private sector.

Please read the studies, posted at www.accountabilityinreform.com. Citizens for Accountability in Reform did not commission any of the studies.

Comparing a state and local government workforce where about 55 percent of workers have a college degree to the private sector work force – or a company – where only 30 percent of workers have a degree, you will find the average public sector worker makes more.

Of course they do. You don’t pay fast food wages to college-educated social workers charged with protecting vulnerable children. You don’t pay hotel clerks the same as biologists keeping pollutants from the Great Lakes.
Since 2001, cuts to state employee wages and health benefits, and changes to the retirement system, have saved the state $3.7 billion, the MSU/Ballard study concluded.

At the local level, teachers in hundreds of districts have negotiated roughly $1 billion in savings through pay cuts and freezes and moves to lower-cost health plans.

School and state employees are now paying an extra 3 percent of their salaries to fund their own retirements.

Even with these massive savings, Michigan’s public work force is among the nation’s most efficient.

After laying off 10,000 state workers this decade, along with thousands of local police and firefighters, Michigan today has the second fewest government workers per capita in the nation, according to another recent study.

If Lansing is going to consider more cuts to public employee compensation to help balance the state budget, it must be an honest debate based on facts.

Multiple independent research studies prove public employee compensation is already in line with compensation in the private sector.

It’s also almost certain more cuts will drive qualified applicants away from public service, whether that is in our children’s classrooms, keeping neighborhoods safe, or protecting our most vulnerable children and senior citizens.

Additional Facts

Roger Martin is a partner at Martin Waymire Advocacy Communications and spokesman for Citizens for Accountability in Reform.

In fact, several studies conclude that if anything, public sector compensation now lags workers in the private sector. The researchers reached their findings by comparing workers with comparable education levels because, obviously, it would be unfair to compare the total compensation of attorneys or engineers in the private sector with, say, human service case workers or secretaries in the public sector, or engineers in the public sector to a cashier at the local grocery store.

The fairest and most accurate comparisons are reached by examining the total compensation of people who have comparable education levels, because education is the most accurate predictor of a person’s wage earning potential.

Three of the studies specifically focus on or mention Michigan: the November 2008 House Fiscal Agency study commissioned by then Speaker Andy Dillon, the Charles Ballard/MSU study from April 2009, and the “Out of Balance” report issued in April 2010.

Collectively, these studies disprove claims that public employees are wildly, or even moderately, over-compensated. Please know that Citizens for Accountability in Reform neither commissioned nor participated in the production of any of these studies.

Are New Jersey Public Employees Overpaid?
Economic Policy Institute

Civil Service Salary and Benefit Comparisons
Michigan House Fiscal Agency

Debunking the Myth of the Overcompensated Public Employee
Economic Policy Institute Briefing Paper

Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
National Institute on Retirement Security

The Retrenchment of the State Employee Workforce in Michigan
Michigan State University Department of Economics/Federal Aviation Administration

The Truth about Public Employees in California
Institute on Labor and Employment

>>UPDATE: Go to “Michigan workers, teachers already have given roughly $4.7 billion in pay, benefit cuts,” an op-ed by Roger Martin published in the Sunday, Jan. 23, 2011 edition of the Lansing State Journal.