Government worker pay to be budget issue

EHN Staff
Government worker pay to be budget issue

Jonathan J. Cooper
Associated Press

Salem, OR (AP) — Thousands of state workers took an unpaid day off Nov. 26, earning a smaller paycheck to help Oregon balance its struggling budget.

With a bigger gap looming in the next two-year budget, public employees are likely to be asked to contribute even more, but they’re resisting steep cuts despite cries from critics that benefits are too generous.

Government managers will negotiate new contracts with their workers next year.

Why the focus on government workers? They’re a big cost — one in three general fund dollars ends up in a paycheck for state employees, teachers, or contractors. And cutting pay means the money doesn’t have to come from state programs or services.

Tax revenue is declining — down $1 billion from 2009 projections. But at the same time, government obligations to employees are increasing. Health care costs are rising and employees earn more money as they gain experience. The state-worker pension fund is requiring government agencies to contribute millions more next year because the Great Recession did a number on the fund’s investments.

There is also heightened national attention on government spending and public worker pay, fueled in part by the tea party movement.

The bullseye is centered especially on government workers’ benefits, which are more generous than those offered by most private employers. State government retirees still get guaranteed pension payments, for example, and they pay little out of pocket for their health care coverage. Both are increasingly rare in the private sector.

“The test of anything is, ‘Can I hire the quality I need for the money I’m paying?’” said Richard Leonetti, a researcher with the Oregon Tax Foundation, which advocates smaller government. “By that test, you could pay a lot of people a lot less money and they would not leave, because they cannot get a better salary anywhere else.”

Public employers have generally absorbed the increasing costs of health care coverage while private employers have not and some pay health care costs for retirees who are too young for Medicare. Those lucrative benefits cost taxpayers too much, he said.

Leonetti advocates eliminating automatic pay hikes that accompany years of service and privatizing some services now performed by government employees.

Still, when viewed as an entire package, salary, benefits, and other perks for Oregon employees represented by the Service Employees International Union is about equal to what they’d earn in the private sector, according to a 2008 report by the union and the Department of Administrative Services.

Unions say state workers have for decades accepted lower pay in exchange for more generous benefits. So while their benefit packages might look generous, they’re making up for lower salaries. Cutting them back would renege on agreements made in the past, they argue.

Government workers are already sacrificing and can’t be the solution to the state’s budget challenge, said Arthur Towers, political director for the SEIU in Oregon, which represents about 22,000 public employees.

Public employees have taken pay freezes at a time when demand is increasing for government services and there are fewer workers to handle the volume. Nov. 26 was the eighth of 10 mandatory unpaid days off for nearly 27,000 state workers — a budget maneuver designed to save $20 million over the two-year budget period.

“State workers are already making sacrifices every pay day in return for a decent benefit package,” Towers said.

In a June “reset report” on cutting the cost of state government, outgoing Gov. Ted Kulongoski’s administration pointed to government workers as a key source for cost cutting.

The report suggested:

  • Eliminating automatic salary increases and instead tracking pay hikes for similar jobs in the private sector.
  • Reducing state payments to employees’ retirement plans. The state now covers a required 6 percent contribution, but critics say the payment is unparalleled in the private sector.
  • Requiring workers to cover more of their health care premiums.

Employees are a big cost, but the Legislature has little direct control over their compensation. Nearly all non-management workers are represented by unions and have contracts with the state, so chipping off wages or benefits requires negotiating new agreements.

The Legislature is even further removed from teacher wages, which are negotiated between teachers unions and the local school board. The state just foots most of the $4.6 billion bill.

Oregon’s teachers union resists state involvement in contract negotiations, saying the decisions should be made at a local level based on priorities of local parents and school board members.

“I hope that state-funded employees are comparable with the private sector and comparable with other states so we know we can get high quality effective people in those jobs,” said House Speaker Dave Hunt, D-Gladstone.

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