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Why State Budgets Are so Deep in the Red

A clear majority of the public, according to Rasmussen, thinks that the federal government should not bail out the state of California but rather let it declare bankruptcy. Even when told that the state might have to slash welfare and medical care for the disabled and elderly and cut state salaries by 14 percent, 53 percent favored that outcome over a federal bailout. Only 33 percent want the feds to help.

Bloated state payrolls are a large part of the problem with state budgets. While revenues have stagnated or fallen, employees have not been laid off, and salaries and benefits have continued to increase. These expenses now make up half of all state spending. As a Cato Institute report makes clear, state employees make out much better than do private-sector ones. In total compensation, state and local workers earn $1.45 for every dollar private workers earn. State workers get $2.18 in health benefits for every one dollar their private-sector counterparts earn. For every dollar in defined-benefit pension benefits given to private-sector workers, public-sector workers get $6.95. Some states allow workers to retire early, begin to collect a pension, and then go back to work for the state at their old job, earning a salary as well as a pension.

Federal workers do even better, earning more than twice what equivalent private-sector workers do. No wonder the ratio of government workers to the total population has been steadily falling. In 1940 there were about 31 Americans for every government worker. By 1970 the ratio was 18.5-to-1. Today it is 13.7-to-1. In this decade, the number of government workers exceeded the number of those in manufacturing. Part of the reason for that, of course, has been the great increase in productivity in manufacturing in recent decades. No such productivity increase in government, however.

And the most frequent non-governmental visitor to the White House since Obama became President? Andy Stern, president of the Service Employees International Union, which represents 1.8 million mostly government workers. It’s the largest and fastest growing union in the country. Its political clout is legendary, thanks to $60 million in contributions in the last election cycle and the ability to turn out large numbers of union workers at rallies.

The states cannot hope to regain fiscal health until the wages and benefits of state works are more nearly in line with those of the private sector.