Published On: Sun, Mar 14th, 2010

Want to know why states and localities are going broke?-look at the salaries and benefits of it’s employees

We have all read about the disparities between federal employee salaries and the private sector and their extravagant benefit packages. Do we have the same issues in states and cities?

Why is Gov. Schwarzenegger’s state of California on the brink of collapse?

photo TaxRebate.org.uk

According to the CATO Institute’s publication, “Tax and Budget Bulletin”, in 2008, wages and benefits of $1.1 trillion accounted for half of state and local government spending.

The disparities are found in all aspects employee compensation with state and local governments getting on average much larger salaries, retirements, and other benefits.
Maybe this irresponsible spending is at the root at why many states and lower governments are flirting with fiscal disaster.
Let’s take a closer look:
The nationwide average total compensation (wages and benefits) on an hourly basis for a state or local government employee is $39.66, while an employee in the private sector is $27.42. That’s a whopping 45 percent higher!
If you were to break it down into wages and benefits, the public sector has an advantage of 34 percent and 70 percent, respectively.
There are differences based on what region of the country you live, with the states on the Pacific coast, California for example, show the greatest public versus private disparities (59%) in total compensation and the mid-Atlantic states (NY,NJ and PA) in second with a difference of 53%.
Retirement benefits and pension plans of employees of states and local governments dwarf similar benefits in the private sector. A big problem is that most state and local pension funds are horribly underfunded, according to some estimates, at about $1 trillion!
Things like early retirement are also hugely different between the public and private sectors. Pensions are for life and indexed for inflation. Where is this money coming from? You guessed it.
You wonder why California is in such dire straits. California’s CalPER’s retirement system allows employees to retire at 55 years old with 30 years of service with a pension equal to 60 percent of the final salary.
And it gets worse, public safety workers can retire at 50 years with 30 years of service with benefits equal to 90 percent of final salary!
And to top it off, California and a few other states allow double dipping. Public workers can retire early and then either resume their existing job or get a new public job. Getting salary and pension on the taxpayers dime at the same time.
Interesting to note is the states with the biggest disparities between public and private overall compensation are also the most unionized states.
Without a major cost-cutting overhaul, these states and local governments will be doomed. Let’s see if they have the guts to do the right thing or will they run to Washington for a bailout?
I bet you know what I think.
C’mon Arnold, use that sword and make the necessary cuts.
On the DISPATCH: Headlines  Local  Opinion

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About the Author

- Writer, Co-Founder and Executive Editor of The Global Dispatch. Robert has been covering news in the areas of health, world news and politics for a variety of online news sources. He is also the Editor-in-Chief of the website, Outbreak News Today and hosts the podcast, Outbreak News Interviews on iTunes, Stitcher and Spotify Robert is politically Independent and a born again Christian Follow @bactiman63

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