The Myth of Salary Concessions

The working public and taxpayers are finally becoming aware of the unsustainability of public employee pay and benefit obligations. Possibility of looming bankruptcy for the State of California and many cities and counties has at least had the beneficial effect of developing an informed public about a major problem that is fast getting worse.

As the public employee unions gather to protect their special privileges, and with lots of money at their disposal, we can expect a barrage of anti-reform advertising with catchy myths and emotional slogans, and perhaps even some suspect logic and data.

One myth worth analyzing is that, “public employees have made salary concessions as a trade off for their rich benefits”. There is good data available going back to 1996, and it does not support the myth of salary concessions. In fact it shows the opposite! Growth in public employee compensation has far outpaced the rate of inflation during that period.

Data supplied by the public employees’ own actuaries through 2009 show the following:

— For Sonoma County, Safety workers (Sheriff) on average enjoyed a compensation increase of 83% since 1996. General workers (all other) enjoyed a 90% increase. This is pretty good when inflation was up only 37% over the same period, no concessions here!

— For the City of Santa Rosa, average Fire compensation has more than doubled (up 118%), Police are up 90% and all others up an average 51%, again, looking good compared to 37% inflation. No salary sacrifices yet!

Some employee groups may have made concessions from time to time during negotiations. But the overall bottom line of actual salary data shows that public employee compensation since 1996 has risen generously above the rate of inflation, certainly making up for any concessions that may have been made. The conclusion is, therefore, that the high and unsustainable benefit levels, especially pensions, cannot be justified on the basis of salary concessions when actual data shows the opposite.

The pension and benefits comparison should therefore stand on its own. Legally provided pension manipulations that allow retirement at 50 or 55 with over 100% of salary are only now being widely understood, and will likely fall of their own selfish weight and devastating costs. This debate should be on factual merits and financial costs, not distracted by claims of “salary concessions”, shown to be illusory.

These generous compensation increases provide an opportunity to bring public employee pay and benefits back to a more rational and sustainable level. Union supported State legislators have built a formidable legal wall to protect the excessive pensions, which will take time and legislative action to correct. Compensation, however, can be negotiated by local authorities. An extended public employee pay freeze would still leave salaries well above inflation adjusted levels while providing quick help to current budget deficits and a start to bringing pensions back to a sustainable level.

Robert G. Williamson

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