Category Archives: Public Sector

Understanding Finances and Changes in Retiree Health Care

Source: Joshua Franzel and Alexander Brown, Government Finance Review, February 2012

From the summary:
This article from Center vice president for research Joshua Franzel and Center researcher Alex Brown advises governments to understand what has been done thus far to address OPEB liabilities so they can assess their own efforts and determine if their retiree health care programs are sustainable.

Are Public Employees Overpaid?

Source: Jeffrey Keefe, Labor Studies Journal, Vol. 37 no. 1, March 2012
(subscription required)

From the abstract:
The research reported in this article shows that public employees, both state and local government employees, are not overpaid and may be slightly undercompensated. Comparisons with the private-sector employees that control for education, experience, hours of work, organizational size, gender, race, ethnicity, and disability indicate that the public-employment compensation (wages and benefits) penalty is relatively small. On average there is a 3.7 percent penalty in total compensation for full-time state and local employees when compared to similar private-sector employees. The data analysis also reveals substantially different approaches to staffing and compensation between the private and public sectors. On average, state and local public-sector workers are more highly educated than the private-sector workforce; 54 percent of full-time state and local public-sector workers hold at least a four-year college degree compared to 35 percent of full-time private sector workers. For college-educated labor, state and local governments pay salaries on average over 25 percent less than private employers. The public sector appears to set a floor on compensation, particularly improving the compensation of workers with high-school educations, when compared to similarly educated workers in the private sector. Benefits are allocated differently between private- and public-sector full-time workers. State and local government employees receive a higher portion of their compensation in the form of employer-provided benefits. Public employers provide better health insurance and pension benefits. National polling data indicate that the public does not believe public employees are overpaid. They oppose pay and benefit cuts, but believe pay freezes and greater employee contributions to their health and pensions plans may be appropriate. Nevertheless, thirteen states revised their public-sector collective-bargaining laws, mainly weakening employee bargaining power or severely restricting or eliminating collective bargaining, while the majority of the public opposed those changes.

State and Local Government Pension Plans: Economic Downturn Spurs Efforts to Address Costs and Sustainability

Source: U.S. Government Accountability Office, GAO-12-322, March 2, 2012

From the summary:
Despite the recent economic downturn, most large state and local government pension plans have assets sufficient to cover benefit payments to retirees for a decade or more. However, pension plans still face challenges over the long term due to the gap between assets and liabilities. In the past, some plan sponsors have not made adequate plan contributions or have granted unfunded benefit increases, and many suffered from investment losses during the economic downturn. The resulting gap between asset values and projected liabilities has led to steady increases in the actuarially required contribution levels needed to help sustain pension plans at the same time state and local governments face other fiscal pressures.

Since 2008, the combination of fiscal pressures and increasing contribution requirements has spurred many states and localities to take action to strengthen the financial condition of their plans for the long term, often packaging multiple changes together. GAO’s tabulation of recent state legislative changes reported by NCSL and review of reforms in selected sites revealed the following:

– Reducing benefits: 35 states have reduced pension benefits, mostly for future employees due to legal provisions protecting benefits for current employees and retirees. A few states, like Colorado, have reduced postretirement benefit increases for all members and beneficiaries of their pension plans.
– Increasing member contributions: Half of the states have increased member contributions, thereby shifting a larger share of pension costs to employees.
– Switching to a hybrid approach: Georgia, Michigan, and Utah recently implemented hybrid approaches, which incorporate a defined contribution plan component, shifting some investment risk to employees.

Compensation for State and Local Government Workers

Source: Maury Gittleman and Brooks Pierce, Journal of Economic Perspectives, Volume 26, Number 1, Winter 2012

From the abstract:
Are state and local government workers overcompensated? In this paper, we step back from the highly charged rhetoric and address this question with the two primary data sources for looking at compensation of state and local government workers: the Current Population Survey conducted by the Bureau of the Census for the Bureau of Labor Statistics, and the Employer Costs for Employee Compensation microdata collected as part of the National Compensation Survey of the Bureau of Labor Statistics. In both data sets, the workers being hired in the public sector have higher skill levels than those in the private sector, so the challenge is to compare across sectors in a way that adjusts suitably for this difference. After controlling for skill differences and incorporating employer costs for benefits packages, we find that, on average, public sector workers in state government have compensation costs 3-10 percent greater than those for workers in the private sector, while in local government the gap is 10-19 percent. We caution that this finding is somewhat dependent on the chosen sample and specification, that averages can obscure broader differences in distributions, and that a host of worker and job attributes are not available to us in these data. Nonetheless, the data suggest that public sector workers, especially local government ones, on average, receive greater remuneration than observably similar private sector workers. Overturning this result would require, we think, strong arguments for particular model specifications, or different data.

Facts You Should Know: 2012 Fact Sheet / State and Municipal Bankruptcy, Municipal Bonds, and State and Local Pensions

Source: NGA – National Governors Association, NCSL – National Conference of State Legislatures, CSG – The Council of State Governments, NACo – National Association of Counties NLC – National League of Cities, USCM – The U.S. Conference of Mayors, ICMA – International City/County Management Association, NASBO – National Association of State Budget Officers, NASACT – National Association of State Auditors, Comptrollers and Treasurers, GFOA – Government Finance Officers Association, NASRA – National Association of State Retirement Administrators, 2012

From the ">summary:
State and local government officials want you to know something: Yes, budgets are tight these days, but their overall financial picture is still solid. That is the message from a new fact sheet, “Facts You Should Know,” released by the International City/County Management Association (ICMA) and 10 other state and local government organizations….

The fact sheet makes the case, citing among other factors:
– Municipal bond defaults are rare. From 1970 through 2011, only five rated city or county governments defaulted. Of the 65 rated municipal bond defaults during this period, most were for not-for-profit hospitals or housing projects. Municipal securities are considered second only to Treasuries in investment safety.
– Most state and local pension systems have assets to weather the economic crisis, with nearly $3 trillion in pension trusts.
– Officials are working to improve their finances. State and local governments “have made changes to benefit levels, contribution rate structures, or both since 2009,” according to the news release.

Public-Sector Unionism vs. the Public Interest

Source: Brian Farmer, New American, December 5, 2011
(subscription required)

The unionization of government workers represents the ideal situation for labor unionism. The ultimate objective of labor unionism is to monopolize the available supply of labor to an employer and to eliminate all competing workers to that source of employment. If a labor union can accomplish that, it can raise the price of labor, be it through increased wages, more generous fringe benefits, or productivity-killing work rules in the determination of working conditions. And that is much easier to accomplish in the public sector than it is in the private sector, because private-sector businesses do not enjoy a monopoly in their provision of goods and services to consumers….By their very nature, collective bargaining laws create an adversarial relationship between the labor union and the employer, which makes strife inevitable. Labor unions know that no employer will seriously consider a labor union demand if it knows that the labor union has no power to enforce it. Obviously, to enforce their demands, labor unions will strike, no matter whether such strikes are contractually legal or not. In the public sector, it means the withholding of public services. Public officials become so desperate to settle the strike and restore public services that a settlement almost invariably involves an agreement not to penalize the labor union for engaging in an illegal strike. This gives the labor union disproportionate power and results in government decisions that have short-term political benefits but disastrous long-term financial consequences….

Title VII and the Public Sector Transgender Employee

Source: Leslie Paul Machado, IPMA-HR News, Vol. 78 no. 1, January 2012
(subscription required)(scroll down)

There is a tendency among many employers to think of transgender issues as “someone else’s problem,” an issue not likely to affect their own organizations. That’s a misconception, and it’s as prevalent among public sector organizations as it is among private businesses. Several recent cases bear witness to this fact….Rather than isolated decisions, these cases may be part of a larger trend in which courts are increasingly holding employers liable under Title VII for alleged discrimination against transgender employees.