One of the challenges facing New York City is that all of its labor contracts with unions representing city workers have expired. If Mayor Bloomberg is unable to negotiate any deals with the city's workers, he will leave his successor a possibly $8 billion problem in the form of retroactive pay increases (the equivalent of the budgets of fire, corrections, and sanitation departments combined). The mayor's office has said that it will only sign contracts where the unions forego retroactive raises, increase employee contributions to healthcare premiums, and provide incentives for workers to live healthier lifestyles. The Mayor needs to reduce healthcare costs, which are rising rapidly and threaten to crowd out spending on other priorities. Right now 95% of city workers pay nothing toward their health premiums.
Not even Stockton city officials dispute the cause of the San Joaquin Valley city's fiscal problems: unsustainable benefits secured by public-sector workers and other poor spending priorities. Councilwoman Kathy Miller, on the stand at the bankruptcy trial held at the Sacramento federal courthouse, was questioned about a video she produced last year detailing the city's "Lamborghini" health benefits. It's crazy, really. City workers and their families had free lifetime medical care with no co-pays or contributions. Stockton officials ended that scam, but they only slightly and temporarily rolled back excessive compensation and they are not even trying to address the ongoing pension debt. If Stockton is allowed to stiff bond holders and leave the California Public Employees' Retirement System alone, then every hard-pressed municipality can continue to crank up retirement benefits and stick it to Wall Street. I attended part of the trial yesterday, then headed to Stockton to check out my rental properties there. When I got home, in the mail was another fee for those properties -- a $165 self-inspection fee to make sure one of my well-kept homes there meets city standards. Meanwhile, the city can't even come close to maintaining its public spaces because it has so overpaid its employees that it has to cut back everything. Welcome to the public sector where the employee is king.
Whenever I report on the absurd level of enrichment by government employees, I hear from readers who simply don't believe the numbers. But the enrichment is very real. It's hard to understand how anyone can defend the kind of pensions and salaries public employees earn in California, while insisting that government is slashed to the bone and that higher taxes are the only solution. That, by the way, is the continuing meme from Gov. Jerry Brown and the Democratic Legislature. This story, broken by columnists Matier & Ross in the San Francisco Chronicle, is par for the course. As they reported, "Alameda County supervisors have really taken to hear the adage that government should run like a business--rewarding County Administrator Susan Muranishi with the Wall Street-like wage of $432,664 a year. For the reset of her life." This is revolting and more evidence that many people in public service don't have a shred of public decency.
I've written before (here and here, for instance) about our decades-long public schools hiring spree and its impact on local budgets and taxes. Now the Friedman Foundation has a formal study on the issue that looks specifically at the growth of administrative (non-teaching) personnel in schools, noting that while the rate of increase in hiring of teachers has been more than double the growth in student enrollment, the ratio of new administrators to additional students is even far higher. The paper calculates that states could be saving $24 billion annually if they had restrained the number of administrative hirings and kept them more line with student enrollment from 1992 through 2009. Needless to say, we haven't gotten much of a payoff in terms of student test score gains over this period, but then again, did anyone ever pretend that hiring more administrators was necessary for more school achievement?
Earlier today I appeared on the Armstrong & Getty radio program in San Francisco, where the host started off by asking me whether the pension problems of the state and its municipalities weren't exaggerated, as some of his listeners who are government employees often claim. There's plenty of money to pay pensions, they say. I told his listeners that to answer that question for themselves they should simply look at how much more of municipal, school and other government budgets that required pension payments were consuming. They might be shocked, I suggested.