NE Public Employee Pay, Benefits: Even the Journal Star Sees Need for Reform

By Shelli Dawdy

GiN is frequently at odds with the Lincoln Journal Star’s editorial board, but for once we agree. Nebraska’s municipalities, counties, and the State simply cannot afford the status quo regarding how public employees’ salaries and benefits are determined.

In an editorial published December 16, Lincoln Journal Star cited the recent raises granted to City of Lincoln firefighters as just one more example in a long line of many illustrating how out of control the situation is. Lincoln fire fighters will receive raises totaling at least 6%, but as much as 10%, at a time when most private sector employees are facing scenarios such as wage freezes. As the editorial points out, the average Lincoln firefighter already makes a salary of $65,000 per year. Official census information from 2000 (full information from the 2010 census is not yet available ¹ I chose to use the official and full U.S. Census data rather than the less reliable figures from 2009, which are based on far smaller sample sets ...continue) lists median household income for Lincolnites as $40,605 and median family income as $52,558. While these comparisons are not fully informative at this point for reasons that include the age of the data on median income and the fact that household and family income medians do not tell us what individual Lincolnites’ median incomes are, it is clear that there is some disparity. One way to make a comparison is to consider possible variables in demographics of Lincoln firefighters’ households; the firefighter could be single or married (or co-habitating) with a working spouse or non-working spouse. Lincoln firefighters have incomes significantly higher than their fellow residents, even if they have a non-working spouse. If a spouse is working, the disparity obviously widens at a rate dependent upon that spouse’s salary.

In addition to the salary disparity, Lincoln firefighters get a literally unbelievable deal on their health insurance; as the LJS editorial also pointed out, firefighters with individual plans literally pay nothing for health insurance coverage; 100% of their premiums are paid for by the City of Lincoln (that means taxpayers, of course). Firefighters with families also get an outstanding deal as well, the City pays 94% of the premiums for family coverage. I spent some time searching for comparable statistics in the private sector in Lincoln but I’ve come up empty-handed so far. But of course, common sense dictates that it is incredibly unlikely Lincolnites working in the private sector have anything like this kind of deal for their health insurance.

There is information available regarding private sector employee contribution to health care insurance premiums versus government workers on a national basis. A 2006 study of the question shows that Americans employed in the private sector paid 70% of their own insurance premiums, the employer, 30%. According to more recent data ² Note that the HR Morning websites’ article makes reference to the Kaiser Family Foundation in the article. I typically tend to shy away from ...continue, the percentage employees in the private sector pay has been increasing and generally speaking, therefore, the disparity between private and public sector employees has likely widened even further.

In addition to the information already cited, a more recent report, released in September 2010 by the U.S. Bureau of Labor Statistics confirms that government workers are better compensated in general and cost employers more than their counterparts in the private sector. The report specifically focused on the cost to the employer of employees and contrasting costs for city / local and state governments to the employer costs in the private sector.

There was only one area in which the cost to the employer was lower for city and state governments, which was defined contribution retirement plans. Defined contribution plans are familiar to most private sector employees; they work like 401k accounts. While I don’t have particular data available to which I can link at this time, it is my understanding that defined contribution plans are not the norm for many public sector employees. Participants in the Nebraska Retirement System (state level workers) have defined benefits plans, meaning that they are guaranteed particular benefits, regardless of the value of the investments. When the market drops, people with defined benefits plans do not have to be concerned that there will be less money available at retirement in the same way that defined contribution plan participants do. So, although the cost to taxpayers is lower for government workers who have defined contribution plans, again, the problem, from all the available information I have, indicates it is small consolation when the majority of government workers do not have that type of plan. Some consolation for City of Lincoln taxpayers resides in the fact that City employees seem to have the more affordable type of plan.

I have included data from the BLS report mentioned above regarding the other areas of employee compensation that presents a stark illustration of the problem with the current methodology for determining city and county employees’ pay and benefits. While these figures are not Nebraska specific, it is illuminating and the figures are recent.

Wages:

Private industry employer wages and salaries averaged $19.68 per hour

State and local government wages and salaries averaged $26.25 per hour

Health insurance:

Health benefit employer costs in September 2010 were $4.65 per hour worked for state and local government and $2.10 in private industry.

As I’ve already stated, GiN is in rare agreement with the LJS editorial board on this subject, at least in general terms. Something definitely needs to happen regarding this whole issue and soon. It’s time to start asking ourselves some fundamental questions:

• Should government employees be better compensated than the citizens whom they are supposed to serve?
• Are government employees more valuable than employees in the private sector?
• Whatever happened to the servant concept in public service?
• What product or service of value to the overall economy do government employees provide?
• Does the available information on government employee vs private sector employee compensation discrepancies give indication of a thriving free market economy or one that is drifting towards a centrally planned economy?

To be continued – more to come on this subject with more specific information about Nebraska, soon.