“No Man’s life liberty or property is safe while the legislature is in session”.

- attributed to NY State Judge Gideon Tucker

Tuesday, March 30, 2010

New Jersey's Governor Christie Begins The Budget Cuts

New Jersey's public employee unions have begun their firestorm of protests over newly-elected Governor Chris Christie's budget cuts.

As the Wall Street Journal noted, these aren't cuts in the growth in items in outgoing governor Corzine's last budget, but several billion dollars of absolute cuts in spending.

Not surprisingly, this means programs which involve and fund state and local government employees. Unionized employees.

On that note, the Journal's lead staff editorial on Friday provided instructive details on the average compensation, nationwide, of public-sector versus private-sector workers.

The editorial observes,

"According to the U.S. Bureau of Labor Statistics (BLS), from 1998 to 2008 public employee compensation grew by 28.6%, compared with 19.3% for private workers. In the recession year of 2009, with almost no inflation and record budget deficits, more than half the states awarded pay raises to their employees. Even as deficits in state capitals widen and are forcing cuts in services, few politicians are willing to eliminate these pay inequities that enrich the few who wield political power.....

This means that for every $1 in pay and benefits a private employee earned, a state or local government worker received $1.45."

The piece goes on to state that public employees earn about 1/3 more than their private sector counterparts, but also receive 70% higher benefit levels.

But that's not all. A good third of the editorial discussed 'double-dippers,' teachers who retire, then are immediately rehired and begin building a second pension. The article mentions,

"Across the state, Ohio's State Teachers Retirement System paid out more than $741 million in pension benefits last school year to 15,857 faculty and staff members who were still working for school systems and building up a second retirement plan."

I had a long discussion this weekend with a local school system teacher about New Jersey's woes and Christie's budget cuts.

The teacher complained that large surpluses of unspent money in the educational system were being cut by Christie, which will require program cuts and, thus, teacher layoffs. She took a while to understand that those unspent funds weren't the property of the NJ school system- they are taxpayer funds allocated- by a prior, free-spending administration- but not yet spent.

She and her colleagues are angry with what they perceive as broken promises regarding teacher layoffs from Christie.

I finally had to drive home to her several times that there is now a very simple, clear metric that instantly illustrates the problem, and is comprehensible to taxpayers. That metric is the one appearing above in this post, used by the Journal editorial.

By simply comparing averages of private and public sector compensation, health and pension benefits, eye-opening differences become clear.

Thus, I told my friend, taxpayers really no longer care about the rates of changes in teacher, police or firefighter compensation and benefits. They notice the incredibly more lush deals the government, unionized workers receive.

When I put it that way, she understood why it was unlikely that her union's pensions would not take some sort of haircut between now and her retirement, nearly 20 years in the future.

In fact, she even agreed that, eventually, taxpayers will want government union employees' contracts to offer no better compensation, nor benefits, than the average of private sector workers in the state.

It's a very compelling argument.

She asked what I thought would happen if Christie is defeated after his first term, and replaced by another spend-borrow-tax Democratic governor? I asked her the same question, and she thought a moment. Then slowly realized the horrible implication and said she thought the state would veer closer to, and maybe into, bankruptcy.

This is why I think Christie will, eventually, make progress. The metrics on taxes and state-and-local worker compensation are compelling. There's no other way out for New Jersey but to cut taxes and spending. And much of that spending is going to have to come from government employees.

As I'm writing this, Democratic Pennsylvania governor Ed Rendell is taking Christie, and New Jersey, to task for not raising taxes! He asserts that NJ will have to raise taxes, and notes a gasoline tax that hasn't been raised since 1989.

It's a typical attitude for a Democratic governor to expect citizens to just pay more taxes, rather than consider their income their own, and expect state government services for the least expense possible.

It's not only teachers. Christie has correctly identified the duplicative layers of county, township, and local governmental entities. They typically all have police and administrative personnel, budgets and regulations. Given some time, some of that spending and staffing can be pared back, with little to no effect on life for the average state citizen.

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