Wednesday, April 07, 2010

A Radical Proposal

Government spending is spinning out of control. Yeah, I know, you are probably thinking what else is new. But one of the key problems with government spending is the explosive growth in wages of government employees.An example from the Cato institute shows that federal workers are making more than double the average for the private sector.

Montana public sector employees average $60,435 in average total compensation which is still more than the average earned by non-government workers.  So how did this imbalance come to pass?  It used to be that government workers were compensated less but had more job stability.  Some of the benefits of course were paid health care, but more than anything else, it was a retirement package that is pretty darned good.
The unfortunate thing about this is that the accumulation of retirement obligations by the government have to be met by the taxpayer.  And it doesn't take long before the obligations get so far out of hand that the rest of the state budget is put in peril.
As a state employee, I am going to make a recommendation that appears to be against my own interests but the alternative is having the state go bankrupt, which is an even bigger harm to my interest.  But I think we have to do two things.  First, freeze government wages until the average government worker is paid the same as the average private sector worker.  Second, we are going to have to change the way that the annual adjustment to retirement compensation is made.  My proposal is to give 100% of the CPI cost of living the first year, followed by 95% the second, and 90% the second and so on reducing the annual adjustment by 5% per year,  The net effect is that after 20 years, there will be no adjustment for inflation, but there will probably be less need as well when the retiree is 80 or older.
Putting a pay freeze is not going to be very popular when inflation starts to take off.  But the good news is that with inflation, it won't take that long for the state worker wage to come into line with the private sector pay.  As a flip side to this, the government would have to make a commitment not to let anyone go, except for job performance problems. Some workers may feel that they could be better served to leave government service and make their way in the private sector.  And I salute them.

If we do not take steps now, there won't be any retirement for anyone.  We have to recognize that state spending is a liability that has to be paid, but the workers have to recognize that killing the goose that laid the golden egg isn't going to work either.

1 comment:

Anonymous said...

Not so radical considering the teacher's retirement fund is in dire shape. Add to that the problems PERS faces and something has to be done. Perhaps you should forward your ideas to the interim members of the State Administrataion and Veterans Affairs committee (SAVA). They're charged with trying to find a way to put the state's various retirement plans on sound footing.