Over at the New York Times blog Economix, Floyd Norris has a post on the downturn in state and local government jobs, which he notes is now deeper than the decline in these jobs during the recession of the early 1980s. This is remarkable and unexpected only if you have not been paying attention to the rise in government jobs in the previous 20 years, or to predictions from experts in a range of organizations who have been noting that when it comes to state and local government budgets and especially spending on personnel costs, this time it really is different.
Over the last 20 years, state and local employment expanded robustly even as the cost of employing workers in the U.S. rose. From 1990 through 2010 state and local worker ranks increased by 28 percent. In that same time, as the chart below shows, the country's population grew by 24 percent.
Meanwhile, certain employee costs, including the cost of employer-provided health care and retirement benefits, have been rising rapidly in many local governments. To take one example, for instance, New York City spent 33 additional cents on benefit costs for every dollar of salary when Mayor Bloomberg took office; today the city is spending 75 cents in benefits for every dollar in salary. Small wonder that the cost of employing the typical sanitation worker in New York City has increased from $79,000 to about $144,000 annually, including benefits.
New York City actually does a reasonably good jobs of accounting for its employee costs. Other places, ranging from Detroit to Pittsburgh to Chicago to Providence (RI), have simply been ignoring or avoiding some of their costs, most especially their bills for funding retirement obligations for current workers. Only now are we starting to get a glimpse of what those liabilities will amount to in the coming years. Dealing with that debt will also constrain local budgets in the future.
The combination of the rapid rise in the number of workers and the far more rapid rise in employee costs in some local governments has led a number of analysts to predict a retrenchment at the state and local level unlike what we have witnessed anytime in the recent past. As a report by the National Governors' Association noted last year, the old tactic of simply cutting spending or raising taxes isn't enough at this point. The governors' report described "new austere realities" that require reform of how states and cities spend their money, and the laws governing that spending. Right now, many local governments are mostly involved in a political tug of war with worker unions and other political factions over their budgets. But some reform ideas designed to make local government more efficient and productive are starting to emerge. If they do, those state and local employment numbers are unlikely to recover any time soon.
Meanwhile, certain employee costs, including the cost of employer-provided health care and retirement benefits, have been rising rapidly in many local governments. To take one example, for instance, New York City spent 33 additional cents on benefit costs for every dollar of salary when Mayor Bloomberg took office; today the city is spending 75 cents in benefits for every dollar in salary. Small wonder that the cost of employing the typical sanitation worker in New York City has increased from $79,000 to about $144,000 annually, including benefits.
New York City actually does a reasonably good jobs of accounting for its employee costs. Other places, ranging from Detroit to Pittsburgh to Chicago to Providence (RI), have simply been ignoring or avoiding some of their costs, most especially their bills for funding retirement obligations for current workers. Only now are we starting to get a glimpse of what those liabilities will amount to in the coming years. Dealing with that debt will also constrain local budgets in the future.
The combination of the rapid rise in the number of workers and the far more rapid rise in employee costs in some local governments has led a number of analysts to predict a retrenchment at the state and local level unlike what we have witnessed anytime in the recent past. As a report by the National Governors' Association noted last year, the old tactic of simply cutting spending or raising taxes isn't enough at this point. The governors' report described "new austere realities" that require reform of how states and cities spend their money, and the laws governing that spending. Right now, many local governments are mostly involved in a political tug of war with worker unions and other political factions over their budgets. But some reform ideas designed to make local government more efficient and productive are starting to emerge. If they do, those state and local employment numbers are unlikely to recover any time soon.
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