the public sector is doing so poorly these days, as President Obama claimed on Friday, is because the cost of employing a government worker has soared, forcing cutbacks in cities, towns, school districts and state governments. Josh uses San Jose as an example. There the average cost of employing a full-time worker is a whopping $142,000 a year, up 85 percent in 10 years thanks to the soaring cost of employee benefits. Josh made a similar point in a 2010 Realclearmarkets column that disclosed that the average cost of employing a cop in Oakland is $162,000 annually, which is why the city cut 10 percent of its police force after the union refused to make benefits concessions. There are many other examples:
- Nicole Gelinas pointed out after New York City's last great snowstorm that Gotham now spends $144,000 per sanitation worker, up from $79,000 a decade ago, thanks to sharply increasing benefits costs.
- For every dollar that Stockton, CA., spends on employee wages, it spends more than a dollar on benefits, which is one reason why the city is insolvent and skipping payments to creditors.
- In Nassau County on Long Island, the average cost of employing a county cop is $198,000 annually, one reason that the county is operating under a fiscal monitor even though it is one of the nation's richest.
The cost of these benefits has been rising even as local governments boosted hiring over the last two decades, creating unworkable budgets. I detailed some of these numbers in my long City Journal article, The Compensation Monster Swallowing Cities. Some snippets:
- In the typical city, town, or school district....compensation costs generally range from 70 to 80 percent of the budget. Those compensation costs have soared over the years as politicians made overgenerous promises to local government workers... These concessions haven't merely resulted in big deficits; they have pushed many localities to the edge of fiscal ruin.
- California's local governments padded their employee count by 15 percent from 1999 to 2008, with average annual pay rising 60 percent, to $61,185, not counting the cost of benefits, according to the Little Hoover Commission. Average pay for cops and firefighters climbed 69 percent, to $89,056, again excluding benefits.
- In New Jersey, where enrollment increased by just 69,000 students from 2000 through 2009, public schools hired 33,000 new full-time staffers--that is, nearly one worker for every two new students.
- Ten years ago, [Costa Mesa's] annual pension bill from CalPERS was $5 million. Since then, it has tripled to $15 million--16 percent of the city's $93 million budget--and Mayor Pro Temp Jim Righeimer has warned that it could reach a staggering $25 million by 2015.
- Los Angeles's retiree costs currently make up an already troubling 18 percent of its budget... but the [California Little Hoover] commission estimated that the percentage would swell to 37 percent by 2015. Retiree costs just for L.A.'s public-safety workers could double to $700 million annually, "enough . . . to fund a second police department in a major city."
- Detroit currently has nearly 13,000 employees but is providing pension benefits to 22,000 retirees, a jaw-dropping ratio of retirees to current workers. The annual pension bill for the city's retired police officers and firefighters alone is $150 million--as much as it costs to pay the salaries of 65 percent of the police and fire departments' active workers.
The President is fond of pointing to layoffs of 300,000 teachers, ignoring the massive hiring spree our schools have been on in the last 40 years, as I've pointed out.
Take local education workers. Hiring has far outpaced the growth in student enrollment, driving down the number of students per teacher in American public schools to 15.6 in 2010 from 26.9 in 1955, according to the National Center for Education Statistics. Robust hiring has continued even during periods of enrollment declines, including from 1971 through 1984, when the number of public-school students fell virtually every year, declining in total by 15%, while the ranks of teachers grew by 7%.
The numbers are even larger for non-instructional personnel. Our public school systems used to employ one non-teaching worker per every 31 students in the 1960s. Today, it's one per every 10 students.
The strategy of the President and his advocates for more spending such as Paul Krugman is to ignore the rapidly rising compensation and hiring numbers at the state and local level over the decades to advocate for federal funds to preserve local jobs. But local governments have been on an unsustainable hiring and compensation path and something had to give. Now it is.