Oh My! (The Free Enterprise Nation)

As researchers for The Free Enterprise Nation began compiling information about the pay and benefits disparity that exists between government/public education and those who work in the private sector, we'd hear an occasional "OH, MY GOSH!" or "OH, MY!" as they found another reference to shocking pay and benefits practices in the public sector. It might have been the first time they saw a State of California pensioner retiring at $500,000 a year...or perhaps the Illinois driver's training teacher earning $170,000 a year and retiring at $130,000 a year...or perhaps the New York City workers who amass more than $100,000 in overtime in their last year before retirement, triggering a pension benefit in excess of their salary.

And in every case, these "public servants" retired in their 50's, with free or highly subsidized health care and guaranteed annual increases in their pension benefits. Countless examples led to a new classification..."OH, MY!,” or "OM" for these examples. The following are just a few:

Pay Excesses

On average, federal civilian wages in 2008 was $79,197, more than 50% greater than that of the average private sector employee’s wages of $49,935, according to the Cato Institute’s analysis of data from the U.S. Bureau of Economic Analysis.
Pay growth in the public sector has been much higher than growth in the private sector over the years, too. Between 2000 and 2008, wages for federal civilian workers climbed 53.7%, while wages in the private sector went up 28.5% over the same time period, according to the Bureau of Economic Analysis.
The U.S. government issued employee bonuses of some $370 million in the fiscal year ending September 2008. The largest bonus went to a Department of Energy administrator who received a $62,925 bonus in 2008 on top of his $172,200 base pay.
The average state and local government employee earns 29% more than the average private sector employee, according to The Tax Foundation’s analysis of 2007 data from the Bureau of Economic Analysis. The differences are greatest in Rhode Island (where state/local employees earn 63% more than private sector employees), Hawaii (62% more), Montana (62%), Nevada (55%), Vermont (55%), Alaska (53%) and Florida (51%).
In Vallejo, California, more than 40% of the 613 city employees had salaries greater than $100,000 in 2008. In May 2008, Vallejo filed for bankruptcy.
Taxpayers support some hefty teacher salaries in Illinois, according to the Illinois State Board of Education’s Teacher Service Records for the year ending June 30, 2008. Some examples are:
- 420 physical education teachers make over $100,000/year, with the top one earning $163,000.
- 332 English teachers earn more than $100,000/year, with the highest paid at $164,000.
- Would you like to be one of the 94 driver education teachers in Illinois making more than $100,000 a year? The highest paid is $170,000.
In Houston, Texas, the number of police officers has remained about the same over the past 6 years despite a 40% budget increase. The Houston Police Department budget has been raised from $480 million in 2004 to $680 million in 2010, yet the additional funds have gone to cover higher salaries, pension and healthcare benefits that are written into contracts with the city.
In New York, 121,000 state agency workers collected more than $459 million in overtime in 2007. One developmental aide clocked in 2,455 extra hours, bringing her salary from $38,500 to $110,841. That’s almost triple her base salary.

Benefits Disparity

When wages and benefits are combined, federal civilian workers averaged $119,982 in 2008, twice the amount of $59,909 which workers in the private sector averaged in their wages and benefits combined, according to the Cato Institute’s analysis of data from the U.S. Bureau of Economic Analysis.
This places the value of benefits for federal civilian workers at an average of $40,000/year, four times the value of benefits that the average private sector employee receives.
Only 12%of retirees from the private sector have defined benefit pensions to supplement their Social Security. Their average annual pension is $13,083, according to the nonprofit Employee Benefit Research Institute, and private sector employees are not eligible for full Social Security benefits until their late 60s.

BUT….

The majority of public sector workers have pension plans that allow them to retire much earlier (10-25 years earlier) and that provide benefits many times the retirement payout that Social Security would provide.
In Fort Worth, Texas, one police chief recently retired at age 55 with a guaranteed annual pension of $188,692. His interim successor retired at age 52 with an annual pension of $113,614. Of the 23 city retirees receiving pensions over $100,000, 13 are former police and fire department employees.
In San Jose, California, there are 256 retired officers and firefighters and 34 other city workers that collect $100,000+ pensions, and all city retirees get free healthcare. San Jose workers get three to five times what the average social security retirement benefit would be, and they can retire in their mid-50s.
Florida spent over $1.6 billion in the past year on healthcare coverage for state employees. Of this, only $156.7 million is from employee contributions. Florida taxpayers footed the bill for the remaining $1.44 billion. The state’s 127,000 employees enjoy perks like free college classes and financial consulting worth at least $115/hour, the latter of which adds another $8 million to taxpayers’ bills.

Double-Dipping/Spiking/Pension Abuse

More than 4,000 state employees are double-dipping in Arizona (700 of those are teachers and administrators). The state law requires that teachers must first take a year off before returning to work, but contract firm SmartSchools Plus now makes it possible for teachers/administrators to return to work immediately as contract workers while collecting their pension and lump sum payments.
In Florida, a police commander in Delray Beach retired at age 42 earning $90,000 a year. He now collects a pension of $65,000 and earns a salary from his new job at a nearby beach.
There are at least 9,000 public employees and 200 elected officials double dipping in Florida. And the state is spending about $300 million on salaries and pensions for these double dippers.
- A Miami-Dade community college president got a lump sum of $893,286 and earns $441,538 annually, in addition to his $14,631/month pension.
- An Indian River State College president got a lump sum of $585,000 and earns $286,470 annually, in addition to his $9,823/month pension.
- A Northwest Florida State College president got a lump sum of $553,228 and earns $228,000 annually, in addition to his $8,803/month pension.
- A community college chancellor got a lump sum of $189,370 and earns $190,000 annually, in addition to his $8,500/month pension.
- A North Florida State Attorney who "changed his mind about retirement," collected a lump sum of $519,995 and makes an annual salary of $153,139, along with his monthly pension payments of $7, 749.
- A Baker County Sheriff collected a lump sum of $311,173 and makes an annual salary of $128,000, plus a monthly pension of $5,699.
More than 200 employees at the Florida Department of Corrections collectively received $11.6 million in salaries AND $4 million in annual retirement checks in 2007. Individuals who left the state’s Deferred Retirement Option Program (DROP) to return to work also received lump sum payments ranging from $81,000 to $247,000.
In Connecticut, two professors at UConn collect six-figure pensions while also collecting a six-figure salary. As of 2008, there were 29 retirees collecting a six-figure pension and still collecting a paycheck.
In San Francisco, California, a recent civil grand jury report noted the prevalence of “spiking,” or boosting pension benefits via final work year promotions, a practice that has resulted, in the past decade, in over half of the police and firefighters earning pensions in excess of the wages they earned while actively working.
One prison guard in Connecticut worked so much overtime he earned more than $100,000 in each of his last five years. He retired at 46 with a pension of $60,000 a year for the rest of his life.
In Arkansas, there are at least 144 employees on the state payroll who have retired and returned to the same job after less than two months since June 2001. For example, a budget director retired in 2006 with a pension of $2,000 per month and a DROP payment of $160,000, yet he still works for the same agency with an annual salary of over $96,000.
Public school teachers in New York are able to retire at 55 with pensions sometimes larger than their annual salaries by cashing in unused sick and vacation time. There are 696 former teachers and administrators receiving pensions over $100,000.
The highest paid city official in California was earning more than $500,000 as a city administrator when he was arrested. He was charged with embezzlement of city funds. Still, he continued earning a $500,000/year pension, even as he waited for his trial.
Several New York state employees are collecting pensions despite being convicted of crimes. Some examples include:
- A Buffalo detective convicted of stealing money and jewelry from suspected drug dealers by setting up raids based on phony information. He was sentenced to 30 months and is collecting a pension of $54,751.
- A state comptroller convicted of defrauding the government used state workers as personal aides for his ailing wife and was also indicted in a kick-back scheme involving the state pension investments. His sentence is pending, but he is still collecting a pension of $166,467.
- A teacher was convicted of sexually abusing members of the Boy Scout troop that he led, was sentenced to 50 years, and is still collecting his pension of $52,073.
- A chief judge in the State Court of Appeals was convicted of stalking a former lover and threatening to kidnap her 14-year old daughter. The judge was sentenced to 15 months in jail and collects a pension of $72,435.
- A detective convicted of orchestrating mob hits was sentenced to life and is collecting a pension of $63,000.

Employment Situation

The disparity between the public and private sectors is present even in employment statistics. Between July 2008 and July 2009, the private sector lost some 5.2 million workers while government grew by 238,000 workers, according to the U.S. Bureau of Labor Statistics.
Since the recession began in December 2007, U.S. Bureau of Labor Statistics data shows that private sector employment has declined 5.74 percent, while government payroll has grown 0.83 percent, according to the New York Times.
The private sector lost more than a million workers in the second quarter of 2009, while government added over half a million, according to the U.S. Bureau of Labor Statistics. From March 2009 to June 2009, the number of employed persons in private industries dropped from 108,674,000 to 107,498,000. During that same timeframe, the number of employed persons in government rose from 20,904,000 to 21,446,000.

Growing Debt and Unfunded Liabilities

The total public debt is now at $11.8 trillion, according to the “Debt to the Penny” search application on www.treasurydirect.gov.
Interest payments alone on debt came to $452 billion in 2008.
The Congressional Budget Office published a document in June, 2009 that states that by next year America’s debt will exceed 60% of its Gross Domestic Product (GDP). In 2023, our debt will exceed 100% of the GDP. And, by 2076, the debt will be greater than 6.5 times the GDP. The CBO states, “Starting in the 2060s, projected deficits become so large and unsustainable that CBO’s textbook growth model cannot calculate their effects.”
The unfunded liability for Social Security is $17.5 trillion in 2009, according to a 2009 National Center for Policy Analysis (NCPA) brief. What’s more, Medicare Part A is underfunded by $36.7 trillion, Part B by $37.0 trillion and Part D by $15.6 trillion, bringing the total unfunded liability for Social Security and Medicare to some $106.8 trillion!
The unfunded liability for state and local pension plans was pegged at $400 billion, but American Enterprise Institute scholar, Andrew Biggs, estimates the actual amount of unfunded liability is more than $3.5 trillion if the plans are analyzed in the same manner as private sector plans.

Government’s Decisions for Dealing with Budget Shortfalls

Colorado has proposed to free 3,100 inmates six months early and end the oversight of some parolees to save almost $19 million. Governor Bill Ritter has released this proposal as part of his plan to correct a $318 million budget debt.
Arizona legislators are considering selling their own headquarters and some 30 other state owned properties in hopes of meeting their budget shortfall. They could make about $735 million on the combined sales, but would then lease back the properties, costing $1.2 billion over the next 20 years. Some of the buildings include the House and Senate buildings, the state hospital, the state fairgrounds and possibly some prison facilities.
In Texas, the city of Dallas will likely cut funds to public parks, libraries and recreation centers, resulting in less maintenance, fewer books, shorter hours and program cancellations. An editorial in the Dallas News called for the private sector to kick in with contributions of cash and books.
In Illinois, the city of Chicago made a $1.15 billion deal to privatize the city’s parking meters via a 75-year lease in order to ease Chicago’s budget deficit. Of that money, $268.7 million will go toward eliminating the 2009 budget deficit, while the remaining $51.3 million will be exhausted in 2010. The city’s 2010 $6.2 billion budget still has a $519.7 million budget shortfall.
Indiana privatized its toll roads to a private consortium of Australian and Spanish investors in March 2006 for a lump sum payment of $2.8 billion for the next 75 years. The one-time infusion of cash was a way to cover the state’s highway funding deficit with no new taxes. It will, however, only cover the shortfall for 10 years.

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