With recession-related expenses up and revenues down, Colorado’s fiscal woes have just substantially worsened.
Offsetting recent budgetary gymnastics by Gov. Bill Ritter and the legislature, a forecast released Monday by the Legislative Council now projects that state spending will still exceed revenues by $249 million in the current budget year and $384 million next year. There are scant options for increasing revenues during a recession, so TABOR limitations on taxes are moot. That leaves spending cuts as the inescapable remedy.
But Amendment 23, the irresponsible brainchild of the teacher unions, mandates increases in K-12 spending, the state’s largest budget item, even when there’s no money to do so. That squeezes all other areas of the budget, like higher education, roads, criminal justice, public services, social programs, etc., which leaves us with the elephant in the budgetary room: the state government payroll.
Faced with his own budget crisis, Gov. Arnold Schwarzenegger of California has proposed the elimination of 5,000 state jobs and a 5 percent pay cut for the rest. It would seem that Colorado must consider savings in this area, too, just as private sector employers have been forced to do. Coincidentally, an audit recently conducted for the state by Fox Lawson and Associates found that Colorado state workers are better paid than their private sector counterparts.
Protected by their monopoly status in most areas, government workers have far greater job security and less performance pressure than those in the private sector. That makes the case for lower pay, not higher. As a citizen, if you’re dissatisfied with customer service at, say, the Department of Motor Vehicles, it’s not like you can take your business to a competitor. And the audit didn’t even consider that state workers get more paid holidays, sick days and vacation days.
The defensive, self-serving reaction to the audit by state personnel officials and union spokesmen was predictable but lame. They claimed that the advantage enjoyed by government workers in pay was offset by their disadvantage in benefits like health insurance and retirement. This is preposterous, especially as regards retirement benefits. Nationally, fewer than half of private sector workers even have an employer-provided retirement plan, while 80 percent of government workers are covered mostly by defined-benefit plans, like Colorado’s PERA program, guaranteeing generous pension payments.
When you throw that into the mix, government workers in the state are substantially better compensated than workers with comparable non-government jobs. In the private sector, defined-benefit pension plans have largely given way to less costly defined-contribution 401(k) plans with no benefit guarantees.
What remain of private-sector defined-benefit pension plans are mostly in historically union-dominated sectors like the auto industry, where such plans have contributed to employer bankruptcies. It’s absurd to justify PERA benefits by comparing them to those fading dinosaurs. And bankruptcy is where government pension plans like PERA would be headed if governments couldn’t soak taxpayers to bail them out.
PERA’s unfunded pension liability is estimated at $22 billion. In New Jersey, the most taxed state in the nation, the shortfall is $52 billion. Nationally, according to the Boston College Center for Retirement Research, the aggregate unfunded liability of public-sector pension plans is $1.7 trillion. It’s a national crisis that will deepen if these plans aren’t phased out in favor of 401(k)s. Colorado would be a good place to start.
I have no animus for government workers. This is about balancing the budget when the only choices are painful. In this recession economy, where private-sector workers are losing their jobs or taking pay cuts, there’s no reason why government workers should be held harmless at the expense of those who pay their wages.
Mike Rosen’s radio show airs weekdays from 9 a.m. to noon on 850-KOA.
