Perhaps Michigan legislators are seeking divine inspiration this Easter weekend as they contemplate the irresponsibility of recessing without tackling the fundamental economic problems facing the state.
Lawmakers began a two-week spring break on March 26 with no consensus on how to erase a projected $1.7 billion deficit in the budget for the fiscal year starting Oct. 1. That means that the window of opportunity for rescinding the proposed 3 percent pay increase for unionized state employees will pass (April 11 is the deadline) with no action taken.
In addition, most lawmakers oppose Gov. Jennifer Granholm's proposal to raise more than $500 million by extending a slightly lower sales tax to services currently not taxed. Granholm's proposal to save money through a retirement incentive package also has stalled. On the other hand, many legislators are reluctant to vote for spending cuts, especially to education and public safety programs.
So what is their solution? Go out for recess and hope that the teacher forgets about the homework she assigned.
While Granholm has taken a beating over Michigan’s plummeting economy -- much of it deserved -- she at least presented proposals for addressing the deficit. It’s the job of Michigan’s House and Senate to decide which measures will be implemented and how the details of a new budget actually will become law.
Right now, lawmakers simply are playing deaf, dumb and blind in a childish gesture of “Out of sight, out of mind.”
The issue of the pay increase for state workers is particularly crucial because it represents not only a practical cost-cutting measure, but because it symbolizes of a deeper, more visceral, feeling among Michigan citizens.
Two separate statewide polls over the past seven weeks show that Michiganders overwhelmingly oppose the 3 percent raise scheduled to kick in for state union employees on Oct. 1. A March 6-8 poll by the Glengariff Group revealed that three-quarters of those questioned oppose the pay hike. An EPIC/MRA poll in late February showed 68 percent in opposition.
Coupled with the Michigan Civil Service Commission’s decision last month to cancel a 3 percent pay increase for about 17,000 non-unionized employees, voters are rightly puzzled by the failure of the legislature to follow suit for 35,000 unionized employees.
The Republican-led state Senate failed for a third time last week to pass a measure aimed at repealing the raises. The proposal garnered 23 votes, three short of the two-thirds majority needed to advance the proposal to the House. That was a one-vote improvement over a bid last month to rescind the hike. Both votes each time fell along partisan lines, with Republicans voting in favor and only one Democrat -- Sen. Michael Switalski, D-Roseville -- joining them.
Opponents of the rollback cite previous concessions by union employees and the relatively small amount -- $50 million to $75 million -- of savings anticipated.
"They were not going to be able to fix the state on that 3 percent raise that was negotiated three years ago," Scott Dianda, president of the 5,000-member Michigan State Employees Association, told The Detroit News last month. "I commend the Senate for doing what is right."
Granholm’s budget proposal for next fiscal year includes the raises negotiated two years ago because, she says, the administration must abide by what’s in state employee contracts.
“If we had negotiated that this year, it would be a different solution than what’s currently in the contract,” Granholm said.
But Granholm also seems as frustrated as Republicans in the Senate with the gridlock encountered on other issues.
"I can't wave a magic wand," Granholm told the Michigan Public Radio Network. "I cannot push the vote button for these legislators. They have one constitutional responsibility... they don't want to do the tough things, and everything I'm asking them to do is tough because there is no easy way out. We cannot get this done unless we take some really hard steps, and it's hard for them to do in an election year. So the question is, for them, you can say 'no' to reforms and 'no' to cuts and 'no' to revenues, but you continue to say that and we've come up against a budget deadline, and it means another shutdown, and that happens one month before a general election in November.”
Granholm has proposed a state-employee contribution of 3 percent toward pension costs next fiscal year. She said it offsets the scheduled 3 percent pay raise.
Non-union employees’ pay already frozen
Some business leaders were outraged at the state Senate’s failure to act.
“To rescind the pay raise of non-union state workers, which are a minority of total state employees, and then allow the pay raise to go forward for union employees is the height of hypocrisy,” said National Federation of Independent Business state director Charlie Owens. “If this administration is serious about cutting spending, they need to treat all employees equally and suspend pay increases for everyone.”
Doug Rothwell, president and CEO of Business Leaders for Michigan, said rescinding the pay raise could avoid spending cuts in education and health services.
“These results (of polls) show that the voters understand the state’s dire financial situation,” Rothwell told the Detroit Free Press. “Given the additional significant cuts that will be required in the state budget if this increase is allowed to occur, we encourage both parties in both chambers of the legislature to rescind the pay increase.”
In the same story, Sen. Gilda Jacobs, D-Huntington Woods, said she wouldn’t consider blocking the pay raise until business executives agreed to reduce state-granted business tax credits.
Jacobs argued that the voters polled might have answered differently if they were aware that state workers have surrendered $700 million in concessions. Jacobs said it should be up to the state and employee unions to renegotiate the pay raises.
“I don’t think it’s fair to single out teachers or state employees, they’re being vilified,” Jacobs said. “These are not bad people.”
Jacobs is parroting the liberal mantra. Voters would feel differently if only they knew the facts. Voters, of course, are stupid, or simply too ignorant, to know what’s good for them. And, by the way, Ms. Jacobs, no one has suggested that state employees are “bad people.” Maybe Jacobs is implying that the 17,000 non-union employees who already have had their scheduled pay raises nixed ARE bad people?
Government workers approaching elitist status
As of now, government workers outnumber any other single private industry work force in the state; they out earn (wage and salary payments) any other single private-industry work force; and they out earn (total compensation) any other single private-industry work force (Bureau of Economic Analysis
Regional Economic Accounts).
Also, as columnist Daniel Howes wrote in The Detroit News last week, according to Bureau of Labor Statistics numbers compiled by the Cato Institute, average hourly wage-and-benefit compensation for state and local government employees across the country totaled $39.66, a 45-percent premium over the $27.42 earned per hour by private-sector employees.
Wage and benefit compensation for Michigan's public sector is up 11.4 percent since 2000 while, over the same period, private-sector compensation is down 19.7 percent.
In addition, Howes says, “In the industrial Midwest of Michigan, Ohio, Indiana, Illinois and Wisconsin, the gap is even wider. Total compensation (wages and benefits) for state and local government employees in 2009 was $43 per hour worked, compared to $26.72 per hour in the private sector.
“That means taxpayers here and in neighboring states are paying a whopping 61 percent premium to their state and local government employees. Those public employees quit their jobs at one-third the rate of those in the private sector, Cato says, meaning such large premiums aren't necessary to attract and retain good employees.”
The Detroit Free Press, in a welcome about-face concerning union matters, penned an editorial on March 12 -- previous to the final two pay freeze votes- -- critical of the increases.
“Compensation for Michigan’s private sector citizens decreased by 10.3 percent between 2007 and the third quarter of 2009 – the most recent data available from the federal Bureau of Economic Analysis,” wrote the Free Press. “Most Michiganders are earning less and struggling to get by.
“But one group is actually becoming richer in Michigan: government employees. State and local government employee compensation increased by 5.5 percent during the same period, and federal employee compensation is up by 7.5 percent.
“Lawmakers supporting the state employee pay increase argue that it was agreed upon through the collective bargaining process. But a pay increase negotiated by a union doesn’t make it sacrosanct or more affordable for citizens.”
You’d never know that by the reaction of opponents. Surely non-union employees whose pay has been frozen must be puzzled.
The U.S. Bureau of Labor Statistics reported that government employee benefits cost twice as much as full-time, private sector benefits. Among the perks that many government employees receive:
• Public school employees pay an average of 4.2 percent to their health care plans, while private-sector workers contribute 22 percent of their own health care costs.
• Lavish, defined-benefit retirement plans are nearly unheard of in the private sector, but are commonplace for many government employees.
• Macomb County government employees enjoy a taxpayer-paid retirement benefit that permits many to retire at the age of 50.
As the Free Press pointed out, there was a time when government employees enjoyed better benefits and job security than most taxpayers, but were paid less than comparable private-sector employees. But Labor Bureau findings show that, today, the privileged government class enjoys higher salaries, richer benefits and better job security than the citizens they’re supposedly serving.
A national poll conducted in December by Rasmussen Reports revealed that 24 percent of government employees rated the economy as good or excellent, compared to just 9 percent of those in the private sector.
Of course government employees are more sanguine about the economy. The tail is indeed now wagging the dog.
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