Are Oregon public employees becoming a privileged class?

Sen Doug Whitsett

by Sen. Doug Whitsett

Last September, my office and the Senate Republican Caucus asked the Oregon Department of Administrative Services (DAS) and Legislative Fiscal Office (LFO) to determine both the average and median compensation for Oregon state employees. Completing the task appeared to be a great deal more labor intensive than we had anticipated.

The agencies were able to provide the requested information in early February. Last week, the Legislative Fiscal Office published their findings in its Budget Information Brief/2016-4.

Their Brief states that in 2015, the average compensation for state employees was just over $89,000. About $56,000 was paid in salary, and another $33,000 was paid in employee benefits such as retirement, medical insurance and other payroll expenses (OPE). The cost of the benefit package and OPE computes to nearly 60 percent of the average salary. Hourly compensation averaged just under $43/hour.

Public employees often protest that average compensation computations may be skewed by a few employees earning very high salaries. While in certain instances this argument may have merit, the LFO Brief reports 2015 median state employee costs at about $7,100 per month, or $85,152 per year. Median hourly compensation was just under $41/hour.

Even these hard to believe figures do not accurately encompass all of the public employee payroll costs. For instance, the costs of paid vacation, other paid leave and paid sick leave were not included in the report. Incredibly, state accounting methods apparently do not keep track of those very real, and significant, payroll expenses with enough accuracy to report the costs.

We understand that the average state employee receives about five weeks of combined sick leave, vacation and other paid leave each year. We assume that their absence from the workplace means their assigned work would either not be completed or performed by another state employee. We further assume the average employee will use or accrue all authorized leave.

Using LFO figures and those assumptions, the additional payroll expenses due to paid leave compute to about $8,600.

Including these very real costs, the average state employee may have actually made about $97,000 last year, or about $46.50 per hour.

Public employees who are represented by unions also enjoy significant job security. Separation of an established employee for cause is very difficult, and often expensive, for the public employer to accomplish. Even in the event that the job itself is discontinued, an employee with seniority is often able to replace another employee with less seniority in the workforce. While such job security certainly has significant value, it is difficult to accurately assess its payroll cost.

In comparison, according to figures provided by the Oregon Employment Department to the Statesman Journal newspaper, the average private sector employee earned $22.60 per hour in 2015, or about $47,000. The Department has no way of accurately estimating benefits paid to private sector employees, because those costs are not reported to the agency. However, I believe we can safely assume that private sector benefits and OPE rarely, if ever, approach 60 percent of average salary.

The discrepancy between public and private employee compensation is evident. It is also unsustainable.

A very high percentage of the revenue needed to pay public employees is derived from taxes, charges and fees paid by employers, their employees and other individuals within the private sector. Annual private sector labor cost inflation appears to be running less than four percent. Annual public sector labor cost inflation is running nearer to seven percent. The structural budget deficit is obvious.

Nevertheless, the current public employee labor contracts, negotiated by the Governor and unions representing the state’s government workers, appear to call for at least 30 percent in compensation increases over the next four years. That enormous increase likely does not fully encompass either the soaring cost of the Public Employee Retirement System (PERS) or the medical insurance provided to state employees through the Public Employment Benefit Board (PEBB). Neither does it include the impending compression costs of Oregon’s new minimum wage law.

On its current trajectory, I believe by the year 2020, Oregon state employee compensation could easily be averaging more than $130,000 per year, or nearly $11,000 a month!

The growing structural budget deficit is already enormous. The only way to pay the costs appears to be through significant tax increases. That is the apparent goal of Initiative Petition 28 (IP 28).

According to the Legislative Revenue Office, IP 28’s new two and one half percent tax on certain corporate gross sales will raise at least $5 billion per budget cycle. That amount of new revenue would increase Oregon’s General Fund by nearly 30 percent.

Although the new revenue would flow to the General Fund, the IP’s sponsors claim that they will be dedicating the new money for public early childhood and kindergarten through 12th grade education, healthcare and services for senior citizens. In my opinion, their rhetoric is simply disingenuous.

The sponsors know, or certainly should know, that General Fund revenue is completely fungible. The Legislative Assembly can and will spend that revenue for any purpose it deems necessary. Because Oregon must have a balanced budget, General Fund revenue must be used wherever budget shortfalls exist. Further, it is not legally possible to bind the actions of future Legislatures, short of a constitutional amendment.

Not surprisingly, the primary sponsor of IP 28 is Our Oregon, a 501 (c) (4) corporation formed primarily by the public employee unions of Oregon. By my calculations, the preponderance of the new revenue that would be raised through the passage of IP 28 will be needed to pay for the combined costs of already negotiated public employee labor contracts, the previously identified enormous increases in PERS employer contributions, the rapidly escalating PEBB medical insurance premiums, and minimum wage compression costs.

The public employee unions appear to be feathering their own nests. The great majority of the enormous cost will ultimately be borne by private sector businesses and their employees.

Senator Doug Whitsett is the Republican state senator representing Senate District 28 – Klamath Falls

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Posted by at 05:00 | Posted in PERS, Public Employee Unions, Public Employees Retirement System, State Budget, State Government, State Taxes | 15 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Jim Kennedy

    Thank you. While I am against crony capitalism this is far worse. (not to make crony capitalism good at all) . This legislation is a small group forcing millions to pay for their benefits. This legislation will at the very least raise food costs by 3% just due to this legislation

  • Dave Lister

    Becoming? You are a little late getting the memo.

  • GObill sizemore

    The sad thing about all this is that every time I put a measure on the ballot to rein in the political power of the public employee unions, who inevitably were going to sink the ship of state, the business community that now finds itself in the unions’ crosshairs, refused to help whittle them down to size before it was too late. With a few hundred thousand more we would have beat them in 1998, 2000, and 2008, twice losing by less than one percent.
    Now those same unions and their Democrat water boys and girls in the state legislature are hopelessly drunk on power and arrogance and will stop at nothing. Portland and Eugene voters will continue to vote for the same far left agenda for a while longer, but eventually even they will be appalled at what the current policies are going to do to schools and jails and the social programs they love so much. At some point, enough common sense Democrats and unaffiliated voters will break off their love affair with the far left to make it possible to set a bold, new course.
    There is a solution to all this nonsense, but it will take thinking further outside the box than anything the Republicans in Salem are suggesting at the moment. And it may require bottoming out first. But we will turn this thing around in time. The pendulum always swings both ways – eventually.

  • Roger Fredinburg

    Most Public employees should be replaced with automation software – Paper pushing is a lost art in the tech age – Plus, they should all get minimum wage with a Bonus process for performance and workload achievements. (also – GOV. wages should be capped at 95% of private sector mean wage)
    EXAMPLE: DMV counter help would get Min. wage + a % of each transaction – Making their pay commensurate with productivity – could extrapolate across job description verticals – Additionally – to salvage the PERS Plan – Must increase retirement age to same as Private sector (age 67) and the pensions must be realistic – tied to similar private pension pay-outs or to Social Security – END extravagant retirement pay-outs for life (It’s killing the school system) – These are the answers… In my humble opinion – Can I get an AMEN?

    • Give it an arrest

      The PERS employee rumble from the jungle has now materialized into unabashed backyard onslaughts by cougars along with foxes sucking eggs from unprotected cooperage.

  • barttels

    You will be missed, Senator Whitsett.

    • Native, not naive Oregonain

      Why? Please expound further, MR lower half of Jaynes?

      • barttels

        Your question is confusing (MR lower half of Jaynes???)

        But I was speaking to Sen Whitsett’s not running for reelection.

        • HIgh fervor for Whitsett

          Misunderstanding re-calibrated.

          Alas, many disparaging pot shots lodged at Senator Whitsett ‘token’ by Blue Oregon hostile barroom patrons

          Matters be, much relieved Senator Whitsett was missed by Dem nimrods.

          Unilaterally all right minded Oregonians prefer to see his remain mainstreaming in the legislature.

  • M2inOR

    Thank you Senator Whitsett.

    Any chance future legislation could have sunsets for any expenditures?

    Seems like the previous legislation guaranteed payouts and increases regardless of the state of the economy and tax revenues.

    In the private sector, when businesses see a decline, there are layoffs, freezes, benefit adjustments, and/or cost improvements. This becomes necessary when efforts to improve sales and profits don’t work fast enough, or at all.

    Apparently the primary lever used to handle increased costs within government is to pull the “increase taxes” one. An alternative might be to bring in businesses with higher paying jobs so that a larger tax base improves tax revenues.

    The streets of Portland and Eugene seem to be getting more populated with people who are looking for a handout. Keep that up, and the businesses and new residents with higher incomes might start looking elsewhere. Same goes for the people choosing to retire here.

  • oregongrown

    Call IP28 what it is; THE PERS TAX. It is a gargantuan shakedown of over $2.5 BILLION and every single dollar will go to PERS. It doesn’t matter what the liars in charge say, like “it’s for the children” it’s not. Never has been. It is a giant money grab from the private sector to the pockets of those on the government payrolls.

    We have filthy government in Oregon, brought to us by almost 30 years of Democratic governors and abuses to the PERS swindle for all that time, called collective bargaining, heaping abuse after abuse and calling it a contract. Except the people expected to pay for the swindle never got a say. It was deal after deal made between union bought and paid for politicians and govt unions.

    I no longer have any respect at all for the government in Oregon. It is filled with grossly inflated salaries, grossly inflated PERS retirements, most notably PERS Tier 1.

    I had no idea the swindle until The Oregonians newspaper sued PERS to release the PERS database. And the math does not lie. The Dem governors lie, and make promises that they should have never made, and again, they will come and demand a whopping $2.5 BILLION, in the biggest money grab in Oregon’s history, and every single dollar will go to PERS.

    • Oregon sunrise au mourning

      Aye, second the emulsion!

      To wit, live free of PERS and/or as FDR’s osmosis promulgated afar back as his genus administration forewarned.: Collective bargaining for those in real need, butt knot for the guardians of governmentium bong wild with ticket fakirs nut-with outstanding hen-house doors.

  • 不错,不错,看看了!

  • Bob clark

    Public employment is most always a good gig to land, as it is hard to lose your job and you get generous health and retirement benefits. There is also a lot of flex in the work schedule. The only way to truly test the breaking point where folks stop applying for this gig is to scale down public employment salaires until there is significant lack of candidates for public employment.

    • To wit

      Amen.

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