Compensation for Michigan’s citizens employed in the private sector decreased by 10.3 percent between 2007 and the third quarter of 2009, according to the most recent data available from the federal Bureau of Economic Analysis. Most Michiganders are earning less and struggling to get by.
But one group is becoming richer: government employees. State and local government employee compensation increased by 5.5 percent during the same period, and federal government employee compensation in the state is up by 7.5 percent.
And the good times will keep rolling for Michigan government bureaucrats: They’re scheduled to receive a 3 percent pay increase this year.
‘In Denial’
One lawmaker staunchly opposing the pay increases is state Senate Majority Leader Mike Bishop (R-Rochester). He said in a floor speech in March, “It’s very obvious that we can’t” afford it.
“The harsh reality is we can’t afford the government that we have. And as we sit here today, we continue in denial. The denial has reached a level that I have never—could never—predict. We are now at a point where we are . . . in the heart of the perfect storm.”
Bishop said he backs a pay freeze for government workers. He cited Michigan’s 15 percent unemployment rate—highest in the nation—and falling personal income levels, “a statistic we haven’t seen since 1958,” as evidence taxpayers cannot afford higher pay and benefits for government workers.
Despite Bishop’s plea, the measure to kill the pay hike was defeated. It needed 26 of 38 votes but received only 22.
Every Republican senator but one voted to reject the pay hike. The exception was Sen. Bruce Patterson (R-Canton) who was present but did not vote.
Sen. Mickey Switalski (D-Roseville) was the only Democrat to oppose the pay hike.
17 Percent Reduction
Sen. Michael Prusi defended the pay increase, citing a 17 percent reduction in the Michigan government workforce over the past eight or nine years even as demands for services stay high.
“It’s become very politically popular to demonize public employees and state workers,” Prusi said, “but I think if the general public was aware of some of the sacrifices they’ve already made, the polls might look a little different, and we shouldn’t operate under polls regardless.”
Gov. Jennifer Granholm (D) and state lawmakers hiked the state income tax by 12 percent and the state business tax by 22 percent in 2007.
Broader Sales Tax
This year Granholm needs even more money to afford her proposed state budget, which includes the state employee pay increase. Granholm is pushing a plan to lower the sales tax from 6 percent to 5.5 percent but extend the tax to numerous purchases currently exempt from the sales tax, including hair cuts, oil changes, carpet cleaning, yard mowing, pet grooming, and thousands of other services.
This sales tax extension would take another $550 million out of citizens’ pockets in 2011 and transfer that money to Lansing.
Some key lawmakers, even within Granholm’s own party, express skepticism about her plan.
Skeptical Response
House Speaker Andy Dillon (D-Redford Townshp), said, “It’s time, first and foremost, to do the hard work of reforming and streamlining state government. Tax increases should be a last resort, not a first option. I’d rather have people spending their money at the corner store than at the State Capitol.”
Dillon has proposed several ways to cut spending and stave off tax increases, including:
- consolidating the health care plans of Michigan’s public workers, which could save up to $1 billion a year;
- examining current state tax credits and loopholes to make sure they’re having the intended effect, particularly regarding job creation; and
- reforming the state’s purchasing system to maximize savings from state vendors.
Lawmakers supporting this year’s state worker pay increase argue state employees have suffered enough in recent budgets, as Prusi argues, but government statistics show taxpayers have suffered while government employee pay and benefit levels keep rising.
Twice the Cost
U.S. Bureau of Labor Statistics show government employee benefits cost twice as much as full-time private-sector benefits. Many government employees receive rich benefits such as the following:
- Public school employees contribute an average of 4.2 percent to their health care plans while private sector citizens pay an average of 22 percent of their own health care costs.
- Expensive “defined benefit” retirement plans are almost nonexistent in the private sector but are commonplace for public school, public university, and local government employees.
- Macomb County government employees enjoy a taxpayer-paid retirement benefit that allows many to retire at the age of 50. Such early retirement for a class of workers is unheard of in the private sector.
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 that’s no longer true. Statistics from the Bureau of Labor Statistics document that today, the government class enjoys higher salaries, richer benefits, and far better job security than the citizens they are supposed to be serving.
Leon Drolet ([email protected]) is director of the Michigan Taxpayers Alliance.
