Is That Really Fair?
Scroll down to test your understanding about some commonly perceived assumptions that are no longer true.
We’re All in This Together. Americans are frustrated with the direction of our country and our continued economic problems. You can see this across the spectrum of American politics, from those joining Tea Parties to those at Occupy Wall Street protests.
Americans are tired of being lied to and misled by government officials who are supposed to represent their interests. Most of all, Americans are frustrated with national leadership that seems more interested in scoring political points than getting things done.
It’s the same in Wisconsin.
Debates about public-sector unions and compensation packages for government workers have been particularly—and unnecessarily—heated. Interest groups have attempted to pit government workers against taxpayers. It’s true in other states, and it’s true in Wisconsin.
But the truth is, we are all in this together.
It’s Not Politics. It’s Simple Math. Americans need to work together to find solutions to the problems that face our local governments, our cities, our states, and our country. We need to realize that this isn’t about politics, this is about simple math. What politicians have promised and the resources we actually have are way out of balance. The numbers simply do not add up.
And when the numbers don’t add up, the real choice isn’t between keeping what was promised and a reduced version, but between a reduced but sustainable version and nothing. No one, when confronted with the choice of funding schools, libraries, transportation, police, firemen, hospitals, and other vital services will choose to protect every last penny of gold-plated pension plans instead.
Hard-working government employees and taxpayers alike have been diserved by politicians who over-promised without being able to deliver. Today, we need an honest discussion about our real situation so we can find answers that are fair to everyone.
That starts with recognizing that the status quo is not an option. Trying to make good on the promises of the past would cripple governments and the economy.
All Americans—union members, government workers, business owners, and individual taxpayers—want our country to succeed. We want to get back on the path to prosperity and opportunity. Working together to put our governments back on sound fiscal footing is an essential first step in that direction.
Did You Know?
Most Americans think that government workers make much less than those in the private sector.
That’s how it used to be: Public servants working in government jobs were making a financial sacrifice to serve their communities and country.
But did you know that government workers today earn more than those in the private sector?
- USA Today reports that, in Wisconsin, state, city and school district government workers earned an average of $50,774 in wages and benefits in 2009, about $1,800 more each year than the average private sector worker.
- Two Bureau of Labor Statistics economists estimated that the salary and current benefits of state and local government employees nationwide are 10 percent and 21 percent higher than private-sector employees doing similar work. This understates just how much more they make, since it doesn’t fully account for other benefits, like retirement health and pension benefits.
Most Americans assume that benefit packages for government workers are similar to those offered by businesses.
But did you know that government workers receive far greater benefit packages, and have been paying less to support them, than private sector workers?
- In the private sector in Wisconsin, employers contributed an average of 5.3 percent of payroll toward employee retirement plans. Yet prior to Governor Walker’s reforms, the government, using taxpayer money, paid twice that (between 10.55 and 13.3 percent of payroll) into the Wisconsin Retirement System to support government workers’ retirement packages. (Background WI.gov document here)
- Before the reforms, government workers contributed little to finance their future pension benefits. For example, in 2010, $1.5 billion was paid into the government pension program; of that, government workers contributed only $12 million (or less than one percent) and the government itself—using taxpayer dollars—picked up the rest of the tab. (Background WI.gov document here)
- On average nationally, workers pay about 30 percent of the costs of their health insurance premiums. Yet prior to Governor Walker’s reforms, Wisconsin state employees had been paying on average just six percent of their health insurance premiums.
Most Americans never hear about the outcomes and real-world effects of policy debates like the one that occurred in Wisconsin about changing how public sector unions operate.
Did you know that those reforms have resulted in dramatic savings for the government, which have protected taxpayers and allowed governments to avoid cutting essential services and personnel?
- Gov. Scott Walker’s reforms helped create more balance by requiring government workers to contribute to support these benefits. Government workers now put in about half (5.8 percent) of total contributions to the pension plan. And state employees are required to pay at least 12.6 percent of the average cost of annual premiums. (NY Times background article link here) This ensures that government workers will receive benefits, but without unreasonably burdening taxpayers or jeopardizing the government’s financial health.
- Government workers had been paying just about six percent of their healthcare premium costs prior to reform. Governor Walker’s reforms require government workers to pay 12.4 percent of premium costs, an important step toward balancing the budget. However, Wisconsin government workers still pay substantially less for their health benefits than government workers in neighboring states, and less than their private sector peers. In fact, the government pays an estimated $3,762 more on average toward health care than does a large private company with union workers, and $5,565 more than a large private company with non-union workers. (Background document link here)
- As the Milwaukee Journal Sentinel reports, since Gov. Walker’s reforms took effect, Wisconsin state and local governments have saved hundreds of millions of dollars, as a result of:
- $226.3 million from higher pension contributions from state workers;
- $82.4 million from state workers paying more for their health insurance;
- $464 million from local government workers paying more for their pensions;
- $65 million from other changes related to health coverage; and,
- And as much as $300 million from local government workers paying more for health insurance.
- These savings have helped prevent the layoffs and reductions in services that otherwise would have been necessary. By looking at what’s happened across the state, citizens can see the impact of these reforms. Those school districts that were not affected by reform and were unable to renegotiate contracts with labor have faced the biggest budget challenges and had to lay off workers. For example, Milwaukee’s public schools have an agreement with the education union that was not affected by the new law. Instead of voluntarily renegotiating the contracts terms in face of budget realities, the teachers unions opted for layoffs. The school districts of Milwaukee, Kenosha, and Racine, which were not affected by the new law, accounted for 13.3 percent of Wisconsin’s educational staff but suffered 42.5 percent of staff reductions. (Weekly Standard background link here)
- Prior to these reforms which allowed for a renegotiation of labor contracts so that government employees contribute to their benefits, the Kaukauna School District faced a $400,000 deficit and was scheduling staff cuts to fill the hole. As a result of increased government worker contributions for benefits, that deficit has not only been eliminated, but the district now has a surplus. (MacIver Institute background PDF here, on p. 8)
- These reforms dramatically reduced the state of Wisconsin’s budget deficit.
Most Americans assume that when unions negotiate that they are focused on ensuring fair pay and safe, fair working conditions for employees.
But did you know that government unions also made deals to require that governments purchase health insurance through the union itself, and pay a significant surcharge? And did you know that they create rules making it difficult (and costly) to fire bad teachers and to compensate top performers, and that require that layoffs be made based on seniority?
- Gov. Walker’s reforms made it possible for government to get competitive bids from health insurance providers. Governments have realized significant savings as a result. The MacIver Institute reports that in the twenty-five school districts which report switching health insurance providers, the average savings has been more than $730,000, or $200 per student. (Link to background PDF here)
- Today, as a result of reforms, school districts can make employment and compensation decisions based on merit, rather than seniority, as had been required under union rules.
- Government workers can still join a union. Yet instead of forcing all government workers to pay dues to union bosses, now employees can decide whether to join and pay to be a part of the union. Taxpayers are also no longer responsible for the cost of collecting union dues. (Milwaukee Journal Sentinel background link here)
Wisconsin residents may think there were better ways to have addressed the state’s budget problems than requiring state workers to contribute to their benefits and giving local leaders more freedom to negotiate better deals for taxpayers.
But did you know that Governor Walker’s opposition – Milwaukee Mayor Tom Barrett – has refused to present a plan for how he would have closed Wisconsin’s billion dollar budget gap?
Wisconsin voters deserve a choice. But they deserve a real choice—not just one side refusing to answer questions or to offer a plan that voters could evaluate, while criticizing those who have actually made hard choices.
What You Need to Know
Government workers have rights:
- Government workers have the right to unionize.
- They deserve fair compensation for their hard work and years of service.
- They also shouldn’t be promised more than politicians know that government can afford to deliver.
- They deserve benefit packages and retirement systems that are real and that the government will be able to afford to pay, not that are based on unsustainable promises.
Taxpayers also have rights:
- They shouldn’t have to shoulder compensation packages for government workers that are the result of negotiations between union bosses and the politicians that those union bosses help elect, and on whom the politicians are looking for future contributions and reelection help.
- They shouldn’t have to pay for super-size benefits that exceed anything like those the taxpayers themselves are receiving.
- Local, city and state governments shouldn’t be pushed to the brink of bankruptcy, jeopardizing essential services, in the name of protecting every last penny of compensation for an overpaid government bureaucracy.
We need balance. We need honest numbers and honest accounting so we can find real solutions to get back on course. This isn’t about politics; it’s simple math. And we can do it, if we work together.