Busting The Conservative Myth: Public Sector Pay Has Declined As A Percentage Of State Budgets

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The rationale that several Republican governors are using to justify their attempts to strip public employees of their collective bargaining rights is that the state can’t afford growing pay and benefits for public employees. “Our state cannot grow if our people are weighed down paying for a larger and larger government — a government that pays its workers unsustainable benefits that are out of line with the private sector,” said Gov. Scott Walker (R-WI). “If you were paying attention, the problems here that are created on the state budget — sure we have a deficit problem that was helped by the economic downturn, but what we also have are benefits and costs that are out of control,” claimed Gov. Chris Christie (R-NJ)

These Republican governors would have you believe that growing public sector pay has outstripped that of the private sector and crippled their states’ finances. The first claim, as many independent analyses have found, is simply not true. Public workers, once you control for education and look at comparable jobs, make less than their private sector counterparts.

As for the second claim, CAP’s David Madland and Nick Bunker found that over the last 20 years, far from spiraling out of control, public employee costs have fallen as a percentage of state budgets:

We find that in fiscal year 2009, the most recent year where data are available, average state spending on compensation as a share of total expenditures was 19.6 percent, below the 1992–2009 average of 20.7 percent…If state government employee compensation had suddenly overwhelmed state budgets, then a jump in compensation as a share of total expenditures would be apparent. Instead, the trend is relatively flat and declined over time. In 1992, compensation averaged 23 percent of total expenditures. That figure was 19.6 percent in 2009.

Over this period, neither compensation nor total expenditures grew at a rapid pace. In fact, measured in 2005 dollars, average total expenditures increased by 3.13 percent annually and total compensation increased by 2.19 percent annually, which is roughly in line with growth rate of the economy.

As the Roosevelt’s Institute’s Mike Konczal found, the housing bubble and negative home equity are better predictors of a state’s budget problems than public sector union membership. And as the Center for Economic and Policy Research found, the shortfalls in state pension funds are largely a result of “the plunge in the stock market following the collapse of the housing bubble.”