Where Should The Money Go?

Michael Shires
Associate Professor of Public Policy, Pepperdine University

Last week service employees at UC Davis defied a court order and went on strike demanding wage increases, service workers are demanding guaranteed overtime pay, a guaranteed step system for salaries, and uniform statewide wages. Basically more money for the work they are doing and promises of more raises in the future on a fixed timetable (the “guaranteed step system”).

There were no allegations of dangerous workplace conditions, no argument about decreased workplace safety, just a demand for higher salaries. To quote Gail Price, the Union Treasurer, in the article, "They won’t give them across-the-board raises like they will the patient care unit. We’re not letting them get away with it anymore."

And if the budget were not so thin this year, it is very likely the negotiations would have ever gotten to the point of a strike. More likely, the University would have simply granted the requests under the umbrella of its other many collective bargaining agreements with public employee unions. But this union’s timing is bad and thus the strike has unfolded.

But the question of public employee salaries is one that undergirds every public policy debate in the state budget. Costs of employees are escalating, in fact escalating so fast that the accounting system does not fully fund the expenditures and commitments made today. Accounting rules imposed this year show the huge cost of unfunded retirement benefits (mostly medical benefits) that have been incurred as part of employee compensation.

The bottom line is that public employees are getting more and more expensive. So expensive in fact that it is often cheaper to pay an employee more than their base salary in overtime rather than hire a new employee. Public safety agencies often face this seeming inconsistency and many police and firefighters receive annual wages totaling more than $100,000 and sometimes $200,000.

So what should be done? Should we simply privatize government services? The private sector certainly realizes lower cost structures. Studies have shown that, while average salaries for service professionals have equalized, the public sector has MUCH better and this higher-cost benefits. Certainly some public activities should be privatized and or contracted out to private vendors. This may work for some activities, but will it work for all? Definitely not! Few of us would want a private police department—the dangers for the abuse of their significant police powers are way to significant to place in the hands of private enterprise.

Then what else should be done? The most important step is that the full tradeoffs of public budgets should be seen and made explicit. At UC Davis, for example, the cost of the additional salaries should be part of a public dialogue. Say for example that the union’s requested concessions totaled $10 million in new costs. The dialogue, instead of being about whether the union has the striking power to extract these concessions and prevent the university from “getting away with it,” should be about what the best investment of the next $10 million of the university’s resources should be. The potential attrition of not spending the $10 million should be set against the benefits of new counselors for the students, expanded health services, increased computer resources, expanded public safety investments, etc. It should be about making UC Davis the best institution it can be instead of about making sure that every group gets their share of the pie.

And this extends to collective bargaining processes across the public sector. These conversations need to be public, explicit about the tradeoffs, and frequent. Often the complexity of the public enterprise allows issues to be hidden in the miasma of minutiae and detail.

It is time that these tradeoffs were public and open. Public employee negotiations and agreements need to be documented and available to the public. Clearly there are legal limitations during the actual negotiating process, but elected officials should be called to accountability before approving any agreement by detailing exactly what is being offered as part of the final proposed agreement and at what costs? They should explain why this is the best use of the resources committed and not just “the best deal we can get.”

Great latitude was historically afforded these negotiations in the past in an era when public servants were paid significantly less than their private sector counterparts and it became more of a ministry than a profession. Those days are behind us as the marketplace has equalized these discrepancies. Now, in times of immense social and economic pressure, these processes need to be more open and held to higher accountability. Only then can taxpayers feel comfortable with the investments they make in the public sector.

Comment on this article


Please note, statements and opinions expressed on the Fox&Hounds Blog are solely those of their respective authors and may not represent the views of Fox&Hounds Daily or its employees thereof. Fox&Hounds Daily is not responsible for the accuracy of any of the information supplied by the site's bloggers.