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Center for Labor Research and Education


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Labor Costs Down in State

The Olympian

By Brad Shannon

New Washington state figures show that the cost of paying state employees shrank as a share of government agency costs over the past decade.

Total compensation fell from 20.5 percent of general-fund outlays in 2002 to 18.2 percent in the year ending in June. The decline was in total pay and benefits for both higher-education and general-government workers.

K-12 public school employment costs were not included in the calculations. If K-12 expenses were included, the share of spending attributable to salaries and benefits would rise to 55 percent to 60 percent, according to OFM spokesman Ralph Thomas.

The governor’s Office of Financial Management released the information Thursday in response to a reporter’s query.

The trend was in line with a report released the same day by labor researchers at the University of California at Berkeley. The Center for Wage and Employment Dynamics’ report, which cited several federal data sources, found public-sector pay shrank from 1992 to 2009 as a percentage of state budgets around the country, although it has been flat since about 2002.

The nonprofit, left-leaning Economic Policy Institute in Washington, D.C., said the California university report “clearly shows that the recession and housing bubble are the cause of state budget deficits, not public sector workers or their unions.”

“I think many thoughtful people are realizing the culprit here is Wall Street – with the Occupy Wall Street activity that is occurring,” said Tim Welch, spokesman for the Washington Federation of State Employees, which represents about 40,000 state-government employees. “The old fallback that it’s all the unions’ fault is false. We’re glad this report bolsters what we’ve been saying all along.’’

Even if Welch is right, Washington state lawmakers must return Nov. 28 for another special session to bridge a fresh budget gap that could require $2 billion in cuts or new revenues, or both. State employee jobs and compensation might land front and center again.

The Personnel Reform Act of 2002 gave most Washington state employees the right to bargain collectively for wages and health benefits. The Federation alone has seen its membership nearly double since the 2002 act, Welch said.

Total state outlays for labor costs including benefits have increased since then – to $2.7 billion in fiscal year 2011, up from about $2.3 billion in 2002 – but at a slower pace than overall state spending.

The OFM data show that employee pay has taken a bigger hit than benefits. Total employee wages and salaries fell to just 13.7 percent of general fund spending in the fiscal year that ended June 30. That was down from 16.7 percent in 2002. At the same time, the cost of employee benefits such as pensions and medical coverage grew from 3.8 percent in 2002 to 4.5 percent in 2011.

Right-of-center groups like the Washington Policy Center have called for changes to collective bargaining laws to free the state’s hand on spending. And a few Senate Republicans sponsored bills earlier this year that would have reopened labor contracts to allow even deeper cuts to pay or increases in workers’ share of health care costs. One bill sought to end collective bargaining for state employees.

Majority Democrats refused to hear those bills, and Gov. Chris Gregoire at one point said workers had sacrificed enough – with furloughs equal to 3 percent of pay, higher workloads, an increase in workers’ share of health premiums and pension reductions for some workers.

Jason Mercier, a government-reform expert with the Washington Policy Center, said there is still reason to consider changes to collective bargaining laws. He said it makes sense to give back all pay-setting authority to the Legislature, which is tasked with getting budgets into balance. Agency directors also need more flexibility in designing programs that deliver services in the most cost-effective way, Mercier said.

Washington state agency employment has been on the decline since 2008. A Department of Personnel report last month showed that the number of workers on the state payroll at general-government agencies fell by 10 percent since 2008. Other OFM data show the number of full-time equivalent jobs is down by 6.9 percent since the peak in about 2008.

The California labor-center study found that government employment as a share of the general workforce has not grown over the past 30 years nationally.