Day: June 30, 2011

State workers in Pennsylvania just got an 11 percent raise.

In case you have been living under a rock, here’s a newsflash: We are experiencing one of the most severe recessions in our history, and there are no greener pastures in the immediate future. Common sense dictates that with high unemployment, decreased tax revenues, large deficits and, most significantly, massive pension obligations, governors would take whatever steps were necessary to ensure that their states, and citizens, remain solvent, especially when it comes to negotiating public-sector union contracts.

That happened in places like Wisconsin, Indiana and Ohio, where true Republicans are in charge. Governors Scott Walker, Mitch Daniels and John Kasich took the heat and did what they had to do, reeling in the out-of-control taxpayer largess afforded to these unions.

But most amazing of all is New Jersey Governor Chris Christie’s remarkable success. Just last week, he pushed through a monumental union pension and benefit-reform package that will save taxpayers over $120 billion—and did so with heavily Democratic, pro-union legislative majorities. So effective was Christie that alongside him at the bill-signing was the Senate President—a longtime union member.

Contrast that to the deal just reached by Pennsylvania Governor Tom Corbett with the largest state unions. Instead of acting in the best interests of the taxpayers footing the bill, he simply continued the Rendell legacy of keeping the cash register door wide open.

It’s bad enough the Governor rolled over on all the sweeping concessions he was seeking, but he ended up giving the unions a sweetheart deal.

Over the next four years, unionized state employees will receive an almost 11 percent raise and a guarantee of no furloughs. And remember, this significant bump is in addition to their three percent raise two years ago, four percent raise last year—and three annual step increases which averaged 2.25 percent during that time.

Cha-ching!

How do these pay raises compare to those in the private sector? With such high unemployment and underemployment rates, do you really have to ask? Most people are receiving no raises at all, not even cost-of-living adjustments. And those fortunate enough to still have a job have no choice but to hang on for dear life, praying they survive the next round of layoffs. Making matters worse, many have to also shoulder ever increasing healthcare costs, if they have coverage at all.

In addition to substantial retirement benefits, state workers have guaranteed healthcare, too. And while they will pay a bit more with this new contract, it’s still at a level way below many in the private sector.
It used to be that working in the public sector was a trade-off. You wouldn’t make as much money as in the business world, but the benefits were good and contracts were guaranteed. But all that changed as union contracts exploded upward—at the expense of taxpayers.

Now, in many cases, unionized public employees make more than their peers in the private sector, and retire on pensions and benefit packages that would make Wall Street financiers blush with envy. Of course, that has come with a price, especially in Pennsylvania, and now it’s time to pay the piper. State pension obligations go through the roof over the next several years, as annual taxpayer-funded contributions to the two state pension funds increase exponentially, ballooning from $800 million now … to billions per year.

The last Governor and legislature kicked the can down the road last year, but that only gets you so far and, in the process, devastates the future of our children and grandchildren.

By caving in to the unions, giving them a contract that would be way too generous even in a strong economy, this Governor has chosen not to address the reforms necessary to keep Pennsylvania on solid ground, which will eventually lead to higher state borrowing costs and push the state closer to the abyss.

While we’re on the subject of the state’s finances, let’s set the facts straight about the current budget. Reducing the budget by four percent is a good thing, but was inevitable after the loss of federal stimulus dollars. Had he won the governorship, Dan Onorato would have signed a budget almost exactly the same as the one Corbett did. For that matter, even Governor Spendell, who never saw a spending increase he didn’t like, would have been forced to reduce the budget to close the $4.2 billion budget deficit—which, in reality, is closer to $7 billion because no one in Harrisburg wants to address the real fiscal situation.

The budget, which is constitutionally required to be balanced, was passed last year on ghost revenue: $400 million from the tolling of Interstate 80 (which never got tolled); $800 million raided from the MCARE fund (used to offset high medical malpractice rates) which, in all likelihood, will be ordered repaid by the State Supreme Court; federal Medicaid dollars that were budgeted to be $800 million but actually amounted to $595 million; and a $1.1 billion revenue shortfall after 10 months of last year’s fiscal year.

This shortfall seems to have simply vanished off the books. Of course, do that with your own business and you go to jail. So with the looming pension bomb and the real state deficit, it’s not a pretty picture for Pennsylvania’s future.

There was a way to address these issues and begin to reverse the state’s decline. Governor Corbett could have mandated a situation whereby union members would negotiate with their prospective employer individually, and free market-type incentives would allow for a fair offer—fair for the employee, and fair for the “employer” (the taxpayer).

So an offer would be made—salary, healthcare, benefits—and the individual could choose to accept or decline it. Which is exactly how it’s done in the free market. And for those who would claim it wouldn’t be “fair” to the state worker, you know what? There would be a line a mile long of qualified individuals ready and willing to accept such an offer. Accountability and efficiencies would increase, and unmotivated, bureaucratic sloths would be eliminated in favor of those willing to be good stewards of taxpayer money.

Sound simple and fair enough? It is, and it’s called the elimination of collective bargaining. It’s something successfully implemented in other states, but was incomprehensibly taken off the table by Corbett three months ago—while getting absolutely nothing in return.

The result: No pension reform and a lucrative union contract that the Governor says will be a net cost to the taxpayers of $164 million (which means that figure can be safely doubled).

The Wall Street Journal just labeled Corbett as leader of Keystone Cops. After this latest debacle, it’s hard to disagree.