If You Want No More Games, Take Away the Ball
New Hampshire employs more public employees per citizen than Rhode Island does — so explained the Rhode Island NEA’s Bob Walsh in a comment to this post:
Mike – Well, I am not a Marxist (unless Groucho counts) but I assume you know by now that the “New Hampshire” miracle is really the New Hampshire mirage. NH, in fact, has 24,700 state employees in total (source: Governing Magazine, which lists RI at 17,500). More importantly, NH has 188 state government employees per 10,000 population (31st nationally) versus RI at 164 per 10,000 population (40th nationally).
Although I noticed that Mr. Walsh didn’t address the fact that led commenter Mike to introduce New Hampshire into the discussion in the first place — that the larger state runs on significantly less public money — I’m always intrigued by arguments that Rhode Island isn’t floating somewhere near the bottom of the pool and poked around for Bob’s source. And sure enough, not only does New Hampshire have more state and local employees per 10,000 population (188 and 475, respectively) than Rhode Island (164 and 353), but Connecticut (196 and 463) and Massachusetts (187 and 425) do, as well. Of course, it bears mentioning that only Connecticut pays its public workers more and that Rhode Island’s median household is significantly poorer:
As you can see, Rhode Island is the only one of the four states with an average public employee salary that is higher than the median household income. (The two data points aren’t comparable to each other for a variety of reasons, though. For one thing, the salary numbers are averages, which is arguably more appropriate when discerning how much the average worker costs the state, while the income numbers are medians, which gives a better impression of the general wealth of the state’s citizens by diminishing the effect of outliers. This consideration is probably far outweighed, however, by the fact that the income is for households, while the salaries are for individuals and often represent only a portion of a “public employee household.”)
The information in the above figure ties in curiously with something that Walsh goes on to say:
We also have a higher cost of living, and our public sector compensation is generally in line with MA and below CT (which is our market).
The interesting — all too typical, from a public union guy — point is that Rhode Island, despite being poorer, has both a higher cost of living and union compensation packages to match the wealthier states. No wonder we feel so strained!
Now add pensions into the analysis. When it comes to public employees’ contributions to their own pension systems (according to Bob’s source), Rhode Island ties Massachusetts for the lowest percentage (13.4%, versus CT’s 16.2% and NH’s 22.3%). Not surprisingly, when it comes to the highest contributions from the public, Rhode Island (23.2%) is only outdone by Connecticut (31.5%) — a state with notably low returns on pension-related investments.
Here enters a counterintuitive finding that illustrates just how sunken Rhode Island is:
Somehow, Rhode Island manages to charge public employees a lower percentage of their pension plans, while still charging them more actual dollars than all states but Massachusetts — at the same time that it’s charging its citizens a comparably high dollar amount. One possible reason for this result is that Rhode Island’s pension offerings are just too generous. Walsh prefers a different spin:
This is an extremely important point regarding pensions – teachers already contribute 9.5% of salary towards their own pensions, and while the combined management contribution (state and local) is listed as over 22% of salary in the coming year, the vast majority of that contribution is related to the existing unfunded liability, and the sustaining contribution needed to actually support the pension for the individual teacher is less than 4%. So, if you did manage to stop the pension system on a going forward basis, the vast majority of the contributions would still need to be made in addition to a match for a 401-k type system. We need to stay on the path toward full funding of the system, without any more game playing, and when full funding is realized, the state and local contribution needed will be under 4% combined.
Check with the pension board, do your own math, consult with the experts, etc. – these are the actual mathematical facts – keeping the pension systme intact is cheaper, and it provides a better benefit in almost all respects.
(Explained another way – every time the pension system was underfunded in one way or another – early retirements, banking crisis, marked to market, less than market rate return, etc. – it was as if the state borrowed the money at 8.25% (the average expected annual yield on the fund.)
I suspect that I’m not alone in believing it unwise to structure our state’s financial recovery around an assumption that our leaders will stop their “game playing.” There’s always something or other that needs to be financed; there’s always some crisis causing fiscal insufficiency. I further suspect that I’m not alone in allocating much of the blame for previous “game playing” to the unions themselves, and their muscle in electing the very candidates who’ve created this situation.
Note how Walsh doesn’t miss a step in spinning on behalf of the poverty industry, as well as his own: “We have more poverty in Rhode Island, and deal with it charitably, which matches the values of the majority of folks in our state” Clearly, he’s not willing to see Rhode Island’s welfare system as a competitor for overdrawn state and local funds. Also clearly, the NEA hasn’t found a way to elect candidates who will forgo all other instances of waste and corruption for the sake of those two.
Not only would a 401K system likely save us money amid the corruption that we must expect, but it would get that money out of the hands of the legislators whom the unions work so hard to put into office.