Francis Suarez felt he had no choice. The Miami city commissioner didn't relish looking over a hearing room full of police officers and firefighters and their families and calling for a massive pay cut that would hit all of them hard.
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Detroit Mayor Dave Bing.
Bill Pugliano/Getty Images North America
But with the city facing a $105 million budget hole, the City Commission's vote Tuesday to slash employee salaries and benefits by $80 million was unanimous. "Had we not made that decision," Suarez says, "our employee costs would have been greater than our budget for next year. It would have been 101 percent of our budget."
Similar calculations -- and similar decisions to chop down pay rates -- have been taking place in countless cities and states. Next week, Detroit Mayor Dave Bing will present an emergency budget plan to the City Council that, if approved, will force the city government's largest holdout union to accept a 10 percent reduction in pay and benefits. In San Jose, Calif., Mayor Chuck Reed has gotten most of his city's unions to accept double-digit salary cuts, while engaging in a highly public, months-long feud with the firefighters to get them to take a big cut, too.
Public employees, who have traditionally enjoyed much greater job security than their private-sector counterparts, are facing wage freezes or cuts, furloughs and sudden attacks on their generous benefit packages all across the country.
Times Are Changing
This represents a remarkable shift. The kinds of cuts now being imposed would have been unimaginable just a few years ago.
Fewer than 10 percent of private-sector workers are unionized, but more than a third of state and local government workers are. Teachers unions in particular are considered among the strongest lobbying groups in nearly every state. Their political muscle had given the unions clout to insulate their members from staff reductions or serious diminution of their benefit packages.
No more. "It has changed radically," says John Weingart, associate director of the Eagleton Institute of Politics at Rutgers University. "Government workers were never loved by the public, but there was a strength in their unions that was feared particularly by Democratic elected officials, but really by people in both parties."
Today, while some public employee unions have dug in their heels, others recognize that, given the recession and the parlous state of government budgets, they have to come to the table to make concessions.
State, local and federal government employees are far more likely than private workers to be represented by labor unions.
All recognize that they are newly on the defensive. "At the state and local level," says Kerri Korpi, director of research and collective bargaining at the American Federation of State, County and Municipal Employees, "there is a kind of aggressiveness that we haven't seen before."
In a sense, this isn't surprising. Unemployment hovering at just under 10 percent makes many people less sympathetic to the usual arguments offered by public employee unions -- that benefits such as "Cadillac" health insurance plans and guaranteed pension incomes in retirement must be protected, or else government won't be able to attract good workers.
In Miami, Suarez says, there were 30 slots for this year's class of firefighters. The city received 8,000 applications.
Armando Aguilar, president of the Miami police union, immediately filed suit to block the wage and benefit cuts. But he recognizes that the poor economy and an anti-tax environment gave the commission room to impose such cuts.
"It was the right time to cut employee benefits and they jumped on the bandwagon," he says.
Public employees elsewhere have suffered black eyes from some clear cases of abuse. The revelation that city officials in Bell, Calif., were receiving compensation packages of up to $800,000 apiece triggered protests and led the state Legislature on Tuesday to pass a law limiting the size of raises at the local level.
Those were elected officials and top managers, not unionized workers. Still, a group called the California Foundation for Fiscal Responsibility has received considerable attention with its database of over 12,000 retired government workers in the state, each receiving annual pension payments in excess of $100,000.
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New Jersey Gov. Chris Christie.
Mel Evans/Associated Press
Last week, Republican Gov. Arnold Schwarzenegger lamented in The Wall Street Journal that the state is spending in excess of $6 billion this year to shore up its wobbling pension funds. That's more than it spends on higher education. Costs will go up an additional 15 percent next year, he says. Those kinds of numbers are hard to justify at a time when funding for most government services is being cut.
Pension gaps in the tens of billions of dollars are common across states. Not all of the blame belongs to public employee unions, though. Some states have been notorious for not making promised contributions to their funds. In New Jersey, where Republican Gov. Chris Christie has scored considerable political points by attacking public employee salaries and benefits, he was able to balance this year's budget in large part by skipping a scheduled $3 billion payment into the pension fund.
Still, says Girard Miller, a public finance expert with The PFM Group, a financial management firm, "The raw economics are that public pensions have such rapidly escalating cost increases that the unions are in a real box."
The Trillion-Dollar Gap
Joshua Rauh, a finance professor at Northwestern University, says that public pensions are underfunded by $3 trillion. He estimates that even if all pension benefits were eliminated for current workers, obligations to those who are already retired would leave states collectively facing a $500 billion deficit.
Given such eye-popping figures, and the shaky nature of the economy as a whole, it's not surprising that public opinion has shifted against government workers, says John Donahue, a public policy lecturer at Harvard University's Kennedy School of Government.
"The pensions in particular are a big concern," he says. "Taxpayers are funding benefits that are more generous than they're getting themselves, in most cases. It's not surprising that the willingness to do that is evaporating."
Higher Costs Down The Road
Given the fiscal realities, many unions have recognized that they will have to make concessions. But they are fighting benefit cuts that they worry will continue to penalize them long after the economy improves.
They don’t always succeed. And that might present problems in the long run, Donahue suggests. It's true that, given the current economic environment, the complaints of public employees that they are suffering from pay and benefit cuts are not especially resonant.
But the economy won't always be terrible. When it comes back around, the quality of the government workforce might in fact suffer. It's still true, especially in jobs that require high levels of education, that government workers make much less than they could doing comparable work in the private sector.
"One of the long-term assets that may go away in the recession is the ability of state and local governments to use their strong benefits to offset low wages," Donahue says. "If job security and good benefits go away, it is going to force us to pay more in the future."