The news this summer has been full of stories about municipal bankruptcies, public sector unions and pensions. What are the facts in Iowa relating to these topics? Are public employees becoming unaffordable here?
Last summer the Taxpayers Association of Central Iowa completed a survey that looked at public sector pay and benefits in our metro area. The chart below shows the data for the City of Des Moines, which is very comparable with Ankeny, Urbandale and West Des Moines. The data show that benefits (pensions and health insurance, primarily) add more than 50 percent to the cost of an average full-time equivalent (FTE) employee. (FTE’s are a way to express full and part-time employees in common units for comparative purposes.) In total, the average total cost of a City of Des Moines employee last year was $102,300.
City of Des Moines Salary and Benefit Costs, Fiscal Year 2011 – 2012
One of the first questions always asked is how this compares with private sector workers. There are many ways to make comparisons between public and private sector workers. When there is no allowance made for differences in the composition of the workforce, state and local government workers typically appear to cost substantially more than private sector workers (including salaries and benefits), overall.
Such comparisons have been criticized, however, because there are differences in educational levels between the two groups. Government employees as a group are more highly educated. It’s instructive, then, to look at comparisons within occupational groups. As shown in Table 1, within the management and professional category of workers (which includes teachers), there isn’t much difference. However, there are significant differences in the other (clerical and service) categories. State and local government workers cost significantly more in these categories than do private sector workers, particularly for health insurance and defined benefit retirement plans. Overall, the cost of benefits for state and local government employees is 70 percent higher than in the private sector, and 75 percent higher within clerical and service categories.
Table 1 also shows the City of Des Moines data presented on a cost per hour basis. Local costs are similar to the national numbers for state and local governments in terms of the percentage of total cost that is for wages and salaries vs. benefits, but local costs are higher overall. State employees in Iowa consistently rank #1 among all states in terms of the pay gap (difference between public and private sector compensation) and #1 or #2 in wages when adjusted for cost of living. (See Table 2 and Table 3.) Larger cities in Iowa and state employees are similar in terms of the major cost drivers (pensions and collective bargaining, specifically), so high pay relative to the national average would not be unexpected for Des Moines.
In summary, state and local government employee compensation costs in Iowa are significantly higher than in the private sector, and state government wage costs are higher than they are in any other state.