Daily Archives: August 2, 2010

NJPP Monday Minute 8/2/10: Rutgers Report Compares NJ Public and Private Employee Compensation


NJPP’s July 19 Monday Minute asked and answered the question: are public employees overpaid? National studies suggest that, on average, public sector employees are paid less than private sector employees – particularly in professional positions – but that public employee benefits (health insurance and pensions) tend to be better than private sector benefits.

Now that question can be asked and answered about New Jersey thanks to a new report by Rutgers School of Management and Labor Relations professor Jeffrey Keefe. His report has just been published by the DC-based Economic Policy Institute.

This is an important question in light of the governor’s interest in privatizing an increasing number of public services. The most significant savings in most privatization proposals come from salary savings – from reduced salaries and the constriction or elimination of benefits.

Professor Keefe’s data analysis controlled for education, experience, hours of work, organizational size, gender, race, ethnicity and disability and found that no significant difference exists between private and public sector compensation cost on a per hour basis.

But he finds that the public and private sector use substantially different approaches to staffing and compensation.

Salaries:

  • New Jersey public sector workers, on average, are more highly educated than private sector workers: 57 percent of full time New Jersey public sector workers hold at least a four-year college degree compared to 40 percent of full time private sector workers.
  • New Jersey state and local governments pay college educated workers, on average, 10 percent less than private employers. As noted in the July 19 Monday Minute, the earnings differential is greatest for professional employees, lawyers and doctors.
  • But the public sector sets a floor on compensation. Compensation of workers without a high school education is higher for public employees than for private employees.
  • State and local government employees receive a higher portion of their compensation in the form of employer-provided benefits and the mix of benefits is different from the private sector.

Benefits:

  • Public employers contribute, on average, 34 percent of employee compensation to benefits compared to 31 percent in the private sector.
  • Health insurance accounts for 11 percent of public sector compensation, but only seven percent of private sector employees’ compensation.
  • Retirement benefits are eight percent of public employees’ compensation compared to four percent in the public sector. And most public employees participate in defined benefit pension plans, while more private sector employers have switched to defined contribution plans such as 401(k) plans. A significant difference between these two plans is risk. Defined contribution plans shift much of the risk from the employer to the employee.

Using a standard earnings equation, Dr. Keefe estimates that fulltime state and local employees are under-compensated by about four percent. When the number of hours worked is included in the calculation, there is no significant difference in total compensation between fulltime state and local employees and private sector employees.

It is alleged that public employee unions and collective bargaining have produced an over-compensated workforce. Eligible public employees are almost completely unionized in New Jersey. It is well known that taxpayers do not want to pay higher taxes and so exert considerable pressure on elected officials to resist increases in compensation, creating an incentive to hold government below market compensation.

This report only considers fulltime public employees in New Jersey. It makes a strong case that fulltime public sector workers are not the cause and cannot be the solution to the state’s financial problems.

Lessons for privatization
It is likely that schemes to privatize state services will fail to result in savings if those services require more than a high school education – since the compensation differential between private sector and public sector salaries tends to be greatest as education levels increase.

Even in situations where a high school education is sufficient, savings may be questionable when health insurance and pensions are considered. When the Whitman administration privatized janitorial services in state buildings, state employees lost their jobs and benefits. The average state salary for a custodian at that time was just under $20,000 with benefits. When state office buildings were raided after the private contractor was hired, it was discovered that a number of the new cleaning staff were undocumented workers working off the books at below minimum wage with no benefits. The only person who benefits from this situation is the private contractor as long as he doesn’t get caught.

The actual cost to the public of low wage private sector workers is greater than people think. People with no health insurance, no vacation or sick days and no retirement are cheaper for their private sector employers to hire, but ultimately are supported by public services.

The children of the person who drives the privately owned school bus, often qualify for New Jersey’s FamilyCare program because they have no other health insurance. That driver personally may use emergency rooms in the hospital more because he or she can’t afford to go to the doctor. If that person’s child is very sick, New Jersey generally allows her to take paid family leave so she can take care of her child. If that person has no employer-sponsored retirement plan, she will need greater public support in his or her old age.

What everyone seems to forget is that when the private sector fails to provide for its workers, it is the public and the taxpayer who picks up the slack. What may seem like a good deal often doesn’t include the hidden costs.

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Filed under compensation, Monday Minute, New Jersey Policy Perspective, NJ FamilyCare, private employees, Professor Jeffrey Keefe, public employees, Rutgers University

Fundraiser to support the 2010 Campaign of Sean Byrnes & Mary Mahoney for Middletown Township Committee Set For August 11th

Vin Gopal
Monmouth County Democrats Finance Chair
invites you
to support the 2010 Campaign of
Sean Byrnes & Mary Mahoney for Middletown Township Committee
RECOGNIZING Middletown Democratic Party Chairman Joe Caliendo
w/ Special Guest Congressman Frank Pallone
Wednesday, August 11th
5:30pm to 7:30pm
American Legion Post 338
Route 36 in Leonardo
Supporter: $35
Friend: $75
Co-Host: $125
* Dinner Provided *
RSVP to vin.gopal.2008@gmail.com
OR CALL 732-299-5625
Please make checks payable to
‘Middletown Democratic Campaign 2010’

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Filed under fundraiser, Mary Mahoney, Middletown Democrats, Sean F. Byrnes

What Is Happening With The Bond For The Middletown Turf Fields?

On tonight’s agenda for the Middeltown Township Committee Workshop meeting there will be a discussion about capital improvement projects and existing bonds and what to do about them. It will be interesting to see what they decide to do with the bonds the town is sitting on, namely the bond that was issued to fund the artificial turf projects for Croydon Hall and Trezza Field.

If we can all remember back to this past January when residents of Lincroft teamed up with members of the Pop Warner Chargers football organization when they found out that the long promised field restoration for Trezza Field (the home of the Chargers) was not going to happen, instead the funds for the turf project at Trezza Field was going to be diverted to West Front Street Park,caused so much trouble for Gerry Scharfenberger and Pam Brightbill earlier this year that they decided to cancel the turf projects all together in April.

The sudden decision to cancel the turf projects left everyone stunned at the time and questioning what was going to happen with the $2.6 million bond that was issued to fund the projects. The bond’s language as written was very specific, the funds couldn’t be used for anything else other than field restoration.

The following audio clip contains comments made by Middletown Attorney Brian Nelson, Middletown Township Town Administrator Tony Mercantante and mayor Gerry Scharfenberger during Workshop meetings on February 1st and March 1st,and seems to confirm that. The audio documents what the three men had been saying about the bonded money that was to be used for the construction of turf fields prior to the sudden announcement that the field project was going to be cancelled and the bonded funds returned.

Fast forward now to the last Township Committee meeting held on July 19th.

Lincroft resident and founding member of the citizens group SONIC (which opposed the turf project at West Front Street Park), Mary Mahoney, addressed the Township Committee about the unused Turf Bond that was to be used for artificial turf fields at Trezza Field, West Front Street Park and Croydon Hall. She wanted to know what was happening with the bonded money,

was there any plans to use it for anything else, how much of it had been spent and why wasn’t it retired as of yet to save the township interest payments on it.

She seemed to have taken the the Township Committee and those that make the decisions on such things by surprise. Listen to it below:

About 1:10 into her comments CFO Nick Trasente is heard saying that the bond funds could be used for other facilities, used to pay down debt or retired, which is contrary to earlier remarks made by Township Attorney Brian Nelson and Scharfenberger, who had stated at earlier meetings and can be heard above in the 1st audio clip, that the bond had to be retired if not used for turf fields and couldn’t be used for anything else.

So, what are Gerry and the boys planning on doing with the funds from this bond? It seems that they are trying to figure out a way to apply it to the budget in order to decrease 14% tax rate increase in this years municipal budget that has not been adopted yet.

If this is a concern to anyone then you should attend tonights meeting at Town Hall, it starts at 8pm. Get there early for a good seat.

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Filed under artificial turf fields, Chargers, Gerry Scharfenberger, Lincroft, Mary Mahoney, Nick Trasente, Pop Warner, Sonic, Tony Mercantante, Trezza Field, Turf project, West Front Street