SPECIAL REPORT: Inside the fight over state employee pay

By John Foren

On one side are those who say state of Michigan employees are getting Cadillac salary and benefits in a junker of an economy and must cough up some of it.

On the other are those who contend the workers are self-sacrificing public servants who have already made more concessions than the fat-cat legislators who are trying to cut them.

Expect the two very opposing views to clash repeatedly in the next couple of weeks before the state Legislature heads into its Easter recess. The largest of the employee unions, UAW Local 6000, is mobilizing state workers to fight off Senate efforts to rescind a 3 percent pay raise set to take effect in October for most state employees. The increase will take effect unless it’s rejected by two-thirds of the House and Senate by April 12.

That raise, part of contracts bargained a couple of years ago, has galvanized a contentious debate over their compensation, how it stacks up with Michigan workers in the private sector as well as public workers in other states.

The equation involves thorny union, political and economic factors. Mix them together and you’ve got something explosive.

“I don’t know in the past several decades whether there’s been a more defining moment for the political parties themselves,” says state Sen. John Gleason, D-Flushing.

State employees are getting it from all sides. Senate Republicans, led by Majority Leader Mike Bishop, are leading the charge to rescind the pay raises. Bishop failed to gain a two-thirds majority in two votes on the measure so far this month but says he’s not yet giving up. They say the move would save the state about $50 million.

The state Civil Service Commission has already voted to take back the raise for about 5,000 non-union workers.

Gov. Jennifer Granholm has walked a fine line in the pay debate; her office has said the money is in the budget and was part of a collective bargaining agreement. But, when directly asked about it, Granholm told reporters only that rescinding the increase is a legislative decision.

She’s already in trouble with some of her labor allies over other cost-cutting moves. Granholm backs legislation to push state and school employees to retire early. Its provisions include eliminating state-paid vision and dental coverage for anyone retiring after Oct. 1.

More importantly, Granholm has called for concessions on health insurance from employee unions, along with a plan to bank 26 hours of work time during the fiscal year. Instead of being paid for those hours, they’ll be counted toward the employees’ pension.

Plus, contracts that expire at the end of this year will be extended to Dec. 31, 2011, giving some stability to anxious workers but meaning new terms (and more cuts) will have to be negotiated by the next administration.

Faced with Granholm’s threats of more unpaid furlough days, like those instituted last summer, most unions have agreed to the concessions or are expected to. Results of a vote by Local 6000 members will be released next week. Other units, such as corrections workers, have already gone along with the changes.

“We’re caught in the crosshairs,” says Ray Holman, spokesman and legislative liaison for Local 6000, which covers more than 17,000 state human services, inspection and clerical employees, among others.

Granting Concessions

State employees have already made hundreds of millions of dollars worth of concessions in the past decade, including other health care cuts, combined with only a 1 percent pay raise over the past two years, Holman says.

The lone holdout over concessions is the Michigan State Employees Association, which has refused to reopen its contract and now faces furloughs.

“What’s the sense of having a contract if you have to reopen it every 6 months?” asks Scott Diandra, head of the 5,200-member union, which represents food inspectors, labor and trades employees, among others.

At issue is tens of millions of dollars that the deficit-ridden state simply doesn’t have, say proponents of the cuts.

“We’re not even talking about cutting their pay, we’re talking about not giving them a raise,” says Sabrina Keeley, chief operating officer of Business Leaders for Michigan, among the most vocal groups supporting worker concessions.

“I understand these were negotiated two years ago,” Keeley says. “The world has changed.”

The business group buttressed its intense lobbying effort by just releasing a poll in which three-quarters of 800 Michigan voters said they opposed the 3 percent pay raises.

Keeley warns that voters will react at the polls in November if lawmakers let the pay hikes stand.

“I think it adds to the anger and frustration of the electorate,” she says.

The group has been touting an analysis by East Lansing’s Anderson Economic Group that estimates state workers’ total compensation of $57,788 is 6 percent higher than state employees nationwide. And that figure is $17,000 higher than the average for private sector employees in Michigan, according to the analysis, which used compensation estimates from federal data.

Labor leaders have countered with another study, conducted last year by Charles Ballard of Michigan State University, that shows the state workforce has fallen nearly 20 percent since 2000. They say services are being compromised, and parole agents, counselors, nurses and psychiatrists, among others, are shouldering heavier workloads than ever.

Average annual compensation for state union employees was more like $54,246, based on state Civil Service Commission reports, the study says. While acknowledging that’s higher than the average pay for all workers nationally, the Ballard study notes state employees are much more highly educated than others and their jobs require more technical skills.

A National Trend

It’s no consolation in all this, but virtually every state in the nation is going through the same angst over cutting state workers and, as a result, services to the public.

At least 42 states are eliminating or not filling state jobs, imposing mandatory furloughs or making other reductions, according to a report released March 8 by the Center on Budget and Policy Priorities in Washington D.C.

For instance:

Iowa just imposed an across-the-board 10 percent cut to state agencies, leading to the layoff of nearly 200 state workers.
Arizona closed 11 Department of Motor Vehicle offices.
New Jersey has eliminated 2,000 state positions through early retirements, layoffs, and attrition.

“When you’re talking about these multi-year entrenched budget gaps states are facing, a lot of the easy solutions have been used,” said Todd Haggerty, a policy associate for the National Association of State Legislatures in Denver.

Haggerty says 48 of 50 states have budget gaps, or deficits, and most states aren’t expecting revenues to bounce back until at least 2014.

New Approaches to Government

As a result, he says, many have set up commissions to study new ways to restructure state government.

Some states are trying innovative things to maintain worker morale while still cutting. Utah moved to a four-day work week for state employees, avoiding layoffs and furloughs, while Virginia is encouraging more telecommuting.

“You want people to be motivated and providing services,” says Stacey Mazer, senior staff associate for the National Association of State Budget Officers in Washington.

But, she adds, “I don’t think anyone’s found the silver bullet.”

The Fiscal Survey of States, released by Mazer’s group in December, shows Michigan with 49,500 full-time equivalent state positions, comparable or less than other like-sized states.

It also shows, however, how much Michigan’s tax collections have lagged behind others. Income tax revenues are projected to fall an average of 2.5 percent nationally in the 2010 fiscal year but by nearly 12 percent here.

Ohio Blues

One state that’s felt similar pain is Midwestern neighbor Ohio.

The state, which as 58,000 full-time equivalent workers, has received $440 million in concessions from its unions in exchange for a promise of no layoffs. The reductions include increased out-of-pocket health care costs, 10 unpaid furlough days, and a two-year pay freeze.

Workers had little choice but to go along, says Sally Meckling, spokeswoman for the Ohio Civil Service Employees Association, which represents 35,000 state workers. The state had proposed a 6 percent pay cut and shorter work weeks, she says.

“Frankly, we do believe we’ve taken it on the chin because the state government has been cut and cut and cut,” Meckling says. “We have some agencies that have cut by half their operating budget in the course of five years.”

And it’s not over yet, she says.

“We’re looking down the barrel of a $4 billion deficit. It’s a potential disaster.”

There are now a half-dozen bills pending in the Ohio state Legislature to consolidate state government; one would cut one-third of the workforce, Meckling says.

Targeting Employee Costs

Employees are bound to be where government goes when it wants to wield the budget scalpel, says Richard Block, a professor at Michigan State University’s School of Labor & Industrial Relations.

States often are hamstrung from cutting fixed programs such as Medicaid and corrections, and turn to workers because government is such a labor-intensive business, Block says.

But the economic woes are only heightened as employees are cut, along with their incomes and what they can spend, he says. The best case state unions can make is that the economy is helped when their wages are kept high, Block says.

That’s in part the argument from Diandra, of the MSEA.

“This thinking out there about wanting to drag everyone down isn’t going to help the economy,” he says. “If the standard of living was taken down to $7 an hour, is that going to satisfy big business out there?”

Diandra complains the state hasn’t taken a hard look at its own wasteful ways, such as granting millions in tax credits and cozy benefits to lawmakers.

Gleason, who hails from the heavily union Flint area, says state workers often perform difficult and thankless jobs and it’s simply wrong to renege on the pay raise provision in a collective bargaining agreement.

“We as a government promised Michigan families and their students to pay a portion of college and we reneged on that,” Gleason says, referring to scuttled Michigan Promise scholarship program.

“So, now we say, no, we’re not going to fulfill our promise to workers. …Eventually, there’s a concern about trust.”

Gleason’s point is well taken but it’s an unfortunate reality, says state Sen. Tom George, R-Kalamazoo, a Senate Appropriations Committee member who wants the pay raises rescinded.

“He’s right. … Unfortunately, we don’t have the money,” George says. “ … We wouldn’t be considering it except for the exceptional times we’re in. We’re not doing it out of glee.”