PUBLIC ROYALTY? REAPING THE REWARDS OF PUBLIC SERVICE
November 10, 2005
For 50 years, public unions, health-care lobbyists and social-services advocacy groups have doggedly amassed power in state capitols and city halls, using their influence to inflate pay and benefits for their workers and to boost government spending. The bill for that influence is now coming due, and it is overwhelming state and local budgets, says Steven Malanga, a senior fellow at the Manhattan Institute.
In New Jersey:
- Legislators wooing union votes in 2001 voted a 9 percent hike in already rich pensions for the state's 500,000 public workers, even though a falling stock market was shrinking pension-fund assets.
- Today, those new perks have added $1 billion to Jersey's deficit-riddled budget and will add another $4.2 billion over the next five years.
In Washington State:
- The powerful teachers' union led a successful 2000 effort to win legislation mandating smaller class sizes, promising that it would cost taxpayers nothing, because surplus revenues could cover the program.
- This year, the cash-strapped state passed $500 million in new taxes to finance the mandate.
- Then-governor Gray Davis and a union-friendly state legislature passed a series of bills that swelled the number of state employees who could claim disability retirement benefits.
- The flood of new disability claims will cost the state's retirement system some $465 million over five years, much of which will come out of taxpayers' pockets.
Such extravagances help explain why state and local government spending reached an all-time high relative to the national gross domestic product (GDP) during the 2002 recession, producing a fiscal hangover that continues today. Even in an expanding national economy, with tax revenues surging once more, state and local budgets teeter in precarious balance, long-term deficits pile up, and politicians hike taxes to close spending gaps, says Malanga.
Source: Steven Malanga, "The Conspiracy Against the Taxpayers [Part I]: Why public servants live better than the public," Commonwealth Foundation, November 8, 2005.
Browse more articles on Tax and Spending Issues