Posted 2/23/11 (Wed)
By Neal A. Shipman
If you haven’t been following the clash between state workers and the Governor of Wisconsin this past week then you have been missing out on a big budget issue that is going to be played out across the nation this coming year.
At the heart of the issue is huge deficits that most states in this country are facing and how these states are going to balance their budgets. Most state elected officials know that they can’t keep raising taxes forever, especially when taxpayers are struggling just to meet their own living expenses.
So how is Wisconsin’s Gov. Scott Walker approaching his state’s $137 million deficit? Among other things, he proposed that instead of laying off 5,500 state workers he would ask that the state’s public employees contribute 5.8 percent of their income towards their pensions and 12.6 percent toward health insurance.
And then as they say, “the ship hit the span!” Thousands of Wisconsin teachers walked out of their classrooms and headed to Madison to protest the Governor’s proposal. And then when it appeared that the Wisconsin Senate would pass the bill, the state’s Democratic Senators fled the capitol and drove to Illinois so that they wouldn’t have to vote on the bill.
And after nearly a week of protests and rallies at the state capitol in Madison, the state seems to be at a standstill when it comes to addressing its budget woes. And all the while, thousands of Wisconsin state employees continue to call in sick so that they can protest the Governor’s proposal.
Obviously, the public employees in Wisconsin feel that they have been singled out to help the state reduce its deficit. And why shouldn’t they feel singled out. After all, the Governor is asking them to ease the burden on the state’s taxpayers by paying a bigger share of their retirement and health care costs. But is the Governor really asking too much?
Most taxpayers in Wisconsin, especially those who have lost their jobs or have seen their benefit plans reduced, probably agree with the Governor that public employees have it pretty good. According to officials in Wisconsin, in 2009, public employers contributed almost $1.37 billion to the state’s pension fund, while employees contributed about $8 million, or about 0.6 percent. And from 2000 to 2009, taxpayers spent about $12.6 billion on public employee pensions, while during the same period, public employees contributed $55.4 million.
According to Gov. Walker, unless Wisconsin can rein in its public employee costs, in particular its benefits programs, the state has no chance of reaching financial solvency.
Which is why other states across the United States are watching with a great deal of interest as to how the events in Wisconsin unfold. Why? Because with the exception of a handful of states, like North Dakota, Wyoming, Alaska and a few others that have a budget surplus, every other state in the nation is facing monumental budget deficits. And without exception, one of the biggest unfunded liabilities of these states is its public pension program.
While there are those who like to remind us that public employees are everyone’s neighbors and friends, it also has to be recognized that there are hundreds of millions of non-public employees across this country who are also neighbors and friends and they are the taxpayers who directly support public employees through their taxes. And many of these taxpayers have seen their retirement plans evaporate, and their health care plans radically changed because their employers couldn’t afford them anymore.
Businesses across the United States have had to change the way that they do business over the years. And that means cutting back wherever they can to stay in business. In some cases, it has meant massive employee layoffs. And in other cases, it has meant altering what a business can offer in the way of a benefit package.
The bottom line is that business and private sector workers have had to adjust to a changing economy. It’s now time for government to adjust as well.
With the tremendous budget deficits facing virtually every state in the union, governors and state elected leaders are going to have to balance their budgets as well. And in the process of doing so, programs are going to be cut, public employees may lose their jobs and public employee benefit packages may have to change.