Thin Gruel for “Social” Republicans

By: Carl Graham

Bozeman: Barry Goldwater, in a line that may have cost him the presidency, famously quipped that extremism in defense of liberty is no vice and moderation in pursuit of justice is no virtue. Turns out he might have been on to something there, and Montana’s latest legislative session is a great example.

Goldwater’s quote came in 1964 when Republicans were in a fissile state just hot enough to self-immolate but not hot enough to start a real fire. The “establishment” wing of the Party was mostly comfortable with a growing government and felt that if they didn’t rock the boat they’d have a seat at the table and get their slice of the pie even if it consigned them to being forever small fish in a big pond.

This governance-by-metaphor confused amity with effectiveness, as well as the electorate, and resulted in a two party, one philosophy system that left a large chunk of American conservatives without a political home until the Reagan revolution scooped them up nearly twenty years later.

Into this vacuum stepped two disparate groups: a new dissident small government movement and a loud anti-communist faction that allowed themselves to painted as nuttier than an Angus bull pen. Goldwater’s quote appealed to the former group but scared enough people into thinking he was a part of the latter one to at least partially account for his losing to an incumbent with few tangible accomplishments under his belt. President Johnson was easily able to win by defining Goldwater as an extremist rather than running on his own merits. Sound familiar?

So what’s all that got to do with Montana’s legislative session? In 1964 the candidate who represented smaller government, fiscal responsibility and libertarian principles was thwarted by a combination of status quo Republicans and Democrats who successfully labeled him as a nut. In 2013 the smaller government, pro-liberty agenda of a GOP majority in both legislative chambers was successfully undermined by the combination of a lockstep Democratic caucus and a handful of – let’s use their term – “Responsible Republicans” intent upon growing state government and presenting a harmonious front. So how’d that work out?

First of all, I don’t blame the Democrats for growing government any more than the turtle blames the snake for biting him halfway across of the river. It’s what they do, and the economic or philosophical merits of that approach are arguments for another day. I even, however grudgingly, respect the consistency and clarity of their approach. But they could not have succeeded in the minority without the handful of “Responsible Republicans” who crossed the aisle on some key bills. So let’s see how the guiding principles of amity and moderation turned out for those folks.

If increasing the state’s budget by 14% when most Montanans are seeing their paychecks stagnate at best is responsible then they’re right on track. If delivering an unbalanced budget to the governor is responsible then they’ve got a lock on what’s good for Montana, if not a handle on what’s required by Montana’s Constitution. If, after inheriting a huge surplus, it’s responsible to have spending increases outpace tax relief by a factor of ten, then those “Responsible Republicans” have their fingers on the conservative pulse. If tying school funding to volatile commodity prices is responsible, then our kids won’t be able to wait until they’re eighteen to vote these guys back in office, if they can read the ballot.

In truth, none of those things are considered responsible in the conservative districts that put most these Republicans in office. To be fair a couple of them are in moderate to liberal districts that fall under the Buckley Rule of electing the most conservative person possible. But most of them advanced an agenda that is anathema to the fiscally conservative, ruggedly individualistic beliefs held by most of the people who sent them to Helena. They either misrepresented themselves to their electorate or they are so devoid of core principles that they covet power for power’s sake and will do whatever it takes to not be called names.

They are Social Republicans, not to be confused with social conservatives who actually stand for something. The “social” in Social Republicans means they want to be seen as socially acceptable by all. They want to get invited to the “right” parties, fawned over in coffee shops, and above all not have any uncomfortable moments with people who disagree with them or be made fun of in the papers. They, like the establishment Republicans of Goldwater’s time, confuse amity with effectiveness and power with principle. And what did they get for it?

The governor slaughtered their sacred cows with the same zeal he took to the priorities of those upstart conservative Republicans who booted them out of leadership positions. They lost the respect of their opponents and the trust of their peers. And for what? To be liked? To not be called names by people who still want to beat them? To get along rather than fight for the values of the very people they were elected to represent?

No, in the end it seems the Responsible Republicans got their cake and ate it too, except that the governor got to eat it first. Bon Appetit.

This commentary appeared on Montana Public Radio : 5/9/2013

Let Other States Experiment with Medicaid Expansion – Part II

Medicaid expansion is supposedly a no-brainer. It’ll provide insurance for a lot low income people. It’s free federal money. And it’ll create jobs and pump up local economies. So why are the 50 states almost evenly divided on whether to take this gift horse or send it out to pasture?

It’s because a lot of governors and legislatures have decided that at best the jury’s still out on whether expansion is a good idea; and more likely it’s a bad idea that will hurt many of the people it’s supposed to help and turn into an albatross around taxpayers’ necks.

I’m open to being proven wrong, but I agree with those who say that Medicaid expansion as laid out in Obamacare is both bad welfare policy and bad economic policy. It’s bad welfare policy because it shifts primarily young, able and to a large extent childless adults into a system with demonstrably inferior access to care, and then traps them there. Forty four percent of the newly eligible would be adults under the age of 34, and seventy five percent would be childless.[i] In addition, a fourth of all new enrollees would be dumped into Medicaid from private insurance plans that almost always provide better access to care than Medicaid.[ii] The difference is in having health insurance versus getting health care.

I have a fishing license. That gives me the right to stand in a river waving my fly rod around, but it doesn’t guarantee that I’ll catch any fish. Same goes for health insurance versus health care. Medicaid recipients encounter barriers to primary care at nearly twice the rate of those with private insurance.[iii] Because of this lack of access to primary care, they then show up in emergency rooms at rates nearly twice those of the privately insured, but sicker and much more expensive to treat.[iv] Shoveling well over 70,000 new Montanans into this system[v] while also decreasing provider reimbursements under Obamacare won’t make access to quality care any easier for these folks or for anyone else in the state.

Medicaid expansion is also bad economic policy. In fact, it’s pure crony capitalism. You can’t swing a dead cat in Helena right now without hitting a hospital or pharmaceutical lobbyist trying to get their surgical gloves into taxpayers’ wallets. Yes, there’s good evidence that the “free” money coming from Washington may create around twelve thousand jobs in Montana; but will those jobs create health benefits that are commensurate with their costs? If not, the money is better left in the private economy where it can be spent more productively. A recent New England Journal of Medicine article said that “Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.”[vi] And anyway, it’d be much cheaper for Montana taxpayers to just put those who are eligible for federal subsidies into the new exchanges and let Washington pay their entire bill. It’s free money, right?

Except that it’s not. It’s taxpayer money whether you write the check to Helena or to Washington. The net cost to Montana taxpayers of Medicaid expansion through 2021 is over $50 million according to one estimate,[vii] and closer to $100 million according to another.[viii] That’s after the “free” money and jobs and tax revenues, and assumes the federal government will keep its promise to cover 100% of expansion costs in the early years and 90% later on, despite the fact that even the President’s own past two budgets included reductions in those commitments.[ix]

In reality nobody knows what it will cost, but there’s precious little precedent for entitlement spending coming in below or even near initial estimates. In 1965 Medicare was estimated to cost $9 billion annually by 1990. The actual cost in 1990 was $67 billion.[x] There’s no reason to think Medicaid expansion estimates will fare any better, and Montana taxpayers would be on the hook for the difference since it’s politically unlikely that these entitlements would be reversed once they’re put in place.

So why not wait a couple of years? Let’s see how things go in California and Illinois and other bastions of state fiscal responsibility, and then take a look at what’s working and what’s not so we can make an informed decision. Or, we could try true reform and turn Medicaid into a system that really does provide quality access to quality care for more people who need it. We’d do that by reconnecting the patient to the provider and the cost to create responsible consumers rather than filtering both the funding and the care through a self-perpetuating bureaucracy. But that’s a topic for another day.

 


[i] The Urban Institute, “Opting in to the Medicaid Expansion under the ACA: Who Are the Uninsured Adults Who Could gain Health Insurance Coverage,” August 2012,  pp. 8-9.

[ii] University of Montana Bureau of Business and Economic Research, “An Estimate of the Economic Ramifications Attributable to the Potential Medicaid Expansion on the Montana Economy,” January 2013, p. 6.

[iii] 16.3% of Medicaid patients encountered barriers versus 8.9% of those with private insurance. Annals of Emergency Medicine, “National Study of Barriers to Timely Primary Care and Emergency Department Utilization Among Medicaid Beneficiaries,” 2012, p. 4.

[iv] Ibid

[v] Urban Institute, op. cit., p. 18 and BBER, op. cit., p. 7.

[vi] Katherine Baicker, Ph.D. and Amitabh Chandra, Ph.D, The New England Journal of Medicine, “The Health Care Jobs Fallacy, June 28 2012, p. 2435.

[vii] BBER, op. cit., p. 29.

[viii] The Heritage Foundation, “Obamacare and the Medicaid Expansion: How Does Your State Fare?” March 5th 2013, http://blog.heritage.org/2013/03/05/obamacare-medicaid-expansion-state-by-state-charts/.

[ix] Charles Blahous, Mercatus Center, “The Affordable Care Act’s Optional Medicaid Expansion: Considerations Facing State Governments,” 2013, p. 32.

[x] Conn Carroll, The Foundry, “Health Care Reform Cost Estimates: What is the Track Record?” August 4th 2009, http://blog.heritage.org/2009/08/04/health-care-reform-cost-estimates-what-is-the-track-record/.

Now Is Not the Time for Medicaid Expansion

 Bozeman – Governor Bullock has decided to ignore the Schweitzer administration’s budget submitted last November and instead opt into Obamacare’s Medicaid eligibility expansion. This looks to be a patently bad idea; and even if it’s not there’s no reason to rush forcing Montana’s taxpayers into yet more unsustainable entitlement spending and to herd more of our citizens into a system that provides inferior care at great expense.

First let’s get a little background out of the way and then I’ll explain why it’s a bad idea.

Medicaid provides health insurance – not necessarily health care, but more on that later – to families with incomes up to 133 percent of the federal poverty level (FPL). Montana’s taxpayers currently pay about 33 percent of the program’s cost, with the federal government picking up the balance.

Last summer’s Supreme Court ruling let states decide whether to increase Medicaid eligibility to 138 percent of the FPL, which Obamacare tried to mandate. Many people portray this as “free money” since Washington says it will cover almost all the costs until 2017 and then ramp down to 90 percent of the costs after that. But that promise, like so many others that were made during the health care reform debate, simply doesn’t match the facts on the ground.
These facts argue against expanding Medicaid eligibility for two major reasons, one of them financial and the other one moral.

The financial reason is that we already know this expansion isn’t “free money” for the state. And the moral reason is that it will result in thousands of Montanans being dumped into a system that results in inferior access to care, with many of them forced out of much better private insurance plans.

Estimates of Montana’s potential share of expansion costs vary pretty wildly[i] but most come in between $100 million and $200 million,[ii] or the equivalent of between two hundred and four hundred new teachers, for example.[iii] Our costs increase for a lot of reasons, but I’ll just highlight a few obvious ones.

First, with Obamacare scheduled to cut $8 billion from Medicaid and $500 billion from Medicare, you can be sure that Montana’s health care providers will be coming to taxpayers to be made whole when their costs inevitably outpace their reimbursements under these government programs.

Next, the largest single increase will result from people who are eligible for Medicaid at the 133 percent FPL rate, but not currently enrolled, coming out of the woodwork as word gets out that eligibility has been expanded. Many of these people are technically uninsured today but would be enrolled in Medicaid and receive care if they needed it. Many others, though, have their own insurance and would simply shift from private to public coverage. Since they wouldn’t meet the new 138% FPL threshold, about 33% of their insurance costs would be shifted from them or their employers to Montana taxpayers.

And finally, for anyone who believes that the federal government will continue to reimburse states at the 100 or even 90 percent level, well, I’ve got a bridge to sell you. Washington’s budget woes are going to be transferred to the states, and states like Montana that get from Washington much more than we give are going to feel the pain first and most acutely.

Shifting our most vulnerable population to Medicaid is also immoral. Studies consistently show that Medicaid patients have poorer access to care than privately insured patients.[iv] Since Medicaid typically pays physicians 56 percent of the amount private insurers pay, fewer doctors are accepting new patients and they eventually wind up in hospitals with more serious conditions than those who are privately insured. In addition, there’s scant reliable evidence that Medicaid improves health outcomes at all, and zero evidence that it is the best way to improve health outcomes per dollar spent.

Expanding Medicaid will only worsen our health care system’s woes, increasing costs and decreasing access to quality care while adding a new entitlement burden on taxpayers and dumping thousands of low income Montanans into a failing program. There’s no rush to expand. If it works for other states we can always sign on. But this is one case where we shouldn’t lead with our chin.

Carl Graham is CEO of the Montana Policy Institute
 

_________________________________
[i] MT Department of Public Health and Human Services, “The Impact of Medicaid Eligibility Expansion and health Montana Kids Monitoring,” 12/2/2011, http://leg.mt.gov/content/Publications/fiscal/interim/financecmty_dec2011/SJ%2026%20ACA%20Medicaid%20expansion.pdf.
[ii] For example, Kaiser Commission on Medicaid and the Uninsured, “the Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis,”  11/2012, http://www.kff.org/medicaid/upload/8384.pdf.
[iii] Derived from data at teacherportal.com, http://www.teacherportal.com/salary/Montana-teacher-salary.
[iv] For a synopsis see The Heritage Foundation, Kevin D. Dayaratna, “Studies Show: Medicaid Patients Have Worse Access and Outcomes than the Privately Insured,” 11/9/2011, http://report.heritage.org/bg2740.

The 2013 Legislative Docket

By:

Carl Graham, CEO, Montana Policy Institute

With the 2013 legislative session about to begin I thought it might be useful to highlight some of the important issues we could see coming out of Helena over the next few months. Montana is fairly unique in that we still enjoy a true citizen legislature and, regardless of what we may think of some them individually or even in their various groupings, our legislators represent one of the last bastions of true public service, giving much more than they get out of the of process. We should thank them for that, even the ones with whom we disagree.

So, what are they going to be talking about? Well, much of what you’re going to hear in the media between now and next April will be spectacular examples of superfluous issues because that’s what makes news. The hard work and hard issues will be left to the back pages because, well, they’re hard. They’re hard to explain, hard to understand, and hard to get people excited about. But some of these issues will drive future Montanans’ ability to live, work and play here, and they deserve more than passing references on opinion pages or superficial treatment under spectacular headlines.

So let’s look at a few of them.

State Employee Pay: Montana’s public employees are not overpaid. In fact too many of them are underpaid. But they do enjoy benefit packages and job security that our private sector workers can only dream of. This simply isn’t sustainable. At some point private sector workers will see their state employee neighbors’ immunity from the business cycle as grossly unfair, especially when they’re making sacrifices to foot the bill. This is a tinder box that will only burn hotter the longer we add fuel without significant reform, especially in the area of pensions.

Public Pensions: Montana’s pension systems are underfunded to the tune of nearly $4 billion by the state’s accounting, and by closer to $10 billion using real-world accounting standards that wouldn’t land a private sector employer in jail. The state understates this liability by assuming, for example, a 7.75% return on investment while actual returns over the latest ten year period were under 5%. Everyone’s goal is, or should be, to preserve the promises we’ve made to our pensioners. But that outcome becomes less and less likely the longer we wait to reform the system in ways that make it both sustainable and fair to Montanan’s taxpayers.

Labor Reform: It’s not likely we’ll see much in this area because a GOP-led legislature and union-backed governor aren’t likely to find common ground. But if we care about growing jobs, it would be irresponsible to not demand a debate about our labor environment in at least two areas: right to work and minimum wage. Some simple facts form the parameters. First, we are surrounded by right to work states, and they are all outperforming us economically and demographically. Second, right to work states on average have lower unemployment rates, but also lower wages than states that compel union membership and/or dues. With those simple facts as givens, the remaining arguments mostly revolve around cause and effect and “fairness” issues that are inherently political. So our political leaders should be arguing them. Next, Montana’s minimum wage is significantly higher than the federal level even though our per capita income is among the lowest in the nation. It also increases automatically even with high unemployment rates. Labor is like any other good in that if you raise its price people will buy less of it. We should have a debate over whether we would rather force people, especially the young and poorly educated, onto the public dole or allow them the dignity of earning a living through the increased job opportunities that would be available at even the federal minimum wage level.

Natural Resource Development: Economic development in Montana means responsible natural resource development. It’s what we have, and it’s sustainable because it’s unique to the state. If you want Montana oil or coal or gold or wheat or recreation, you have to pay Montanans to get them. That’s not true of portable industries that can easily relocate. So while we should welcome all industries, we should also be lowering barriers, especially those that come from Washington D.C., that restrict the responsible development of what we have here in abundance.

Education Reform: Montana’s schools are good but have seen static performance at higher per pupil costs for two decades. We’re good at teaching our kids on average, but nobody’s average. Each kid deserves to be taught in a way that maximizes his or her potential, and our current one-size-fits all system simply doesn’t allow us to optimize educational outcomes for each of our kids. We need to catch up to the true education innovators around the country by providing more delivery options that address the needs and aspirations of each student, and not just accept that they do Okay on average.

What Should Government Do vs. What Can Government Do? Finally, in times of abundance it’s easy to say government should do something because government can do something. Political philosophy aside, that simply doesn’t work when taxpayers are struggling to make ends meet and can’t afford an ever expanding state. Just because government can do something doesn’t mean that it should. Whether for fiscal or philosophical or moral reasons, we as citizens will be forced to take more responsibility for our actions, for our livelihoods, and for our happiness as the math catches up and current spending levels become unsustainable. The sooner our public servants in Helena acknowledge that fact and begin to grapple with its implications the easier their decisions will be, and the better our lives will be.

Montana Public Radio Commentary: The Courtier Society

By: Carl Graham, CEO, Montana Policy Institute

Thanksgiving always reminds me of an old Twilight Zone episode where the aliens show up in sparkly robes with gleaming big eyes and smiles all around. Their elongated fingers carry a book called “To Serve Man,” which everyone naturally assumes is a primer for saving us silly humans from our own ignorance and evil natures. This is during the Cold War, remember, when we all assumed we were going to blow each other to smithereens at any moment.

Naturally the best and the brightest humans start lining up for a trip to the home planet where further enlightenment undoubtedly awaits and a select few will be chosen as mankind’s benevolent overlords. It’s for our own good, of course.

Unfortunately, “To Serve Man” turns out to be a cookbook and the best and brightest are on the menu instead of the guest list.

Maybe it’s just the Thanksgiving tryptophan talking, but I think that’s where this country is headed as people and businesses line up for special treatment from an increasingly centralized and powerful government. At some point they’re going to find out that they’re dinners instead of diners.

We’re already seeing the increased influence exerted by just a few large special interests with access to political power resulting in more restrictions, regulations, and costs that disproportionately fall on small businesses and families, whose voices and opportunities to pursue happiness have grown relatively weaker in the process.

I could give you any number of examples, but let’s just use one that everybody has seen in the papers. The Dodd/Frank banking reform law was passed in the wake of a financial crisis that resulted in taxpayers bailing out big banks to the tune of billions of dollars and looking for someone to blame. Although many of its rules are still being written, we already know that the law includes massive increases in compliance, insurance and capital costs for banks, along with giving politically favored large institutions a de facto “too big to fail” designation.

It’s a law that was written for big bankers by big bankers. They can absorb the increased compliance costs while small banks with much lower margins can’t. They can meet the capital and insurance requirements that stifle small banks’ ability to make local loans to farmers and homebuyers. And of course with an implicit government guarantee, big banks enjoy much lower borrowing costs than small banks giving them even more of a competitive advantage.

The result is that we will soon see our community banks – those that survive anyway – become nothing more than storefronts and loan processors for the “too big to fail” banks that the government has chosen to guarantee. Decisions will be made based on checklists developed in New York and Washington D.C. rather than on personal relationships and local knowledge. Loan proceeds will be shipped out of the state and the big banks will increasingly feed the revolving door of the regulated and regulators until only those that can maintain their political access survive. Consumers will have fewer choices with higher costs, and will have to tailor their lives to meet one size fits all requirements if they want mortgages or small business loans.

But that’s not my point.

My point is that by massively centralizing and expanding government power we’re creating a courtier society, one where access to the King’s court is more important to success than merit or effort or risk taking. Now of course I’m not saying we’re creating a monarchy, but the effect is the same when power, influence and success come from proximity to the levers of power rather than from working hard and taking risks. The politically connected will always have access to power, and so the greater that power the more they will succeed at everyone else’s expense.

The result of this centralization and expansion of power is the systematic elimination of small business in this country. The barriers to entry are becoming so high and the cost of complying with regulation so onerous that would-be entrepreneurs are increasingly unable to make any return on their investments or even go about their daily business without risking fines, penalties, or jail.

Many existing businesses will simply close up shop as regulations and reporting requirements become too expensive or difficult to comply with. Job growth will dry up – especially at the low end of the income scale – as the costs of hiring new employees increase and government becomes a competitor for labor with new and expanded entitlement programs. New entrepreneurs will increasingly look at the barriers to entering the marketplace and the myriad of obstacles erected in their path and just go do something else. The risks and rewards of starting a new business will just not be worth it, especially if their success will be demonized in the increasingly popular political tactic of class warfare.

In a courtier society power is centralized and only that power decides who succeeds and who fails. Decisions are made based on proximity to the throne rather than merit, effort, or even the law. That is the direction we are headed as government becomes increasingly centralized, large, powerful and arbitrary.

The end of this path lies in a business/government partnership where large corporations operate under the umbrella and the thumb of government, and people trade their freedom for a monthly check. There’s a name for that, but I don’t want to be incendiary on this special holiday. Just take a look at Italy in the 1920s for a good example.

And have a Happy Thanksgiving while we still have much to be thankful for.

####
For Immediate Release
930 Words

Carl Graham is CEO of the Montana Policy Institute, a nonprofit policy research and education center based in Bozeman.
He can be reached at:
67 W. Kagy Blvd., Ste. B
Bozeman, MT 59715
(406) 219-0508
cgraham@montanapolicy.org

Montana Public Radio Commentary: Public vs. Private Pay

By Glenn Oppel, Policy Director, Montana Policy Institute

In a year when most state legislatures were engaged in budgetary belt-tightening, Montana Governor Brian Schweitzer and public employee union representatives agreed to a pay plan package that would make any private sector worker envious. According to the agreement, each of the next two years state workers would receive both a five percent raise in pay and a 10 percent increase in the state contribution toward health insurance premiums. The price tag is estimated at $138 million.

After the pay plan agreement was reached, a local representative of the American Federation of State, County, and Municipal Employees (AFSCME) argued that it was necessary to “bring us closer to being compensated fairly with those in the private sector.” Union representatives would have the public accept as conventional wisdom their caricature of the underpaid public employee, but the data suggest that public employees are actually compensated far more generously than their private sector counterparts.

Public sector unions have a vested interest in advancing the myth that they’re undercompensated, as it gives them more power at the bargaining table. But state analysts tasked with comparing public and private pay have been encouraging it as well. In June 2012, legislators on the Legislative Finance Committee received a report outlining the results of the State Human Resources Division’s biennial salary survey. Salary data culled for the survey is used to determine what the state calls the “market midpoint” of compensation for 750 occupations within state government. According to the salary survey, state workers are earning on average 13.3 percent less than the market midpoint.

The state analysts are far more likely to shoot straight than some union research shop, but their salary survey unfortunately suffers from a weakness in methodology. By relying on salary ranges for occupational categories, the state’s report has grossly oversimplified the compensation question. For instance, many positions in the public sector, such as correctional officers and fire fighters, have no private-sector equivalent. Additionally, employees within these categories are not interchangeable; some are more educated, some are older, some are more experienced. Comparing only occupational categories ignores all of this variation.

A final shortcoming in the salary survey is that it doesn’t include the value of employee benefits – health insurance, paid leave, pension, etc. – which make up a considerable portion of any worker’s compensation.

In sum, merely matching a state job to an occupational category will not yield apples-to-apples comparisons with private sector occupations and compensation. This is an argument that both conservative and liberal analysts have agreed upon when analyzing compensation in the public and private sector.

To facilitate a more accurate comparison, the Montana Policy Institute has released a report that uses the “human capital” approach to achieve apples-to-apples comparisons between public and private sector pay. Our report starts by using government data to compare public and private employees of similar personal and professional characteristics. For instance, instead of comparing pay in broad occupational categories, we compare public and private employees of similar work experience, education, gender, race, and disability status. Additionally, we calculate the annual compensation value of fringe benefits on top of annual wages, including pension, paid leave, and health insurance (including retiree health).

The results of the analysis are telling. Whereas the state’s salary survey concludes that that average state employee is earning 13.3 percent less than the market midpoint, our report shows that after adjusting for age, work experience, education, gender, race, and disability status, state and local public employees are in a statistical dead-heat with their private sector counterparts in terms of take-home pay. Where state and local public employees surpass private sector workers in total annual compensation is from their various fringe benefits. When compensation from fringe benefits is factored in, state and local public employees earn nearly 15.4 percent more in total annual compensation than comparable private sector workers.

Last session, lawmakers didn’t enact the previously-negotiated pay plan, citing concerns over revenue forecasts and challenges faced by private sector workers. With fiscal analysts projecting a $457 million surplus, union representatives will lobby vociferously this coming session for some follow through from legislators. Half a billion dollars seems like a lot of extra money, but our fiscal house is not exactly in order. As the Montana Policy Institute details in another study on Montana’s budget, there are long-term structural deficits that could break the bank in the near future, including unfunded liabilities of $3.8 billion in its pension programs for state workers and teachers.

This fiscal sleeping giant, and others, should be priority number one for lawmakers, and true solutions could easily consume whatever surplus materializes.

Thank you for listening. This is Glenn Oppel, Policy Director for the Montana Policy Institute.

Montana Taxpayers Foot the Bill for the Public Sector Pay Premium

By Glenn Oppel, Policy Director, Montana Policy Institute

In a year when most state legislatures were engaged in budgetary belt-tightening, Montana Governor Brian Schweitzer and public employee union representatives agreed to a pay plan package that would make any private sector worker envious. According to the agreement, each of the next two years state workers would receive both a five percent raise in pay and a 10 percent increase in the state contribution toward health insurance premiums. The price tag is estimated at $138 million.

After the pay plan agreement was reached, a local representative of the American Federation of State, County, and Municipal Employees (AFSCME) argued that it was necessary to “bring us closer to being compensated fairly with those in the private sector.” Union representatives would have the public accept as conventional wisdom their caricature of the underpaid public employee, but the data suggest that public employees are actually compensated far more generously than their private sector counterparts.

Public sector unions have a vested interest in advancing the myth that they’re undercompensated, as it gives them more power at the bargaining table. But state analysts tasked with comparing public and private pay have been encouraging it, also. In June 2012, legislators on the Legislative Finance Committee received a report outlining the results of the State Human Resources Division’s biennial salary survey. Salary data culled for the survey is used to determine what the state calls the “market midpoint” of compensation for 750 occupations within state government. According to the salary survey, state workers are earning on average 13.3 percent less than the market midpoint.

The state analysts are far more likely to shoot straight than AFSCME’s research shop, but their salary survey unfortunately suffers from a weakness in methodology. By relying on salary ranges for occupational categories, the state’s report has grossly oversimplified the compensation question. For instance, many positions in the public sector, such as correctional officers and fire fighters, have no private-sector equivalent. Additionally, employees within these categories are not interchangeable; some are more educated, some are older, some are more experienced. Comparing only occupational categories ignores all of this variation.

A final shortcoming in the salary survey is that it doesn’t include the value of employee benefits – health insurance, paid leave, pension, etc. – which make up a considerable portion of any worker’s compensation.

In sum, merely matching a state job to an occupational category will not yield apples-to-apples comparisons with private sector occupations and compensation. This is an argument that both conservative and liberal analysts have agreed with when analyzing compensation in the public and private sector.

To facilitate a more accurate comparison, the Montana Policy Institute has released a report that uses the “human capital” approach to achieve apples-to-apples comparisons between public and private sector pay. Our report starts by using government data to compare public and private employees of similar personal and professional characteristics. For instance, instead of comparing pay in broad occupational categories, we compare public and private employees of similar work experience, education, gender, race, and disability status. Additionally, we calculate the annual compensation value of fringe benefits on top of annual wages, including pension, paid leave, and health insurance (including retiree health).

The results of the analysis are telling. Whereas the state’s salary survey concludes that that average state employee is earning 13.3 percent less than the market midpoint, our report shows that after adjusting for age, work experience, education, gender, race, and disability status, state and local public employees are in a statistical dead-heat with their private sector counterparts in terms of take-home pay. Where state and local public employees surpass private sector workers in total annual compensation is from their various fringe benefits. When compensation from fringe benefits is factored in, state and local public employees earn nearly 15.4 percent more in total annual compensation than comparable private sector workers.

Last session, lawmakers didn’t act on the previously-negotiated pay plan, citing concerns over revenue forecasts and challenges faced by private sector workers. With fiscal analysts projecting a $457 million surplus, union representatives will lobby vociferously this coming session for some follow through from legislators. Half a billion dollars seems like a lot of extra money, but our fiscal house is not exactly in order. As the Montana Policy Institute details in another study on Montana’s budget, there are long-term structural deficits that could break the bank in the near future, including unfunded liabilities of $3.8 billion in its pension programs for state workers and teachers.

This fiscal sleeping giant, and others, should be priority number one for lawmakers, and true solutions could easily consume whatever surplus materializes.

 

In the Media:

Great Falls Tribune: http://www.greatfallstribune.com/article/20121112/OPINION/311120020/Montana-s-public-employees-earning-more-than-private-sector-counterparts

Missoulian: http://missoulian.com/news/opinion/columnists/state-public-employees-earn-more-than-private-sector-workers/article_9704997e-2f34-11e2-9530-0019bb2963f4.html

Havre Daily News: http://www.havredailynews.com/news/montanapublicemployeesearnmorethanprivatecounterparts.html

KGVO Missoula: http://newstalkkgvo.com/montana-public-workers-earn-more-than-their-private-sector-counterparts/

MTPR Evening Edition Commentary: http://www.mtpr.org/podcasts/audio/mtee_newscasts/11-15-2012Newscast.mp3 (at 20:30)

Montana Watchdog: http://watchdog.org/61693/oppel-montana-public-employees/

Media Trackers: http://montana.mediatrackers.org/category/analysis/

UnionWatch.org: http://unionwatch.org/union-watch-highlights-102/

Montana Public Radio Commentary: Philosophies on Philosophies

Philosophies on Philosophies

By: Carl Graham, CEO, Montana Policy Institute

With stimulus packages apparently designed to just stimulate government growth, “Quantitative Easing” that’s only inflating the next bubble, and institutionalized denigration of those holding differing opinions passing for political discourse, maybe it’s time to say a few words about central planning.

Huh? What the heck does central planning have to do with any of that stuff?

Well, it’s a good representation of those differing opinions that many of us have. It exemplifies the difference in philosophy between those who think government is the only thing we all belong to, and those of us who think government actually is the only thing that belongs to all of us.

Let’s face it.  Some people want to be planned for.  They like having membership in a club that can make the tough calls, do the intellectual heavy lifting, and take the heat for our collective misdeeds.  They’re willing to give up some latitude in their lives to not have to make those hard decisions, or maybe they think there are enough others out there who are incapable of making good decisions that somebody should help narrow their options.  And of course there’s no shortage of people who think they have all the answers and gee wouldn’t we all be better off if they could just impose their ideas on the rest of us in the form of central planning. It’d be so much more efficient and, even if a few eggs get broken it’ll still be a better omelet.

But history is littered with failed attempts by states (or more accurately elites) to centrally plan all or significant portions of economies.  From the French Revolution to socialism to communism, to even Plato’s philosopher king, elites have tried to tie all the pieces of society together in a way that provided for everyone by dictating the types and amounts of things (materials, ideas, labor, etc.) to keep the machine running.  All failed spectacularly.  Well, Plato’s wasn’t really tried but come on; can you really see your old philosophy professor with the pony tail and bong blisters in charge?

These attempts were all cloaked in good intentions but failed out of a combination of hubris and indifference: someone assumed they could know the unknowable about what people wanted and needed, and what it would take to provide all of those things in the right quantities and at the right places and times.  And because enough people didn’t demand the right to make their own decisions the ruling elites were able to use powerful and centralized governments to impose their “solutions.”

Let’s see: bank lending requirements, pay caps, government-run healthcare, mass subsidies, auto bailouts…the list is growing of things that someone somewhere thinks they know more about than millions of free people making free decisions about how best to allocate their resources to pursue their own happiness. As more and more decisions and resources are centralized in Washington, the gap between haves and have-nots is being replaced by a growing gulf between those who get to make decisions about we’ll live our lives, and those of us who have live with those decisions.

And that is why, I think, we’re seeing denigration passing for opinion and demonization passing for discourse. The stakes have never been higher, and there are two broad camps out there with fundamentally different visions of what this country should look like– both with strong historical philosophical roots and legitimacy. But both can’t be right, at least not at one time in one place.

I’m getting quite tired, for example, of hearing that those on the Left are stupid, uninformed, or evil.  Some certainly are some or all of those things, as are some on the Right. But just like ignorance, racism and extremism don’t define the vast majority of those on the Right; stupidity and malevolence don’t define the activating forces behind those on the Left.

Ignoring the vast malleable center for the moment – which we generally do anyway except at election time – most people fall into one of two camps, both of which have long philosophical pedigrees and solid ideological underpinnings.

Folks like me who believe that freedom and happiness flow from natural rights and having choices in our lives too often fall into the trap of casually dismissing as useful idiots or miscreants those who believe that rights are granted by governments which are in turn best led by intellectual elites attuned to the needs of the times.

It’s not necessarily gullible or malevolent to believe that some set of experts are better at adapting to the times than individuals and so they should be in charge for the betterment of us all.  It sounds nuttier than a Planters Peanut factory to me, but it’s not an illegitimate view and it should be argued against, not belittled.

Likewise, many on the Left generally dismisses the new grassroots conservative movement as not worthy of their derision and so fall back on manufactured stereotypes of racists and bumpkins to explain any popularity and successes these groups attain.

What many on the Left don’t understand is that there are sound ideological and philosophical underpinnings to conservative values as well. Founding principles and religious values are legitimate in the mainstream, and so the people who hold them must be tarred with illegitimate caricatures of bigotry or ignorance to marginalize them. That is, or should be, insulting to honest people on both sides of the argument.

The thing is, if we don’t understand our opponents’ philosophies and what goes into their assumptions how can we tailor our arguments to oppose them and expose their fallacies?  And if we take the intellectually lazy position of ascribing ill intent or ignorance rather than understanding their arguments then we miss an enormous opportunity to debate issues on the strengths of our own arguments.  We’re seeing too much of that now, where informed and interested people are calling each other playground names instead of trying to persuade each other and educate those around them.

We would do our political system a favor, and maybe we could get back to watching boring beer commercials for a while if we spent a little more time listening and a little less time calling each other names.

–end–