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Big Sky Business Journal: MPI and New State Transparency Site

…”The state website came as a complete surprise, albeit a nice one,” said Carl Graham, whose organization, Montana Policy Institute, (MPI) fought long and hard to get such a site.

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Press Release: Montana State and Local Public Employees Earn 15 Percent More in Total Compensation Than Private Sector Workers

Press Release
11/8/2012
For Immediate Release
Contact:
Glenn Oppel, Policy Director
Montana Policy Institute
406-443-4205
Summary:

Decision makers and taxpayers often hear that public employees earn less than private sector workers. In Montana, the State Human Resources Division’s latest biennial salary survey enforces this impression, concluding that public employees earn 13.3 percent less than comparable private sector counterparts. But the salary survey suffers from weaknesses in its methodology, omitting fringe benefits, comparing employees of unequal skill and experience, and evaluating public sector occupations that have no private sector equivalent (e.g. firefighters.) A new analysis from the Montana Policy Institute uses rigorous statistical analysis to compare public and private employees of similar personal and professional characteristics. They also calculate the compensation value of various fringe benefits. MPI’s new report “Public Versus Private Sector Compensation in Montana” finds that public employees earn 15.4 percent more than private sector counterparts in total annual compensation.

FOR IMMEDIATE RELEASE

 

Montana State and Local Public Employees Earn 15 Percent More in Total Compensation Than Private Sector Workers

Bozeman – 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 cost taxpayers $138 million. 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. After the pay plan agreement was reached, a local representative of theAmerican 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,” responded Glenn Oppel, MPI Policy Director, “but the data suggest that public employees are actually compensated far more generously than their private sector counterparts.”

Much of the perception that public employees fail to earn as much as private sector counterparts is fueled by standard compensation comparisons. The State Human Resources Division’s biennial salary survey is a case in point. Salary data culled for the survey is used to determine what the state calls the “market midpoint” of compensation for 750 occupations within stategovernment.According to the salary survey, state workers are earning on average 13.3 percent less than the market midpoint.

“The state’s salary survey unfortunately suffers from a weakness in methodology,” emphasized Mr. Oppel.

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. An additional 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.

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,” explained Mr. Oppel. “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.”

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, the MPI report shows that when comparing similar employees, 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.

“We encourage lawmakers and state analysts to take a close look at the methodology we use in our report,” suggested Mr. Oppel. “It more accurately compares total annual compensation between public and private sector workers in Montana, which can better inform the decision making process on the state pay plan legislation.”

The full report is available on the MPI web site at http://www.montanapolicy.org/2012/11/public-vs-private-sector-compensation-in-montana-study-2012/.

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596 Words

 

The Montana Policy Institute is an independent, nonprofit policy research center based in Bozeman. It provides analysis and information to encourage individual freedom, personal responsibility, and free markets in Montana.

Montana Policy Institute
67 W Kagy Blvd, Ste. B
Bozeman, MT 59715
406-219-0508
MPI is a Montana tax exempt corporation operated exclusively for the public benefit.  No substantial part of the activities of the Institute are used for the carrying on of propaganda or otherwise attempting to influence legislation, promote any political campaign, or on behalf of or in opposition to any candidate for public office.

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/

Media Trackers Montana: New Study Says State Employees Receive 15% More in Total Compensation than Private Sector Workers

A new study released by the Montana Policy Institute (MPI) shows that employees of the state of Montana receive 15 percent more in total compensation than employees in the state’s private sector.

Unlike Montana’s State Human Resources Division’s biennial salary survey, the MPI study on public and private wages in the state includes fringe benefits and compares total compensation to private sector equivalents.

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Public vs. Private Sector Compensation in Montana (2012)

By Glenn Oppel, MPI Policy Director

Click here for full study. (PDF – 4MB)

The State Human Resources Division (Division) of the Montana Department of Administration plays a key role in the adoption of a pay plan for state employees in Montana. It is for all intents and purposes the sole source of data on compensation used by policymakers and agency managers. Unfortunately, the data the Division produces is based on a flawed methodology and limited data.

The Division conducts a salary survey of Montana and surrounding states on a biennial basis to arrive at a private sector comparison for occupations and offices in state government. With the most recent survey, the Division determined that on average a majority of the public sector occupations studied have earnings that are 13.3 percent below what they call the “market midpoint.” The Division’s methodology is open to criticism on a number of points:

• Many positions in the public sector have no private-sector equivalent. Correctional officers and fire fighters, for instance, have no direct private sector equivalent. Comparing occupations like these to a “market midpoint” yields very little useful information.

• Comparing earnings among occupations does not account for the differences in age, education, and experience for the employees who work in these occupations.

• The Division’s analysis doesn’t include the value of employee benefits — health insurance, paid leave, pension, etc. — which make up a considerable portion of public employee compensation.

This new analysis from the Montana Policy Institute compares employees of similar personal and professional characteristics in both the public and private sectors of Montana. Instead of comparing pay in broad occupational categories, this report uses regression analysis to compare public and private employees of similar work experience, education, gender, race, and disability status. It also analyzes total compensation (which the state fails to do), including take-home pay as well as fringe benefits.

This report details the methodology and finds that public employees in Montana actually earn over 15 percent more than comparable employees in the state’s private sector.

New Website Provides State Employee Pay

Bozeman — Despite a two-year pay freeze, average state employee salaries and benefits have increased faster than the rate of inflation since 2004.

This and other findings are available in a new website, opengovmt.org, created by the Bozeman-based nonprofit Montana Policy Institute.

Pay data in the website was handed over by the state following a long legal battle and provides individual pay information for all state employees along with summary statistics in a variety of areas, including employee demographics, average compensation values, union membership, and funding sources.

According to MPI president Carl Graham, site users can review salary information for employees based on name, location, department, and many other criteria.

“The site is nonjudgmental about whether the numbers are too high, too low, or just right” said Graham. “But it does put the lie to recent statements that state employee pay has been frozen.”

According to site data, the real (after inflation) average increase in compensation was nearly 11 percent between 2004 and 2011, with the largest increases going to those making over $75,000 per year.

Compensation is likely to be a hot issue for the 2013 Legislature after it failed to ratify a pay raise for state workers in 2011. Lawmakers will be expected to vote on a recently announced 5 percent increase negotiated between public employee unions and the Schweitzer administration.

“This type of data should place everybody on an equal footing” added Graham. “Legislators and taxpayers have a right to know what their employees are paid, and that information simply was not available until now.”

Following nearly two years of open records request refusals by the state, MPI recently won a lawsuit demanding actual pay data for each state employee. That data is now available to the public at no cost on the opengovmt.org transparency portal along with detailed school revenue and spending information.

 

Contact:

Carl Graham

CEO

Montana Policy Institute

(406) 219-0508

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305 Words

For July 11th, 2012 Release

 

For an interview with Montana Policy Institute’s Carl Graham call (406) 219-0508 or email info@montanapolicy.org.

The Montana Policy Institute is a nonprofit, nonpartisan policy research center based in Bozeman. To find out more visit us on the web at www.montanapolicy.org or contact us at 406-219-0508.

 

Public Pay: A Lesson in Translucency

By: Carl Graham, CEO, Montana Policy Institute

Are taxpayers entitled to know how their money is spent, and to whom it is given? You’d think so. And so have a lot of judges. But in Montana results don’t always follow findings and converting even this modest proposition into a practical reality is not as simple as it might seem.

You may have read that Montana Policy Institute recently won a court battle to find out just how much we pay our state employees. But that victory for Montana’s taxpayers barely dented the wall that’s been erected between public information and the public. A penchant for secrecy combined with arcane accounting and budgeting systems allows basic information to be withheld regardless of the party in power or the virtuous noises of constitutional and statutory pronouncements. The tactics are consistent, the obfuscation relentless, and it’s all done on the taxpayer’s dime.

In our public pay example, one tactic we’ve seen is the argument that nobody has a right to know, or should even want to know, how much public employees are compensated. These are generally the same people who consistently (and sometimes correctly) bemoan “undeserved” executive bonuses or pay packages.

The difference, of course, is that nobody goes to jail for not kicking in their “fair share” of a bank president’s bonus. People do go to jail for not paying taxes. That creates a higher accountability standard for public dollars. Courts have consistently agreed that taxpayers’ knowing who benefits from their tax dollars is not only fair, but essential to accountable government.

Another and more insidious tactic is to hide data in a labyrinth of budgetary, accounting, and technological worm holes. Montana’s state government has literally hundreds of pay accounts, covering everything from basic hourly wages to, according to court records, horseshoe reimbursements.

These pay accounts are scattered around in budget and accounting spreadsheets that require professional-level accounting and database management skills to manipulate, or even to find. The result is that anyone – even a state legislator – who wants to see how much state employees are paid will only be provided an hourly rate; no overtime, bonuses, or even the number of hours worked. Which brings us to why we should care.

Montana has had a pay freeze in place for the past two years. And yet state agencies have provided millions of dollars in raises to selected employees. In addition, according data provided by the Legislative Fiscal Division, average employee pay outpaced inflation from 2004- 2010, and the number of state employees earning less than $25,000 per year decreased by nearly 60% while the number of those earning more than $100,000 increased by five times during that same period. Since anecdotal evidence suggests most employees are not seeing raises, we at MPI wondered who was benefiting from this pay migration and why. So we asked.

Unfortunately the information was hidden behind computer systems whose designers apparently didn’t contemplate people asking awkward questions, an open records law written when fax machines were cutting edge technology, and a bureaucracy that was unable or unwilling to overcome any of these inconveniences. Since the law doesn’t allow for penalties or even arbitration, we were forced to sue. And we won, although as of this writing we’re still awaiting the data.

And therein lies a lesson to all advocates of transparency and accountability in government, whether coming at it from the Right or the Left. Too often government transparency has been confused with government translucency, allowing only enough light through to see shadows of what’s truly underneath. We’ve seen it in Montana as lip service is paid to “right to know” laws while real, actionable information is hidden behind layers of red tape, obfuscation, and complexity. The system is fixed against those who write the very checks that the political and bureaucratic class cash.

These barriers to transparency and accountability exist at all levels of government. Lip service and selected data releases create the illusion of openness, but in truth are often merely shiny facades over a tangle of, well, we don’t know what’s under there. That’s the point. In our case public pay was the issue, but there are many more battles to be fought if we’re ever to go from the translucent to the transparent.

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For Immediate Release

704 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