Are we running a state or a fast food chain?

(Quite a smackdown of the Denver Post – promoted by Colorado Pols)

On Thursday, the Denver Post editorial board published a brief but disingenuous editorial that can only fairly be described as a declaration of war against Colorado’s middle class vis-à-vis Colorado’s state employees.

At issue, ostensibly, is the 3% pay raise that state employees have been advocating for since last fall and which was given temporary approval by the legislature’s Joint Budget Committee on Monday.

But really the issue goes well beyond state employees – this is an issue of whether Colorado is going to have an economy that works for the middle-class. This is about whether or not Colorado policymakers are going to lead on the issue of income inequality or whether they’re going to perpetuate economic stagnation for Colorado’s middle-class. The Post has clearly chosen the side of economic stagnation for the majority of Coloradans and now the question is which side are our elected leaders on?

The Post blithely states that the 3% raise plus average merit pay comes with an $88 million price tag. That number is presented without any citation or context in a deliberate attempt to stoke maximal outrage. The Post neglects to mention that the governor’s budget request is for $58.5 million in salary and merit pay funds, a request they seem to endorse when stating, “It’s not a question of whether state workers deserve a pay hike.”

So fully 2/3rds of what the Post insinuates is an extreme and untenable financial outlay had already been requested by the governor and is endorsed by the Post. Let us assume, arguendo, that the Post’s completely uncited $88 million figure is correct. The governor’s total budget request for 2014/15 is $21.9 billion dollars – $88 million dollars is just 0.4% of that total budget. If 30,000 middle-class workers aren’t worth 0.4% of our budget then what are they worth?

Next the Post posits another uncited data point, that “99% of state workers received some increment of merit pay” last year. This may actually be a true statement as far as it goes, but it doesn’t describe in any way the reality of the state’s merit pay system for workers. If you scored average on your performance plan (a Level 2 out of a possible 3) and had wages at or below the median in your salary range your merit pay ranged from 0.6% to 1.1%. That’s hardly the boondoggle that the Post would like to portray the merit system as. In fact, it means that many employees were, at best, keeping up with inflation. Is a pay raise actually a raise when it doesn’t actually increase your buying power?

To dive a little deeper into this complex issue let’s actually look at what’s happening in two departments, one “blue collar” and one “white collar” – Corrections and Information Technology. Based on data received by Colorado WINS from the Department of Personnel and Administration through an open records request, there were 2787 Correction Officer I and II’s with the state last year and only 12% received a Level 3 (the highest rating) on their performance evaluation, while 87% received a Level 2. In the Governor’s Office of Information Technology, a department one would anticipate to be stocked with high-achieving innovators motivated by potential merit pay, only 20% reached a Level 3, 78% received a Level 2. So while a significant reward for exceptional performance exists in theory, we see that in practice real gains through the merit pay system are few and far between.

Finally the Post gets to the issue of what they describe as a “generous” retirement savings plan that state employees enjoy. Let’s be absolutely clear – PERA is the only source of retirement income for state employees, they don’t receive Social Security – which also means that the state doesn’t pay the employers 6.2% share of Social Security tax either. In fact, in the latest PERA Comprehensive Annual Fiscal Report (CAFR) the state’s normal cost [1] for 2012 was just 1.64% of payroll. Compare that to the private sector where employers pay 6.2% of payroll into Social Security and 4.45% of payroll into some sort of tax deferred retirement plan. So the state’s annual contribution to their employee’s retirement is actually well below what the private sector provides, 1.64% compared to 10.65%. Meanwhile employees pay 8.05% of their annual pay into PERA. Can a system where employees pay 83% of the normal costs of their retirement be accurately described as “generous”?

During the recession state employees tightened their belts to continue to provide the highest possible level of service to the people of Colorado while working without any pay increases for 4 years. Let’s not forget that for two of those four years the employees not only didn’t receive a raise but they elected to take a 2.5% take home pay cut in order to stabilize PERA, which had been savaged by the excesses of Wall Street and the near collapse of the world economy. Last year, as the state economy improved, state employees were voted their first raise since the 2008 legislative session.

So with the full picture in front of us the question is, is the governor’s proposed 1.5% base building raise sufficient to recruit, maintain and motivate a qualified work force for the state? One needs only to look and the Consumer Price Index to see just how short of the mark that initial proposal falls.

While state employees saw no raise in 2010, 2011 and 2012 and take home pay cuts in 2010 and 2011, inflation continued unabated – eroding the buying power of more than 30,000 workers by 7% from 2009 through 2012. These are workers who live in every county in this state; they are your friends, family and neighbors. Their economic impact is felt in every local economy – from Phillips County on the eastern plains to Delta on the western slope and literally everywhere in between.

The state is Colorado’s largest employer and when state workers fall behind it drags down every local economy in the state. If you say that you care about rural Colorado’s future then you should support wages for workers who live in rural Colorado that let them keep their heads ever-so-slightly above water.

As the governor stated a week ago in his State of the State address,

While the national economy around us remains sluggish, Colorado’s unemployment rate has not gone up. It has gone down, to the lowest levels since 2008. This is our fourth consecutive year of economic growth. According to a study from the University of Colorado’s Leeds School of Business, we can expect robust job growth in virtually every sector of the economy this year. Colorado is ranked among the top five states in the entire country for business, careers and job growth.

These are all things that we as Coloradans should be immensely proud of. But job growth and a friendly business environment alone won’t move our economy forward. What competitive business pays their employees, year after year, less than the cost of living? Are we running government like a competitive business, as so many advocate we should, or are we running a fast food chain?

Our economy is driven by the middle class and state employees are a critical part of that middle class. A 2011 Denver Business Journal article cites the average worker pay in Colorado as $47,510. The state’s own salary survey this year showed that state employee salaries lag private sector workers by 9.2%. Don’t believe the state’s own survey? An independent audit by Buck Consultants shows that state employee salaries lag by 6.5%. Take your pick of numbers – it doesn’t change the fact that state employee pay lags behind private sector pay. And a 2% base building raise in 2013 followed by a 3% raise in 2014 doesn’t come close to putting workers back in the same financial position they were at in 2009.

This Post editorial is not just an attack on state employees; it is a divisive and insidious ideological attack on all middle class Coloradans. The Post wants to make this an issue of class warfare – pitting state employees against other middle class workers. But you cannot separate state employees from the rest of the middle class – state employees are the middle class.

Our economy nationally and here in Colorado isn’t working for the middle class. As the Denver Post reported in August, “In Colorado, the inflation-adjusted median hourly wage is down 1.7 percent [since 2000]…” Nationally we have unprecedented levels of income inequality. Workers are more productive than ever but that increased productivity is going to record corporate profits and record executive pay while middle class workers are in their third decade of stagnant wages. The state has a $500 million budget surplus, taking 0.4% of the state budget and investing a small portion of our annual budget back into Colorado’s communities helps the entire Colorado economy. State employees shop in your neighborhood grocery store, they buy clothes for their kids in your local stores, and they buy lunch at the restaurant on Main St.

In their editorial the Post, as an argument against state employee raises, says “…the pay of most private-sector workers [hasn’t] ballooned.” Shared misery is not a plan for economic growth. Wages need to rise for all middle class Coloradans and as Colorado’s largest employer the state can help Colorado’s middle class finally break free of the economic doldrums and start participating in the economic growth we all keep hearing so much about.

[1] Normal costs are the percentage of salary necessary to pay for the future benefits of an existing employee.

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