Lower pay does not equal lean government

The editorial in Sunday’s Grand Forks Herald was entitled “From big government to lean government.” Tom Dennis, editorial page editor, posited that Minnesota can learn something from its neighbors, Wisconsin and North Dakota, by rejecting public sector unions and the “overpaid” workers with “overly generous” pension plans that the unions advocate. Here is the full quote:

Because thanks to North Dakota’s status as a right-to-work state, government workers here aren’t overpaid, nor are their pensions especially generous.

Traditionally, government workers accepted low pay in return for good benefits and job security. In Wisconsin and Minnesota, union strength changed those terms, so that public-sector workers get good pay in addition to good benefits and job security. But that has proven to be unaffordable as time and step increases roll on.

First, the title of the article is a misnomer. Lean services are about efficiency and effectiveness in design and operation. Wages and benefits have nothing to do with lean design. Second, the editorial offered no specific facts to back its claims.

Dennis mentioned, in passing, Minnesota’s reputation (or “Big Blue,” as he put it) for being a “high tax, high services” state. There is some truth to the cliché insofar as this is a generalization that relies on historical inferences and past practices. Beyond that, I did not find one bit of evidence to support the notion that Minnesota’s employees are overpaid relative to North Dakota’s public workers. Here is what I found with regard to pensions.

  • In North Dakota, employees are eligible to retire with full benefits under the Rule of 85, or age 65; whichever comes first. Minnesota previously had a Rule of 90, but the rule was phased out in 1989. Any public employees in Minnesota hired after July 1, 1989 must retire at age 65 (or 66 for younger persons, similar to Social Security) to receive full benefits. *
  • In North Dakota, the annual pension benefit for an employee is computed by taking average salary times two (2.0) percent per year of service. In Minnesota, the service credit is 1.7 percent per year of service.
  • In North Dakota, the mandated employee contribution is 5.0 percent of the employee’s salary with an employer match of 5.12 percent.** In Minnesota, the employee contribution is 6.25 percent, and the employer contribution is 7.25 percent.

Based on these observations, I cannot determine how Minnesota has “overly generous” pensions relative to North Dakota. Pensions are complicated business. And, as an employee in Minnesota, I have even less information about North Dakota’s plan than I have about Minnesota’s plan. If Mr. Dennis knows something that I do not, he did not include it in his editorial. 

The editorial also asserted that Minnesota employees are overpaid simply by virtue of having high levels of public sector unionization. I did not find even one example of a position of classification that is “overpaid.” I noted in the same print edition of the newspaper that the North Dakota State Superintendent of Schools salary is around $102,000 per year. To me, that does not seem like a large salary for the top education official in the state. One could compare any or all job classifications, which Mr. Dennis did not. Maybe North Dakota is underpaid. Without any analysis or examples, one cannot determine. Either way, being overpaid or underpaid is largely relative to one’s perspective.

My position in the City of East Grand Forks calls for frequent interaction and negotiation with public sector unions. I am very sensitive to the demands placed upon public sector budgets and how salaries affect those budgets. There are some very real issues that unionization brings to the table. I highlighted many of those in my public sector compensation series, especially Part 4. I negotiate with unions based upon facts, not generalizations and assumptions.

I do not find objectionable the tone of the editorial. Different governments can learn from one another. And, public sector compensation is a topic frequently discussed. Public sector officials must pay attention to the tone and sentiment of their constituencies. Editorials such as this, however, do nothing to advance the public discussion. They cast broad brushes without any verifiable facts to back their assertions. I listed some facts as best, and as succinctly, as I could about the two state’s pension plans. There may be mitigating factors that I overlooked.

I subtitled one of my recent posts “Facts are stubborn things” (thanks to the ICMA for publicizing that post). We often assume or wish certain things to be true in spite of direct evidence to the contrary. Or, sometimes we simply do not have enough time or resources to seek data, so we “go with our gut.” Mr. Dennis has to publish a column every day. He has to meet deadlines. I can easily criticize on my blog that has no deadlines, and is created largely in my “spare time.” Nonetheless, as members of a society and especially as those of us who are public managers, we need to be more demanding of ourselves and of those who watch our work. I’ve cited before the late Daniel Patrick Moynihan who said, “Everyone is entitled to (one’s) opinion, but not (one’s) own facts.”

*For those unfamiliar, the Rule of 85 means that an employee can retire with full benefits when the employees age plus years of service equal 85. For example, if a career public servant began with the state at age 25 and worked continuously, that public servant could retire with full benefits at age 55 (30 years service + 55 years age = 85).

**The North Dakota contributions rates are scheduled to increase in January 2013 to 6.0 percent employee contribution with a 6.12 percent employer match.

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