? ? While most eyes are riveted on Washington,

who is watching their own backyard? ?

RAPID EXPANSION OF STATE & LOCAL GOVERNMENTS

Employing More Workers Than Any Other Sector of the National Economy

with Spending Growth Faster than the General Economy

now spending $2.1 Trillion, $6,607 per man, woman and child and 18% of the total economy

with an Excessof 12.4 million Government Employees

because the number of employees continues to increase

faster than the national population

with average Wages, Benefits, Job Security and Inflation Protection

much Better than the Private Sector

If current spending had been at the 1947 ratio to national income

it would have been $1.4 Trillion less than it is - - equivalent to $4,605 excess per person

 

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Quick Links: Number Employees Trend, Employees per 100 Citizens, Spending % National Income, Govt. Compensation vs. Private Sector, Spending per Capita, Taxes, Debt, Comments, Actions

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Headcount should have increased slower than the 117% population growth over the past 63 years, if there were efficiency in government. But, government head-counts increased 488%.

Even with zero efficiency increases, a 63% headcount reduction would be required to eliminate the excess.

The difference between actual head-counts and what they should have been is an excess of 12.4 Million employees - - a quantity more than the total population of many of our states.

When you hear politicians brag about new job creation, you should ask how many are full-time private sector jobs with better pay and benefits than government workers receive - - and how many jobs were additions to state & local governments. See if they know the answer - - and if they do, watch how they answer when you ask: "WHY?"

"In the public (government) sector we routinely have five people doing the work of one. It's a simple fact. Are we over-governed in the United States? We are wildly, bizarrely, sickeningly, ludicrously over-governed." - by Tom Peters, also a consultant to former Vice President.

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REGULATORY COST IMPACTS NOT INCLUDED

Additionally, the above chart showing about 18% of the economy represented by state & local government spending understates the impact, as it does not include regulatory compliance costs mandated to the private sector by these government entities. The Regulation Cost Compliance Report shows $343 billion, or an additional 4% of the economy, is represented by the cost to the private sector of complying with state & local regulatory mandates - - bringing total state & local government cost impact to 22% of the entire economy - - and these regulatory costs are not accounted for in government budgetary mechanisms, or in impact backup statements.

All those extra 12.4 million state & local government employees (4.3 extra per 100 citizens) are not sitting still - - many are dreaming up and issuing new regulations which they mandate on the private sector which must bare both the cost of paying taxes to cover those extra government employees PLUS bare the cost of complying with their regulations. (note: no attempt is here made to differentiate between 'good and bad' regulations, just the cost of same and lack of accounting & control thereof).

QUESTION # 3:Must families of private sector workers pay more taxes to support higher wages, benefits and job security for state & local government employees than they receive?

STATE & LOCAL GOVERNMENT EMPLOYEES RECEIVE 31% HIGHER WAGES,  60% HIGHER BENEFITS+ MORE JOB SECURITY than PRIVATE SECTOR EMPLOYEES A. Higher Wages: State & Local government employees receive higher wages than does the private sector. The National Compensation Survey of Occupational Wages in the United States, July 2003, published by U.S. Department of Labor Bureau of Labor Statistics in September 2004 stated > "Average hourly earnings in private industry were $16.98, compared with $22.22 in State and local government (31% higher). Following is a breakdown of several categories > Average hourly earnings among white-collar occupations in private industry were $21.12, compared with $25.09 in State and local government. Among white-collar major occupational groups, workers in professional specialty and technical occupations earned $29.80 an hour in State and local government, while their private industry counter- parts earned $27.73. Average hourly earnings of workers in administrative support occupations were $13.69 in the private sector and $14.17 in State and local government."  (http://www.bls.gov/ncs/ocs/sp/ncbl0658.pdf) Reported June 2008, according to the federal Bureau of Labor Statistics, Public-sector service employees (including many blue-collar jobs) averaged $16.72 an hour in salary, 69% more compared to $9.87 for private-sector employees.http://money.cnn.com/2008/06/02/pf/retirement/vallejo.moneymag/index.htm?section=money_latest Here's a SHOCKER to some > Pay for City of Vallejo (California) - annually new-hires > firefighters is $80,603.74 - $97,974.66 (experience: "Any combination of education and experience equivalent to graduation from high school."). Warehouse Specialist: $48,818.02 - $59,338.66. Accounting Technician: $59,473.44 - $72,290.61. Drafting Technician: $53,875.54 - $65,486.51  (experience required: "some technical drafting experience is desirable." Meanwhile in May 2008 the city filed for bankruptcy.  Average pay existing beat-walking police officer $122,000 before overtime; fireman $130,000.  Police and firemen may retire at age 50 with 90% of prior pay. data sources 2/2008 on new-hire pay > http://agency.governmentjobs.com/vallejo/default.cfm?action=viewclassspec&ClassSpecID=62567&Agency=1108&ViewOnly=Yes http://agency.governmentjobs.com/vallejo/default.cfm?action=viewclassspec&ClassSpecID=62654&Agency=1108&ViewOnly=Yes B. Higher Benefits: State & Local government employees mostly have superior medical, prescription and dental insurance benefits, at lower premium costs to themselves, than nearly all persons in the private sector. It is often found that city employees receive medical insurance AND prescription drug benefits AND dental benefits, yet pay only 1-2% of the premium costs - - with local taxpayers picking up the other 98-99%. Not only is such a low employee payment mostly unheard in the private sector, but today senior citizens find their Medicare covers but 60% of medical expenses and they must pay 100% of any medi-gap insurance - - AND they must pay 100% of their prescription drug and dental expenses. Additionally, in general state & local government employee medical and pension obligations are guaranteed by taxes on local residents - - whereas nobody guarantees private sector medical and pension obligations. 'States pay more for public retirees too. According to the Employee Benefit Research Institute (EBRI), the average public-plan retiree got $16,188 a year in 2003, far more than the $7,200 their private company counterparts could expect. All in all, EBRI concludes, state and local government wage and salary costs are 40% higher than the private sector's; its employee benefit costs are 60% higher. According to the U.S. Census Bureau, major public pension plans paid out $78.5 billion in the 12 months ended Sept. 30, 2000. By the comparable period in 2004, that had grown to $117.8 billion, a 50% climb in five years.' "Sinkhole", Business Week June 2005 - http://www.businessweek.com/magazine/content/05_24/b3937081.htm C. Inflation Protection: Generally state & local government employee wages and benefits are protected from inflation, whereas most private sector employees have no such inflation protection. Question: Why should government employees receive better wages and medical insurance coverage (at lower premium costs to themselves than the taxpayers who are paying for their coverage?

Were you surprised with the above report showing state & local government employees earning more than those in the private sector? How about federal government employees? The Federal Government Spending Report chapter shows the following > >

Federal Government Employees Earn Twice as much

as the Average Private Sector Employee

“The closest thing to a lifetime sinecure in America is a federal government job, and now it turns out that it’s also a very lucrative way to make a living.  New data from the U.S. Bureau of Economic Analysis confirm that the average federal civilian worker earns $106,579 a year in total compensation, or twice the $53,289 in wages and benefits for the typical private worker. This federal pay premium costs taxpayers big bucks because Uncle Sam’s annual payroll is now $200 billion a year. No wonder that, with a per capita income of $46,782 a year, Washington, D.C. is the fourth richest among the nation’s 360 metropolitan areas… The Cato Institute’s Chris Edwards…finds that in 1950 the average federal bureaucrat received $1.19 for every dollar that a private employee earned. By 1990 that ratio had risen to $1.51 and is now $2. In 2005 federal wages rose 5.8% compared to 3.3% in the private sector.” Wall Street Journal 15 August 2006. Additionally, government workers realize significantly more job security than private sector workers.

So, let's again ask that QUESTION: Why should government employees earn significantly more than those in the private sector?

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Here's the Per Person Cost for State & Local Government Spending

- which continues to climb

You may have seen this chart elsewhere in the Grandfather Government Spending Report

It is repeated here because it includes the per capita national average for spending by state & local governments - the chart bar at the right - at $6,848 per person. This equates to $27,392 for a family of four.

- and that does not count federal spending per person as shown in the chart.

Much of this spending is covered by a combination of state income taxes, sales taxes, excise taxes, property taxes (tenants also pay for property taxes as a portion of their rents), and many, many taxes hidden in the cost of goods & services families purchase - - and some federal transfers.

If today's state & local govt. spending ratio were equivalent to the 1947 generation (at 6% of national income instead of today's 18%), then the per capita spending by state & local governments would be $1,899 instead of the $6,310 shown in the chart. That excess today amounts to $4,605 per person, or $18,420 per avg. family of 4. That's $1.4 Trillion excess spending by state & local government, compared to prior spending ratio.

If families could pay $1 trillion less state & local government taxes by supporting the prior spending rates, would that increase their living standards and saving rates AND reduce their need for debt? Of course !!

How do we justify this extra drain per family drain for state & local government? The author could not find any justification, since education quality is less today than before and less than foreign nations, crime rates are higher, the percentage of families without 2 parents is higher, real median family incomes are not climbing long-term as in the past, and household debt ratios are climbing while personal savings rates are falling.

Another thing we know is that this rapid expansion of state & local government has partly 'justified' itself by loading more regulations on the backs of citizens.

THE TAX TAKE FROM THE ECONOMY BY STATE & LOCAL GOVERNMENTS

The chart at the left shows the percentage of the economy consumed by state & local government taxes.

This is the sum of property taxes, state personal & corporate income taxes, sales taxes and other tax-charges (revenues from federal grants are excluded).

If state & local taxes had not increased faster than the size of the economy in the past 50 years then the right bar on this chart would be the same height as the left bar.

But the chart clearly shows that whereas taxes were 5.9% of the economy (left bar), they are now 16.1% of the economy (right bar).

This means this 'tax take' has increased 273% faster than the economy.

This reduced the effective share remaining to the private sector, and reduced the share of family income power, compared to prior generations.

This 16.1% is made up of 4% property taxes, 4% sales taxes, 3% individual state income taxes, 0.5% corporate income tax, and 4.5% other. This does not include revenue from the federal govt.

(for those interested in seeing the total tax-take, including federal taxes, see the Tax Report - showing the average citizen now works 5 months per year to pay all taxes, compared to 1.4 months in prior generations.)

In 2005, according to the U.S. Census Bureau(http://www.census.gov/govs/www/statetax.html), state tax collections (not counting rapidly increasing local city and county taxes) increased by an average of 9.7 percent across the country, which translated into $57 billion more in state coffers. On average, states charged each of their residents $2,192 ($8,768 per family of four), mostly from income and sales taxes.

The increase in the relative size of state & local government is explained not by increases in public services but by the soaring compensation of public employees (and their headcount)

The relationship between spending on public assistance and economic growth is strongly negative. The chief culprit was government employee compensation, which grew much faster than private sector wages in almost every state. The excess pay to public employees, the equivalent of a major income transfer program, has sharply inhibited growth. Data show that spending on education has some positive though diminishing effects on student learning when the money is spent for actual instruction, but administrative expenditures, which have been growing in relative importance, tend to have negative effects on learning. Source: Richard Vedder, "Economic Impact of Government Spending: A 50-State Analysis," NCPA Policy Report No. 178, National Center for Policy Analysis.

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COMMENTS

< >The greater the portion of our economy consumed by government at all levels, the smaller the Private Sector and the smaller the future economic opportunities are for my grandchildren.As reported in the Tax Report and according to Economy.com, since 1995 property taxes nationwide have jumped 48%, that’s 30% higher than inflation.Government employees have salary and benefit packages better than many in the private sector, plus protection from inflation. Ballooning state/local payrolls also create tremendous pension loads to be funded by our grandchildren. And, since many such pensions are outside the social security system, increased relative pressure is applied to that system by increased employment that should be in the private sector instead of in the public sector - see the Grandfather Social Security Report.Regulatory compliance costs imposed on the private sector by state & local governments. Regulatory compliance costs are not taken into account in the above pie chart but are covered in the Grandfather Regulation Report, which shows the additional cost burden per man, woman and child of $800. It stands to reason that the greater number of government employees the more the capacity to generate regulatory burdens on the 'free-market' private sector - - effectively further reducing its share of the economy and its capacity to generate family income improvement and positive balances of payment as shown in the Grandfather Foreign Trade Report.The increases in excess headcount and spending cannot be justified by education performance, since the Grandfather Education Report shows less education quality, despite record (inflation-adjusted) per student spending increases. Additionally, the Education Report shows the large increase in the quantity of non-teaching employees per student compared to prior generations - - no measurable quality improvements to show for it.Shouldn't state & local government budgets be required to include targets to reduce spending as a share of the economy? None do. Why Not?And, the lack of productivity and efficiency of state & local government seems to call into question the thought of some at the federal level to transfer functions and spending to lower levels of government. That's not controlling national government spending. Is it?Lastly - - The Voting Report shows a 36-year decline of voter participation in national elections. Although I do not know the participation rate in state & local elections, during the declining national voting trend state & local government has expanded quite nicely. Obviously citizens need to take strong action in their own 'back yards,' and JUST SAY NO to state & local budgets that do not reduce spending & headcount ratios.AN EXAMPLE OF ONE STATE:

 

This State and Local Government Report page includes nation-wide data. To get a 'feel' for how a similar treatment would appear for just one state, as an example, see the Florida Government Spending Report with its own long-term trend pictures of spending and headcount ratios - quite dramatic, and similar to the nation-wide findings. By showing this specific state it is hoped others will take a similar look at other states, using the format of the Florida report. The author would like to hear from those who have made similar studies of other states, to exchange information - email Michael Hodges.

RECOMMENDED ACTIONS - - PRIVATIZE

There are numerous studies proving that privatization of state and local government can realize tremendous savings and efficiencies. From studies of Lawrence Reed of the Mackinac Center for Public Policy to the Imprimis of October 1997 - - Governments must say "We are no longer going to perform this work with our own workforce." States are privatizing utilities, prison management, data processing, foster care and others. Counties and cities and schools are privatizing fire protection, police protection, waste-water treatment, street lighting, tree trimming, snow removal, hospitals, custodial and jails." And, "government must be most careful with the savings realized, less they be squandered on some other dubious government enterprise." The best thing is to prove the mettle, but passing back all savings to citizens via tax cuts. (author). A few examples from 'Imprimis':

< >Indianapolis - Mayor Steve Goldsmith has put up almost everything the city does on the list for privatization, including 60 services not previously competitively bid. He says, "A funny thing happens when public employees have to compete - they discover they really don't need so many supervisor categories and breaks." "It was extremely difficult to resolve citizen complaints and get the bureaucracy to move on anything. Once a service is privatized, accountability is almost instantaneous. If performance suffers, the city can quickly cancel the contract. Because of this city officials are really empowered."Flint - Mayor Woodrow Stanley experienced 32% savings in privatization. He said, "If I were some weak-kneed kind of namby-pamby politician, I wouldn't have touched this privatization issue with a 10-foot pole. Political leaders who aren't willing to take risks don't deserve to be in office." Considering the privatization option is nothing less than good stewardship. It prompts officials to open their minds and think about government services in ways they never pondered before. It forces them to find out the real free-market price, and need.Head count growth - state & local government should be required to achieve equal to or better productivity than the local private sector, such that its spending ratio to gross state product declines instead of increases, and that the number of its employees increases at a smaller rate than the population.Compensation - state & local government should be required to assure that their employees do not receive wages higher than the local private sector, nor receive medical insurance, dental insurance, and prescription drug insurance of a better quality or at a cost to employees less than in the local private sector, nor pension costs better than the private sector. A significant down-sizing of compensation is called for.And - considering the overwhelming evidence of poor education quality, including polling data, public school boards should privatize operations.- For a sample planning format for establishing action targets, See the Grandfather Action Plan Report. -

 

SHOULD WE DO SOMETHING

ABOUT

EXCESSIVE STATE & LOCAL GOVERNMENT

GROWTH ?

The action required is clear !

Increase the private sector share of the economy by reducing government's share !

http://mhodges701.home.comcast.net/~mhodges701/state_local.htm