‘Public Sector Reality’ findings bolster claims for pension reform
by Guy Page
Vermont public school teachers and state employees might have been underpaid once, but now they out-earn the private sector – refuting the myth that their low pay merits higher pensions, a new study concludes.
On Wednesday, Campaign for Vermont (CFV) released a new report entitled Public Sector Reality that compares the wages and benefits of teachers and state employees to the private sector and what that means for the current discussions around pension reform.
“As a former Commissioner of the Department of Labor and Commissioner of Human Resources, I was surprised by what we found in this report,” said CFV President Pat McDonald. “I think everyone needs to read this report because there were a number of assumptions that were carried through the years that were just plain wrong.”
The report found that public employees earn about $12,000 more per year in wages alone than the average private sector employee (a gap that grows further when benefits are considered). In retirement, this number jumps to over $20,000 per year. The average public employee in Vermont also earns right at the 75th percentile for all wage earners in the state. This means, on average, they are in the top 25% of income earners even before benefits are considered.
“It’s a myth when the union representatives stand up there (in the Legislature) and say the employees are underpaid, and that’s why benefits are so generous,” pension reform advocate David Coates of Colchester said during a Wednesday afternoon press conference.
“The goal is to better inform the public and policy makers about the reality around compensation for our public employees,” said Ben Kinsley, one of the lead researchers on the project. “There is a perception that state employees and teachers are underpaid and that we must offer extremely competitive benefits in order to compensate for this. In reality, the data doesn’t appear to back this up,” he concluded.
The organization hopes the pension task force, which is preparing to make recommendations to the legislature, will review this information and ask appropriate questions about the total compensation of public employees as they receive pushback on making critical changes to pension benefits.
“This study isn’t saying they’re overpaid,” Kinsley said during the press conference. But he added, “We don’t need to be afraid of making the state non-competitive.”
“We have always said we need to value our public employees,” said McDonald. “We should not break promises, but to do this we also need to make changes that safeguard the long-term stability of our pension funds. I think what we have learned here is that going forward we maybe don’t need to be quite as generous as we thought we did to compete with the private sector.”
She and Kinsley refrained from offering detailed specific recommendations on pension reform. However, they suggested that at the least, pension expectations for new hires should be reduced.
The full report can be found at CampaignForVermont.org/Public_Employees.
This news story includes excerpts from a Campaign for Vermont press release.
Categories: State Government
To say they are ‘in’ the top quarter of wage earners is a bit misleading. Yes, they are very well compensated by wages. But the article is correct in its focus that their annual wages don’t account for the money that goes annually toward their pension programs. Their pensions alone require more than a million dollars in the bank for each of them to sustain their guaranteed and ever-increasing annual retirement benefits when they begin to take them. Few others have those guarantees.
Also, to say they are ‘in’ the top quarter of wage earners is incongruent with the fact that 40% of the Vermont workforce is employed in the heavily tax subsidized government, education, and healthcare sectors as it is. More accurately, they ‘are’ the top quarter of wage earners.
I beg to differ. Look at salaries in other states. Match it with the requirements for education. 30 years and M. Ed. and I am barely making it on my pension!! Taxes, medical, dental, all chip away at the end result. No one mentions the State has been borrowing from this kitty and owes us millions! It’s in jeapordy of being solvent for any future payout. I’m mad as hell at the NEA and Treas. for allowing this to happen as well as all the other issues now degrading our schools!! There has been no pay back by the State! There has been no cost of living adjustments that have not been eaten by medical increases. We all need to work into our 80’s to live unless you are happily married and your spouse makes up for living costs. Lies, lies, lies, all around! This State is doing a criminal job of handling money of retirees!!!
Let’s see now.
In general, teachers today have three retirement plan options, Group A, Group C, or a 403(b) Plan. Yes, there are other options. But for this example, when a Vermont teacher works for 25 years with a final average salary (their highest average pay for three consecutive years) of $60,000, they are eligible for an annual pension benefit worth approximately 50 percent of that average final salary.
Teachers also receive a subsidized high end health insurance plan, even while they qualify for Medicare too.
And, importantly, teachers in Vermont also receive Social Security benefits.
If, for example, the teacher’s retirement system pay is $30K per year, and their healthcare is equivalent to a $1000 per month insurance premium, that’s a benefit worth $42,000 annually – not counting the Social Security and Medicare benefits they also receive.
When the average savings account earns less than 1% interest, the nest egg required to fund that annual $42K payout has to be equal to $4.2 million to sustain that one teacher. Even if the Rate of Return quadruples to 4%, a nest egg with a value of more than $1 Million is required to sustain it.
I can’t argue whether or not you can ‘barely make it’ on your retirement benefits. But most of us who worked for an even longer period in the private sector don’t receive anywhere near that level of retirement support. Perhaps you should try harder to live within your means – like the rest of us do.
Post Script: And while you have a graduate degree, does that make you any more deserving of earning the higher salaries it commands? When half of Vermont’s students don’t meet grade level standards, what have we been paying for?
Oh, yes, I get it. That’s the fault of the parents.
But if the parents are responsible, why don’t they have the authority to direct their tax dollars to the education programs they believe best meet the needs of their children?
additional benefits of only 180 work days, what other full time job works that.
they also get to accumulate their sick days and get a pay out when they retire, but if you accumulate sick days from 10-15 years ago and getting a pay out dollars on the current year of retirement they are in effect getting another benefit. many private companies and even the federal post office doesn’t allow you to carry over vacation or sick days. just awful. an how much does the union cost on the local tax payer
I beg to differ with you about “sick days”. When I retired I lost all the sick days that I accumulated. (and that was a lot!) I could not even donate them to the sick leave bank. State employees can only donate unused/unwanted earned vacation time to the sick bank.
As an employer, once a benefit is earned (e.g., a sick day or a personal day) I am not allowed to take that benefit away. Most employment agreements include qualifications for the accumulation of sick days or personal days. After all, they are intended to be used to provide a benefit for unexpected circumstances, be they illness or whatever. They are not intended to be used as a retirement fund.
For my employees, a worker must work a certain percentage of hours per month, or per quarter, to qualify for paid days off, be they sick days or personal days. Once the employee qualifies, they own that benefit. Of course, there are also caveats that stipulate, in some circumstances, how long the benefit can be accumulated. I typically required that the sick/personal day be used within a year of the time it was earned. But, again, this is all based on ‘employment at will’ negotiations. Employees agree to work under the terms presented to them. Blaming the employer for any misgivings they may have after the fact, is unreasonable.