Back in February 2014 the California Policy Center publicly announced the Transparent California website, developed in partnership with the Nevada Policy Research Institute. An article covering this announcement was posted on the Forbes Magazine website, entitled “Hundreds Of California Government Employees Are Paid Over $400,000 A Year,” which a review of 2013 Transparent California data (2014 data is still being assembled) easily confirms. As a matter of fact, in 2013, total compensation in excess of $400,000 was paid to 1,292 public servants in California. A staggering 2,818 of California’s public employees collected total compensation in excess of $300,000 in 2013.
Some have argued that it is misleading to claim people are making, for example, over $400,000 per year, when in fact the $400,000 being referenced is total compensation, not regular earnings. We reject this argument categorically. It is incumbent on anyone who assesses compensation to treat total compensation as the only valid measurement both for comparative purposes and, especially, when considering employer costs. Total compensation represents the actual cost to the employer, and it represents the actual value earned by the employee. Every penny of total compensation, whether it’s to fund future retirement benefits or to pay for current benefits such as health insurance, is something a worker will have to pay for themselves out of their regular earnings, unless it is instead paid for by the employer.
When talking about how much we pay our public servants, we contend that it is misleading to reference anything but total compensation.
The Forbes article published in Feb. 2014 also cited examples of excessive pay from Redwood City, which raises another issue, which is the reliability of the data gathered. As it turns out, and as the city acknowledged, the data provided to Transparent California by the city was not intentionally misleading, but easily misunderstood. This lead to the author of the Forbes article claiming that “nine employees made over $400,000 in total compensation with a total of 33, mostly police and fire department employees, making over $300,000 in total compensation in 2012.” The city’s response: “No Redwood City employee earned more than $400K. Furthermore, the correct number of employees earning more than $300K is 28, not 33 as stated in the op ed.” The city had put “exit incentive” payments into two data columns instead of just one and they got double counted by Transparent California’s researchers during the formatting process.
These are innocent mistakes. It’s worth noting that even the State Controller issues this disclaimer on all of their downloadable raw data spreadsheets showing public employee compensation – “the information presented is posted as submitted by the reporting entity. The State Controller’s Office is not responsible for the accuracy of this information.”
The real question, the real issue that isn’t going to go away, is how much should we be paying our public servants? How much can we afford to pay, and how much is fair both to these employees but also to taxpayers? So let’s take a look at 2013 data for Redwood City’s firefighters. We choose firefighters because the fire department in Redwood City, just as in nearly every other city in California, has the highest average pay and benefits of any major department.
To make this assessment, we used data provided to the State Controller for three years, 2011, 2012, and 2013. Here are the results:
As can be seen, during 2012 these firefighters earned significantly more overtime pay, probably because in 2012 full-time staffing was down from 2011, but then recovered again in 2013. It’s important to observe that the median total compensation is higher than the average. This is common when evaluating public safety pay and benefits in California, and refutes the claim that highly compensated executives skew the averages.
When evaluating the median total compensation of Redwood City’s full-time firefighters in 2013 of $226,365, it is necessary to consider what primary variables are driving that amount. The issue of overtime, for example, can be quite misleading. If you read the MOU in effect between Redwood City and IAF Local 2400, you will see that the 56 hour (fire suppression personnel who work 24 hour shifts) employees are apparently paid overtime when they work on any of the 12 paid holidays (MOU page 22, section 8.1). This makes sense, but if you assume these firefighters are, on average, earning 224 hours of vacation per year (10 years service, ref. MOU page 25, section 9.3), then their estimated actual 24 hour shifts per week are 2.32, an amount that includes only 3.9 hours of overtime. Holiday coverage is a sacrifice, to be sure, but apart from holidays, it does not appear that Redwood City’s firefighters are working significant amounts of overtime. Yet their median total compensation was $226,365 in 2013. Making these estimates is admittedly a fairly complex exercise and readers are invited to review the calculations on the “notes” tab of the downloadable spreadsheet “Redwood City 2013 – Firefighter Pay Analysis.xlxs,” a document that also shows all original SCO compensation data and the median/average calculations.
Another important variable affecting total compensation are pension contributions made by the employer. It is necessary to make two points on this topic with respect to Redwood City’s firefighters:
(1) The Firefighter MOU grants a raise to cover every increase to their payroll withholding for pensions:
To fully appreciate this, read page 33, section 17.3 of the MOU, which covers the calendar years 2013 through 2017. In year 1 (2013), the employees begin to pay 2% towards their pension costs via withholding, and their pay is increased by 2%. In year 2, another 2% is withheld, and another 2% raise is granted. In year 3, another 2% is withheld, and another 2% raise is granted, and in year 4, another 1% is withheld, and a 1% raise is granted. In all, by 2017, Redwood City firefighters will be paying 7% of their pay towards their pensions. As a percent of regular pay, the city (the taxpayers) in 2013 made a 40% pension contribution. That’s 7% (eventually) from the employees to pay for their pension, and 40% from the city. That’s a nearly six-to-one employer match for retirement.
(2) The city’s required pension contribution is going up, way up, no matter what. In February 2015 the California Policy Center published a study entitled “California City Pension Burdens,” compiling data and projections provided by the various pension systems, including, in this case, CalPERS. Here are some pension facts that confront Redwood City: Their estimated pension contribution in 2015 will be 6.61% of total revenue (all taxes and fees). Their pension contribution between 2015 and 2020 is assumed – according to CalPERS own projections – to increase by 54%, which, barring significant increases to employee withholding, means that instead of paying, on average $47,191 per firefighter (that is the 2013 number, the 2015 number is almost certainly higher), they will be paying $72,674 per firefighter. Just to fund their pensions. And barring pay decreases, that will elevate the median total compensation per full-time firefighter to at least $251,848.
All of these numbers are conservative, because in reality the increases to required pension contributions for firefighters will be more than what CalPERS projects for all of Redwood City’s employees, because firefighter pensions are far more expensive than those offered to miscellaneous employees. These numbers are also conservative because Redwood City is almost certainly not adequately funding their “OPEB” benefit (other post employment benefits), in particular, retirement health insurance (MOU page 49, section 19.2). And, of course, these numbers are grossly understated if you have any doubts regarding CalPERS’ ability to earn 7.5% per year through 2020 and beyond.
Asking whether or not California’s taxpayers should be paying firefighters roughly $250,000 per year is a question fraught with controversy. Clearly firefighters deserve a pay premium for the risks they take in their job. But firefighter unions have exploited the well-deserved respect firefighters have earned, and used that in conjunction with their dues revenue, to exert almost irresistible pressure on local politicians.
The rates of total compensation currently earned by Redwood City’s firefighters are by no means unique. Comparable levels of pay and benefits for firefighters are in place throughout California’s cities. When firefighter jobs that pay a quarter-million a year in exchange for slightly over two 24 hour shifts per week open up, literally thousands of people apply for them. The goal of public safety would be enhanced if we could hire more public safety personnel, firefighters in particular, for less money. But today there is no viable political coalition, anywhere, with the power and will to make that happen.
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