A recently released study by the California Public Policy Center (CPPC) entitled “Costa Mesa, California – City Employee Compensation Analysis,” using actual payroll data provided by the city, has calculated the average total annual compensation for an employee of that city to be $146,863 during 2011. Anyone wishing to review their calculations can download the spreadsheet by clicking on this link: Costa_Mesa_Total_Employee_Cost_2011.xlsx.
In earlier UnionWatch summaries of CPPC compensation studies, we’ve used headlines referencing total compensation of $175,000 per year, both for Anaheim and for San Jose. Those figures, even higher than Costa Mesa’s, were based on assuming that CalPERS will eventually have to lower their earnings projections from 7.5% per year to 4.5% per year, and if they do, the average total compensation the workers in those cities receive, around $150,000 per year, will have to be increased to at least $175,000 per year in order for them to meet their negotiated pension benefit obligations. Costa Mesa is in the same boat. Here is the unadjusted, current and exact total compensation averages for all three cities – and it is unlikely these three amounts are unrepresentative of most California’s cities:
San Jose: Average total compensation, all workers = $149,907
Anaheim: Average total compensation, all workers = $146,551
Costa Mesa: Average total compensation, all workers = $146,863
In all three cases, as documented in the CPPC studies, this average total compensation is more than twice the average household income earned by private sector taxpayers in each city.
It is important to reiterate the relevance of “total compensation.” To quote from the Costa Mesa study:
Journalists who dutifully report “base pay” rates for city workers that sound somewhat high, but not ridiculously unreasonable, are ignoring glaring facts about compensation: (1) “Other pay” now adds more than 50% to the current earnings of many city workers, and (2) The only honest measure of how much someone earns is their total compensation, i.e., everything the employer pays each year in direct pay and benefits for an employee. That is what they earn. That is what they cost taxpayers. That is the number that should be compared to what taxpayers themselves earn. In Costa Mesa, the average employee’s total compensation of $146,863 adds 69% on top of their base pay. This is real money, and journalists who continue to ignore total compensation statistics in favor reporting only base pay are doing their public a disservice.
Put another way, an independent contractor who manages to earn $70,000 per year, which happens to be the average base pay – almost certainly understated – reported by the U.S. Census Bureau for a state or local government worker in California, has a total compensation of $70,000 per year. This is because an independent contractor is self-employed. If they want health insurance, they buy it themselves. If they want to save for retirement, they spend their own money. There is no 3rd party employer kicking in more money.
As documented in a UnionWatch analysis, “Self-Employed Workers vs. Government Workers – A Financial Comparison,” here, using extremely conservative assumptions, after taxes and benefits, is the comparison between an independent private contractor and a government worker who both earn $70,000 per year:
A self-employed person making $70,000 per year, once they’ve paid their taxes. social security and insurance premiums, will enjoy compensation of $45,021 per year. A government worker making $70,000 per year, once they’ve paid their taxes, pension contribution and health insurance co-pays, with the value of the employer paid current and deferred benefits added back, will enjoy compensation of $74,781 per year, 66% more.
Let’s not forget that the self-employed person, who contributes 10.25% of their gross income to social security, will collect perhaps $20,000 per year from social security starting at age 67, whereas the government worker will collect, on average, a pension that averages well over $60,000 per year starting, on average, at age 61.
Once you accept the fact that total compensation is the only accurate way to compare rates of pay in the public sector vs. the private sector, it is fair to wonder why our public servants are earning more than twice as much as the taxpayers who serve them. Here then, drawing from the CPPC study, are the average rates of pay for Costa Mesa in greater detail:
As can be seen, the average for non-safety personnel, while still well above private sector norms, is not where the most surprising data lies. It is the police, who have total pay that averages $181,709 per year, and the firefighters, whose average pay averages $208,401 per year, where we see truly astonishing figures.
When compiling all this data, it is easy to stick to the numbers and avoid the equally controversial but far more debatable causes behind these numbers. Perhaps the most egregious example of this would have to be the “other pay” for firefighters in Costa Mesa, which averages $56,395 per employee, a number that includes $44,810 per year of overtime earnings per employee. Why did Costa Mesa pay this much overtime to their firefighters?
If you review the contract negotiated between Costa Mesa and their firefighters union, you will see that if firefighters work more than 56 hours per week (two and one-third 24 hour shifts per week), they earn overtime pay at a rate 50% greater than their base pay (“time and a half”). But the agreement is also written to require overtime pay if firefighters work any shift that isn’t their regularly scheduled shift. So if one firefighter calls in sick and another firefighter has to work that shift instead of their regular shift, voila, they earn overtime pay. Whatever the cause, firefighters in Costa Mesa increased their base pay by nearly 50% in 2011, simply by working overtime – and many times they received overtime pay not for putting in extra hours, but simply because they had to swap shifts.
When discussing the role of public sector unions in driving cities to negotiate unaffordable and excessive rates of compensation and benefits for public safety personnel, it is necessary to acknowledge legitimate reasons why their compensation has increased well beyond the rate of inflation for at least two decades. During that time our society has placed an increasing premium on maintaining public safety. During that time we have also come to appreciate more than ever the need to pay a premium to anyone who risks their safety to ensure our safety. And during that time the nature of crime and catastrophes have become more complex and challenging. Crime has become globalized, catastrophes are more diverse and fighting them requires more preparation, options for medical responders are more sophisticated and require more training. We should pay our public safety personnel more than we used to. That much is indisputable. But it is also becoming indisputable that if we don’t roll back the total annual direct compensation package for police and firefighters to something well south of today’s average that exceeds $200,000 per year, pretty much every city and county in California is going to go bankrupt.
Whether or not it is appropriate to unionize people who are empowered to protect and to rescue members of the public is a question that is inextricably tied to the issue of how citizens may ever reduce their pay and benefits in order to financially rescue our cities and counties. Because unionizing empowers public safety employees to consolidate and enhance what is already tremendous authority, granted with what is historically a precarious trust. Harassment of an elected official in Costa Mesa by a private investigator with ties to a law firm retained by police officer’s unions recently made national headlines. This shameful affair was not an isolated incident. Public sector unions have not only used their power to harass their political opponents, they protect the incompetent and the criminal among their members – often to the point of absurdity if not tragedy. In all these cases, the public interest is the victim.
Discussing matters as sensitive as rates of pay cannot be productive when reformers who are simply recognizing the financial constraints we live under face relentless demonizing, outright harassment, and political annihilation by deep-pocketed public sector unions whose primary agenda is to optimize the financial status of their organizations and their members. It is pertinent to wonder whether or not genuine reforms to the pay, benefits and work rules of public employees can ever be accomplished, without first introducing fundamental, game-changing restrictions on the activities of public sector unions.