Sync

Out
of
G over n me nt and Pr iv ate E mpl oye e C omp e ns at i on i n I l l i nois
By Wendel l C ox Ju ly 19, 2 0 1 1

Contents
Executive Summary....................................................................................................................... 1 Key Findings................................................................................................................................... 2 Out.of.Sync:.Government.and.private.employee.compensation.in.Illinois Introduction .......................................................................................................................................5 Average Employee Compensation in Illinois ............................................................................5 Employee Compensation Trends ....................................................................................................8 Government and Private Employee Compensation Comparability .................................9 Non-Monetary Advantages of Government Employment .................................................15 Conclusion ........................................................................................................................................17 Appendix: Detailed Compensation Estimates .................................................................................20 Endnotes ......................................................................................................................................................23
Graphics
Graphic 1: 2008 Wages & Benefits: Illinois Full-Time Equivalent Employees .......................................................................................... 7 Graphic 2: Estimated Annual Compensation per Full-Time Equivalent Employee: 2008 ...................................................................... 7 Graphic 3: Compensation per Hour Worked, State and Private Employee ............................................................................................... 7 Graphic 4: Wages and Salaries: 1993-2008, Annual Average for Full-Time Equivalent Employees ....................................................10 Graphic 5: Employer Paid Benefits: 1993-2008, Annual Average for Full-Time Equivalent Employees.............................................10 Graphic 6: Employee Compensation: 1993-2008, Annual Average for Full-Time Equivalent Employees .........................................10 Graphic 7: Cumulative Employee Compensation - Comparable Jobs, Estimated Private and State Government: Career ..............12 Graphic 8: Projected 35-Year Career Wages, Full-Time Equivalent Employees .....................................................................................14 Graphic 9: Projected 35-Year Career Benefits, Comparable Full-Time Equivalent Employees............................................................14 Graphic 10: Projected 35-Year Career Compensation, Comparable Full-Time Equivalent Employee ...............................................14 Graphic 11: Cumulative Compensation for Time Off, Estimated Private and State Government Employee: Career .......................15 Graphic 12: Projected 35-Year Hourly Compensation, Comparable Full-Time Equivalent Employee...............................................15 Appendix Table A-1: Estimated State Government Employee Annual Compensation by Function: 2008, Ranked by Wages and Salaries per Full-Time Equivalent Employees ................................................................20 Appendix Table A-2: Estimated Local Government Employee Annual Compensation by Function: 2008, Ranked by Wages and Salaries per Full-Time Equivalent Employees ................................................................21 Appendix Table A-3: Estimated Private Sector Employee Average Annual Compensation by Industry: 2008, Ranked by Wages and Salaries per Full-Time Equivalent Employees ................................................................22
Guarantee of Quality Scholarship The Illinois Policy Institute is committed to delivering the highest quality and most reliable research on matters of public policy. The Institute guarantees that all original factual data (including studies, viewpoints, reports, brochures and videos) are true and correct and that information attributed to other sources is accurately represented. The Institute encourages rigorous critique of its research. If the accuracy of any material fact or reference to an independent source is questioned and brought to the Institutes attention in writing with supporting evidence, the Institute will respond. If an error exists, it will be corrected in subsequent distributions. This constitutes the complete and final remedy under this guarantee. Wendell Cox is an international public policy consultant in Belleville, Illinois, who specializes in government compensation and other issues. Amanda GriffinJohnson provided research assistance for this report.

Out of Sync Government and private employee compensation in Illinois

Executive.Summary
Since the January 2011 tax hike, Illinoisans have seen more of their household budgets go to shoulder the growing cost of government employee compensation packages packages made up of overly generous pay and perks that many can only dream of. Righting this imbalance is one of the great social justice questions facing policymakers today. In 2008, government employee wages and benefits accounted for one-third of Illinois state government spending and two-thirds of Illinois local government spending. This study details how much of this spending is disproportionate with comparable private sector spending and current financial realities. As fiscal year 2012 begins, governments in Illinois continue to face serious budgetary challenges perhaps the most serious since the Great Depression. This situation requires a thorough review of expenditures, particularly in the realm of government employee compensation. Solving the states fiscal crisis and, by extension, the flight of people and businesses from Illinois, will require tackling government labor costs. The expectations of state workers should be balanced with those of others who rely on government spending, such as welfare beneficiaries, contractors, service providers and the states creditors, as well as the taxpayers who pay the bills. Right-sizing public employee compensation will help balance the budget in a fair manner, maintain funding for core government services and protect overburdened taxpayers, thereby resulting in a stronger, more prosperous Illinois.

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Key.Findings
Average Employee Compensation in Illinois Overall, the average compensation for an Illinois government worker is higher than the average compensation for a private sector worker in Illinois. It is estimated that in 2008: Compensation per state government employee averaged $69,500, which is 23 percent more than the private sector worker average of $56,500. Much of the difference was in employerpaid benefits, which were more than 1.5 times that of private employees. State employees received 16 percent more in wages and salaries than private employees. Compensation per local government employee averaged $63,100, which is 12 percent more than the private sector worker average of $56,500. Much of the difference was in employerpaid benefits, which were more than 1.5 times that of private employees. Local government employees received 4 percent more in wages and salaries than private employees. Compensation Per Hour Worked: The gap between state and private employee compensation is greater per hour worked. The more generous state government paid time off policies raise the state government employee compensation advantage to 28.8 percent over private employees. Likely Understatement of Government Employee Benefits: These data, it should be noted, appear to understate the difference between government and private employee compensation in Illinois. The state has underpaid its annual pension and retiree health care obligations for some time. These deficits, which amounted to $2 billion in 2008 alone, will need to be paid. If the payments had been made on time, recorded levels of state employee compensation would be higher. There also is evidence of underpayment of annual pension and retiree health care obligations in local governments, though the extent of underfunding is undetermined. Further, the cost to taxpayers has been increased by the failure to make on-time payments, because of the obligation to pay interest on deficient balances (interest that would otherwise be earned by the funds). However, this is not a cost of employee compensation, but rather results from the states financial management difficulties. At the same time, government employee compensation has been rising faster than that of private employees. Between 1993 and 2008, overall full-time equivalent state employee compensation rose $11,700 relative to private employee compensation. Local government employee compensation rose $4,800 relative to private employee compensation (all data is adjusted for inflation). Comparing Private Sector and Government Jobs There is no reason for government employee compensation to differ from private employee compensation for comparable jobs. However, differences between private and government employment make it difficult to compare employee compensation for equivalent positions. Studies have reported substantially different results, even using purportedly equivalent jobs. The ultimate test is the value employees themselves place on the job. The value of a job is indicated by more than wages or even total compensation. A job can be more or less attractive based upon

Between 1993 and 2008, overall full-time equivalent state employee compensation rose $11,700 relative to private employee compensation.

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other characteristics, such as job security, paid time off, responsibilities and eventual retirement income. The value of a job and the attractiveness to the employee may be most effectively evaluated using relative turnover rates (voluntary separations) between comparable jobs in the government and private sectors. The employee turnover rate at the state level is comparatively low, at approximately one-quarter the private sector rate, which could indicate overall that employee compensation is higher than appropriate. Equity between the government and private sectors requires that comparable jobs be equally attractive (have the same market value), including both monetary and non-monetary factors. Career Compensation: To circumvent the difficulties in categorizing jobs, this analysis uses a comparable job analysis, which assumes that three employees of equal education and skills begin working for the state, a local government and a private company on the same day in 1993, in jobs of the same responsibility at the same wage or salary level. Over the course of the three careers, wages, salaries and benefits are adjusted based upon trend differences between the sectors: Over a 40-year career, the private sector worker would receive compensation of $2,246,000. The state employee would receive $2,890,000 which is $644,000 more than the private employee. The local government employee would receive $2,580,000, which is $334,000 more than the private employee. Over a 35-year career, the private employee would receive compensation of $1,973,000. The state employee would receive $2,457,000, which is $484,000 more than the private employee. The local government employee would receive $2,236,000, which is $263,000 more than the private employee. Career Compensation Per Hour Worked: This analysis, however, understates the value of state government employment because state workers receive more paid time off than private sector workers. It is estimated that over a 40-year career, the average state worker would receive $210,000 more in compensation for time off than a private employee. Over a 35-year career, the state government employee advantage is estimated at $169,000. For example, state workers would receive approximately 440 more days of paid vacation days, personal days and holidays over a 35-year career. Over a 40-year career, the same state worker would receive approximately 510 additional paid days off when compared to the average employee in the private sector. The comparable private employee would have to work 6.8 days to earn the same compensation as the comparable state employee earns in five work days (one week), and would need to work 6.6 days to earn the same compensation as the average local government employee. Additional Advantages of Government Employment: There are additional advantages of government employment relative to private sector employment. These include superior job security, superior sick time accrual, earlier retirement and higher retirement incomes. Further, in 2009, state and local government employees took approximately one-third more paid sick days than private sector employees at the national level (Illinois data was not available). Government employees have even more significant advantages in having their compensation generally established administratively. Additional advantages come through their political access to officials responsible for making compensation decisions, rather than through the competitive conditions. Conclusion It is important to note that employees of the state of Illinois, its units of local government and its private companies are overwhelmingly dedicated to their jobs and effective in their job performance. Nonetheless, there is strong evidence that government employees are better compensated than private employees in comparable jobs. The existing and expanding compensation gap between

The existing and expanding compensation gap between government and private employees is unlikely to be sustainable in the long run, especially with the economic and fiscal challenges facing Illinois.

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government and private employees is unlikely to be sustainable in the long run, especially with the economic and fiscal challenges facing Illinois. There is a need to undertake reforms, such as moving from unsustainable defined-benefit pensions to defined-contribution retirement systems, to evolve toward parity between government and private employee compensation. These reforms should take into full consideration monetary and non-monetary factors. Because turnover rates may serve as the best indicator of job attractiveness, policymakers should seek to align compensation with the private sector. With that, Illinois public sector turnover rates should converge with those in the private sector.

There is a need to undertake reforms, such as moving from unsustainable defined-benefit pensions to definedcontribution retirement systems, to evolve toward parity between government and private employee compensation.

In preparing this report, difficulties in state employee compensation reporting were evident, which make it exceedingly difficult to obtain comprehensive data. There appears to be no comprehensive state personnel report detailing employee wages, salaries, employer-paid benefits and the number of employees. For example, it was reported that there is no central source for sick day usage information. The lack of comprehensive and readily available data on state employment is a serious problem. A comprehensive state and local government employee compensation reporting system should be implemented without delay so that elected officials, administrators and taxpayers have access to accurate and reliable data. The State Comptroller could issue these reports.

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G over nment and Pr ivate Employe e C omp ens at ion in Il linois

Sync

Out of

Introduction
Governments in Illinois face serious fiscal challenges perhaps the most serious since the Great Depression. Employee compensation is the largest element in government budgets. In 2008, government employee wages and benefits accounted for one-third of Illinois state government and two-thirds of Illinois local government operations spending.1 Further, there is massive under-funding of pension and retiree health care programs, which could indicate that government employee compensation is higher than reported. Private sector workers, whose taxes fund governments and government employee compensation, have experienced stagnating or even declining real incomes and higher unemployment. Private sector employment has become comparatively less secure as business competition has increased, while government employment has remained comparatively secure. At the same time, government employee compensation has risen substantially and appears to generally exceed that of private sector employees with similar duties and education. This analysis compares state and local government employee compensation in Illinois with private sector employee compensation in the state.

In 2008, government employee wages and benefits accounted for one-third of Illinois state government and twothirds of Illinois local government operations spending.

Average.Employee.Compensation.in.Illinois
The optimal resource for obtaining state government employee compensation data would have been Illinois-based governmental resources. Unfortunately, Freedom of Information requests for such information yielded no evidence of an overall state employee compensation reporting system an issue that is discussed in more detail in the reports conclusion. Of course, it would have been a daunting task to collect data on local government employee compensation from the many units of local government throughout the state. As a result, this report relies principally on national reporting systems, administered through the U.S. Department of Commerces Bureau of the Census and Bureau of Economic Analysis.2 The private employee compensation data is principally obtained from the U.S. Department of Labors Bureau of Labor Statistics and the U.S. Department of Commerces Bureau of Economic Analysis. This analysis uses 2008 data.3 All data was normalized to reflect full-time equivalent employees.4 Wages and Salaries: It is estimated that average state and local government full-time employee wages and salaries in Illinois were higher than those in the private sector in 2008:5

Page 6 of 24
The average Illinoisan working in the private sector was paid $47,200 in wages and salaries. The average state government worker was paid $54,900 in wages and salaries, which is 16 percent higher than the private employee average. The average local government worker was paid $48,900 in wages and salaries, which is 4 percent higher than the private employee average.

The average state government worker received $69,500 in total compensation, which is 23 percent more than that of the average private sector worker.

Employer-Paid Benefits: The gap between private and government employee benefits in Illinois was substantially greater than the wage differential. In 2008:6 The average Illinoisan working in the private sector received $9,300 in employer-paid benefits. The average state government worker received $14,600 in employer-paid benefits, which is more than 1.5 times that of the average private employee. The average local government worker received $14,200 in employer-paid benefits, which is more than 1.5 times that of the average private employee. Moreover, as is discussed later in this study, state government employee benefits may be understated because payments to pension and retiree pension programs have been less than required. Total Compensation: As a result of their higher wages, salaries and benefits, state and local government workers in Illinois have higher overall compensation than private sector workers. In 2008 (Graphic 1 and 2, page 7): The average private sector worker received $56,500 in total compensation. The average state government worker received $69,500 in total compensation, which is 23 percent more than that of the average private sector worker. The average local government worker received $63,100 in total compensation, which is 12 percent more than that of the average private sector employee. Further, in the eight-month time frame between June 1, 2011, and Feb. 1, 2012, employees represented by the American Federation of State, County and Municipal Employees (AFSCME) will receive a combined 7.25 percent in cost of living wage increase (at the time of publication of this report, a portion of this raise was under budgetary dispute). This is a higher average wage increase than is likely in the private sector and could expand the state employee compensation advantage over private employees even further.7 These financial comparisons do not account for any variations in education or employment conditions such as employee security, employer security, differing responsibilities, productivity levels or the number of hours worked. Compensation Per Hour Worked The gap between state and private employee compensation is greater when compared based upon hours of work. State workers receive more paid time off (vacation days, holidays and personal days) than private sector workers. It is estimated that state employee compensation per hour worked is 28.8 percent more than that of private sector employees (Graphic 3, page 7).8 Detailed paid time off data is not available for local government employees.

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Graphic.1 2008 Wages & Benefits: Illinois 2008.Wages.&.Benefits:.Illinois FULL TIME EQUIVALENT EMPLOYEES Full-Time.Equivalent.Employees
$80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Private State Benefits Wages Annual Compensation

$14,600 $54,900

Calculated from Bureau of Economic Analysis data

$9,300 $47,200

$14,200 $48,900

Local

Graphic.2 Estimated.Annual.Compensation.per.Full-Time.. Equivalent.Employee:.2008

Private Employees
Wages & Salaries Employer-Paid Benefits Total Compensation
$47,200 $9,300 $56,500

State Employees
$54,900 $14,600 $69,500

Local Government Employees

$48,900 $14,200 $63,100

Estimated from Bureau of the Census, Bureau of Labor Statistics and Bureau of Economic Analysis Data. Does not include adjustment for underpaid pension and retiree health care obligations.

Compensation per Hour Worked Compensation.per.Hour.Worked

State.&.Private.Employee
STATE & PRIVATE EMPLOYEE
$40 $35 $30 $25 $20 $15 $10 $5 $0 Private State Assumes 6 Years Seniority

Graphic.3

$38.40 $29.81

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Likely Understatement of Government Employee Benefits The nationally reported data, however, appears to understate the difference between state and private employee compensation because of the sizeable amounts by which the state has underfunded employee pension and retiree health care programs. A report by the Pew Charitable Trusts indicates that Illinois has the largest unfunded pension ratio of any state, at only 51 percent of full funding.9 In 2009, the state paid approximately $1.2 billion less than the amount required to fully fund the four separate state employee pension programs for the year.10 Pew further indicates that the state was 76 percent ($2.4 billion) short of funding retiree health care (which is 99.9 percent underfunded) in 2009. Overall, state employee pension funds were found to be underfunded by $62 billion, while retiree health care was underfunded by $44 billion.11 These payment shortfalls represent employee compensation (benefits) that should have been paid, but were not. Thus, employee benefits have been understated in any year the state has failed to pay in full. The amount of underpayment allocable to any year is unknown. It would appear that any reporting in recent years would have understated the actual employee compensation. There is a similar problem of unknown dimensions in local government as well. Some of the states largest units of government have been underfunding retiree benefits as well, such as the city of Chicago and Cook County.12 Related Interest Costs: There are additional costs to the taxpayers that result from the states failure to meet its pension and retiree health care obligations. The state is required to pay interest on the amount of its retirement underfunding, which amounted to nearly $700 million in 2009.13 Moreover, because the state payments were short in 2009 by $900 million, the net pension obligation rose approximately 10 percent. This means that the interest on the unfunded obligation (net pension obligation) could be even higher for 2010.14 In addition, the state has borrowed to make payments to the retirement funds, in an attempt to reduce the underfunding. There have been recent bond issues of $10 billion (2003), $3.5 billion (2009) and $3.7 billion (2011) principally to pay pension liabilities. The interest on this borrowing adds additional costs that would not be incurred if the state kept its retirement fund contributions up to date. The problem also extends to units of local government, though the extent cannot be determined. For example, the Chicago Transit Authority issued $2.3 billion in revenue bonds in 2008 for the principal purpose of paying down its previous underpayments to pension and retiree health care funds.15 It is important to recognize that these excess interest payments are not inherently issues of government employee compensation or the result of negotiations between the state and local government employee unions. They are a consequence of the states financial management difficulties. There are also instances of failure by private corporations to fully fund their pension programs. However, because defined benefit pension programs are relatively rare in the private sector (unlike government), these amounts are not likely to be large in relation to total private sector payrolls.

Illinois government employee compensation has been outpacing that of private employees over the last 15 years.

Employee.Compensation.Trends
Illinois government employee compensation has been outpacing that of private employees over the last 15 years for which data is available. In fact, Illinois private sector employees have experienced declining wages and salaries, while state and local government wages and salaries have increased (inflation adjusted).16

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From 1993 to 2008: Private sector employee wages and salaries declined 1.6 percent.17 State government wages and salaries increased 12.6 percent, while local government employee wages and salaries increased 2.4 percent (Graphic 4, page 10.18 Private sector employer-paid benefits declined 5.2 percent.19 State government employer-paid benefits increased 41.1 percent while local government employer-paid benefits increased 19.3 percent (Graphic 5, page 10).20 The combined result is that private sector employee compensation declined 2.3 percent. State government employee compensation rose 17.6 percent, while local government employee compensation rose 5.8 percent (Graphic 6, page 10). Between 1993 and 2008, overall, full-time equivalent state employee compensation rose $11,700 relative to private employee compensation. Local government employee compensation rose $4,800 relative to private employee compensation (all data is adjusted for inflation).21

Government.and.Private.Employee.. Compensation.Comparability.
Government employee compensation should be the same as private employee compensation for comparable jobs. However, differences between private and government employment make it difficult to compare employee compensation for equivalent positions. Comparability involves much more than education levels, for example. Apparent responsibility levels are difficult to judge. In the end, comparability may be nearly impossible to determine objectively. There are, for example, differences in education levels, paid time off, job security, responsibilities and other factors. Moreover, studies have shown substantially different results in purportedly comparable jobs. For example: The Center for State and Local Government Excellence found employee compensation in the state and local government sector to be less than that of employees in comparable jobs in the private sector.22 The state of California found that state employee compensation was generally above that of comparable jobs in the private sector. The report also found that state employee compensation was generally less than that of other public sector employees in the state (such as local government employees),23 implying that local government employee compensation is also higher than in the private sector. The ultimate test is the value employees themselves place on the job. The value of a job is indicated by more than its wage rate or even its relative compensation. A multiplicity of other factors, such as employment security, paid time off, responsibilities and eventual retirement income enter into the equation. The value of a job is perhaps best illustrated by relative turnover rates, as indicated by voluntary separation (resignations). If the employee turnover rate is higher for comparable jobs in government compared to the private sector, it may be an indication that the employer is unable to retain employees because they perceive that better employment opportunities are available elsewhere. This could be an indicator of lower than appropriate employee compensation at the government job.

From 1993 to 2008 private sector employee wages and salaries declined 1.6 percent. State government wages and salaries increased 12.6 percent.

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Graphic.4 Wages.and.Salaries:.1993-2008 Annual.Average.for.Full-Time.Equivalent.Employees

Estimated from U.S. Census Bureau and Bureau of Labor Statistics data. Does not include allocation for underpaid pension and retiree benefits.

Graphic.5 Employer.Paid.Benefits:.1993-2008 Annual.Average.for.Full-Time.Equivalent.Employees

Estimated from U.S. Census Bureau and Bureau of Labor Statistics data. Does not include allocation for underpaid pension and retiree benefits.

Graphic.6 Employee.Compensation:.1993-2008 Annual.Average.for.Full-Time.Equivalent.Employees

Estimated from U.S. Census Bureau and Bureau of Labor Statistics data. Does not include allocation for underpaid pension and retiree benefits.

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If the employee turnover rate is lower for comparable jobs in government than in the private sector, it may be an indication that the employer can retain employees longer because they perceive that their employment conditions are better than available elsewhere. This could be an indicator of higher than appropriate employee compensation at the government job. According to the Illinois Department of Central Management Services, state employees had a voluntary separation rate24 that is approximately one-fourth that of the national private sector rate.25 This would appear to be evidence that state jobs are more valuable than jobs in the private sector and could be an indication that compensation rates are higher than appropriate.26 Career Comparison To circumvent the difficulties in categorizing jobs, this analysis uses a comparable job analysis. The analysis assumes job comparability and applies existing trends over a career of 35 or 40 years. Three comparable employees, based upon education and skills, are assumed to begin working for the state, a local government and a private company on the same day in 1993, at the same wage or salary level, adjusted for differences in benefits and annual percentage changes in compensation.27 The starting pay in 1993 is the average private sector wage or salary.28 40-Year Analysis Over a 40-year career (Graphic 7, page 12), in wages and salaries: The average comparable private employee would be paid $1,877,000. The average comparable state government employee would be paid $2,246,000, or $369,000 (20 percent) more than the comparable private employee. The average local government employee would be paid $1,979,000, or $102,000 (5 percent) more than the comparable private employee. The differences in employer-paid benefits would be much larger: The average comparable private employee would receive $369,000 in employer-paid benefits. The average comparable state government employee would receive $644,000 in employer-paid benefits, or $275,000 (75 percent) more than the comparable private employee. The average local government employee would receive $601,000 in employer-paid benefits, or $232,000 (63 percent) more than the comparable private employee. Over 40 years, the total compensation (wages, salaries and employer-paid benefits) would be as follows: The average comparable private employee total compensation would be $2,246,000. The average comparable state government employee total compensation would be $2,890,000, or $644,000 (29 percent) more than the comparable private employee. The average local government employee total compensation would be $2,580,000, or $334,000 (15 percent) more than the comparable private employee.

Over a 40 year career the average comparable state government employee would receive $644,000 in employer-paid benefits, or $275,000 (75 percent) more than the comparable private employee.

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35-Year Analysis Over a 35-year career (Graphic 7), in wages and salaries: The average comparable private employee would be paid $1,647,000. The average comparable state government employee would be paid $1,925,000, or $278,000 (17 percent) more than the comparable private employee. The average local government employee would be paid $1,725,000, or $78,000 (5 percent) more than the comparable private employee (Graphic 8, page 14).

Graphic.7 Cumulative.Employee.Compensation.-.Comparable.Jobs. Estimated.Private.and.State.Government:.Career

Years Employed

Private

State

Local

Government Employee Advantage State

$5,000 $20,000 $46,000 $86,000 $137,000 $201,000 $278,000 $369,000

Local
$1,000 $6,000 $13,000 $25,000 $39,000 $57,000 $78,000 $102,000

WAGES & SALARIES

5 10 15 20 25 30 35 40 $239,000 $477,000 $714,000 $949,000 $1,183,000 $1,415,000 $1,647,000 $1,877,000 $244,000 $497,000 $760,000 $1,035,000 $1,320,000 $1,616,000 $1,925,000 $2,246,000 $240,000 $483,000 $727,000 $974,000 $1,222,000 $1,472,000 $1,725,000 $1,979,000

BENEFITS
5 10 15 20 25 30 35 40 $49,000 $97,000 $145,000 $191,000 $237,000 $281,000 $326,000 $369,000 $53,000 $113,000 $181,000 $255,000 $339,000 $431,000 $532,000 $644,000 $61,000 $126,000 $195,000 $268,000 $345,000 $426,000 $511,000 $601,000 $4,000 $16,000 $36,000 $64,000 $102,000 $150,000 $206,000 $275,000 $12,000 $29,000 $50,000 $77,000 $108,000 $145,000 $185,000 $232,000

TOTAL COMPENSATION
5 $288,000 $574,000 $859,000 $1,140,000 $1,420,000 $1,696,000 $1,973,000 $2,246,000 $297,000 $610,000 $941,000 $1,290,000 $1,659,000 $2,047,000 $2,457,000 $2,890,000 $301,000 $609,000 $922,000 $1,242,000 $1,567,000 $1,898,000 $2,236,000 $2,580,000 $9,000 $36,000 $82,000 $150,000 $239,000 $351,000 $484,000 $644,000 $13,000 $35,000 $63,000 $102,000 $147,000 $202,000 $263,000 $334,000

10 15 20 25 30 35 40

Assumes starting salary at 1993 average private sector level (2008$). Applies average annual salary and benefit rate of change from 1993 to 2008 to 2008 to 2028.

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The differences in employer-paid benefits would, again, be much larger: The average comparable private employee would receive $326,000 in employer-paid benefits. The average comparable state government employee would receive $532,000 in employer-paid benefits, or $206,000 (63 percent) more than the comparable private employee. The average local government employee would receive $511,000 in employer-paid benefits, or $185,000 (57 percent) more than the comparable private employee (Graphic 9, page 14). Over 35 years, the total compensation (wages, salaries and employer-paid benefits) would be as follows: The average comparable private employee total compensation would be $1,973,000. The average comparable state government employee total compensation would be $2,457,000, or $484,000 (25 percent) more than that of the comparable private employee. The average local government employee total compensation would be $2,236,000, or $263,000 (13 percent) more than that of the comparable private employee (Graphic 10, page 14). Paid Time Off and Career Compensation Per Hour Worked The comparable state government employee compensation advantage becomes larger when paid time off is considered. Generally, government employees receive more paid vacation days, personal days and holidays than private sector employees. For example, state of Illinois employees would receive approximately 440 more paid vacation days, personal days and holidays over a 35-year career and approximately 510 additional paid days over a 40-year career compared to the average employee in the private sector (Graphic 11, page 15).29 40-Year Analysis: Based upon this information, it is estimated that state of Illinois employees would receive the equivalent of $210,000 more in compensation for time not worked over a 40year career than a comparable private employee. Paid time off data was not available for local government employees. The comparable private employee would be paid $30 per hour worked over the 40 years. The comparable state employee would be paid $40.90. The comparable private employee would have to work 6.8 days to earn the same compensation as the comparable state employee earns in five days. 35-Year Analysis: It is estimated that the comparable state of Illinois employee would receive the equivalent of $169,000 more in compensation for time not worked over a 35-year career than the comparable private employee. The comparable private employee would be paid $30 per hour worked over the 35 years. The comparable state employee would be paid $39.60. The comparable private employee would have to work 6.6 days to earn the same compensation that the comparable state employee earns in five days (Graphic 12, page 15).

Over 35 years, the average local government employee total compensation would be $2,236,000, or $263,000 (13 percent) more than that of the comparable private employee.

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Graphic.8 Projected.35-Year.Career.Wages Projected 35-Year Career Wages FULL TIME EQUIVALENT EMPLOYEES Full-Time.Equivalent.Employees
$2.0 $1.8 $1.6 $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 Private State Local In Millions

$1,925,000

1993-2028

$1,647,000

$1,725,000

Graphic.9 Projected 35-Year Career Benefits Projected.35-Year.Career.Benefits COMPARABLE FULL TIME EQUIVALENT EMPLOYEES Comparable.Full-Time.Equivalent.Employees
$0.6 $0.5 $0.4 $0.3 $0.2 $0.1 $0.0 Private State Local In Millions 1993-2028

$532,000

$511,000

$326,000

Graphic.10 Projected.35-Year.Career.Compensation Comparable.Full-Time.Equivalent.Employee

$2,457,000 $1,973,000

$2,236,000

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Graphic.11 Cumulative.Compensation.for.Time.Off Estimated.Private.and.State.Government.Employee:. Career

Years
5 10 15 20 25 30 35 40

Private
$21,000 $47,000 $76,000 $107,000 $138,000 $170,000 $201,000 $233,000

State
$34,000 $76,000 $124,000 $177,000 $235,000 $301,000 $370,000 $443,000

State Government Employee Advantage

$13,000 $29,000 $47,000 $70,000 $97,000 $131,000 $168,000 $210,000

Projected 35-Year Hourly Compensation Projected.35-Year.Hourly.Compensation

Comparable.Full-Time.Equivalent.Employee
1993-2028

Graphic.12

COMPARABLE FULL TIME EQUIVALENT EMPLOYEE

$40 $35 $30 $25 $20 $15 $10 $5 $0

$39.60 $30

In 2009, the state employees for whom the Illinois Department of Central Management Services maintains records had a layoff and involuntary separation rate approximately one-third that of the national private sector.

Private

State

Non-Monetary.Advantages.of.Government.Employment
The above analysis has documented quantifiable advantages of government employment in larger annual wage, salary and benefit increases, more substantial employer-paid benefits and more paid time off. There are, however, additional advantages to government employment that are not readily converted into monetary equivalents. Superior Job Security: Government employees have better job security than private employees. This is best illustrated by the factors that so often lead to job losses in the private sector, such as mergers, closings and the movement of jobs to other states and nations. Employees of the state of Illinois can be sure that a merger with Indiana is not in the offing. The state will not close and it will not export its jobs to Alabama or India. Thus, there is greater employment security in government because the governments will continue to exist while private companies can fail or be absorbed by

Page 16 of 24
other entities. Government employees also have greater employment security by virtue of employee protections and grievance procedures that are generally not available in the private sector.30 In 2009, the state employees for whom the Illinois Department of Central Management Services maintains records had a layoff and involuntary separation rate approximately one-third that of the national private sector,31 which is an indicator of the superior compensation and employer security in government. Accrual and Payment of Sick Time: Illinois state workers accrue sick days from year to year, though they are not paid for accrued sick days when they resign or retire.32 There are indications of even more generous sick pay benefits in some local governments. It has been reported that there is payment for sick time accrual over multiple years, for example, in the cities of Evanston and Joliet.33 However, private employees do not generally share the benefit of sick day accrual beyond one year. Earlier Retirement: State workers generally are able to retire earlier than private employees. This advantage is likely to be largely removed for new employees as a result of the reforms adopted by the state in 2010, when the full benefit retirement age for new employees was raised from 55 to 67 years of age. However, the lower retirement age provisions remain in place for the overwhelming majority of employees who were hired before the reforms were implemented. Higher Retirement Incomes: A national report by the Pew Charitable Trusts indicated that government employees have considerable advantage over private employees in retirement benefits. Only one-third of private retirees have pension programs, which is considerably less than the 82 percent among government retirees. The median annual pension among private retirees was less than one half that of government retirees. Much of this advantage is due to the prevalence of the more expensive defined benefit pension plans in government (as opposed to the defined contribution plans, such as 401(k)s, that are more routine in the private sector). Nationally, of the employees with pension programs, only 20 percent of private sector retirees have defined benefit retirement programs, compared to 90 percent among government retirees.34 Sick Day Usage: Nationally, state and local government employees use approximately one-third more sick days than private employees. In 2009, private sector employees were absent 3.1 percent of the time, state government employees 4.2 percent and local government employees 4.0 percent.35 A response to a Freedom of Information request indicated that there is no overall data on sick day usage in Illinois state government. Administrative Determination of Employee Compensation: In the private sector, employee compensation results from the operation of the competitive market. A firm that compensates its employees at higher than competitive rates36 is likely, all things being equal, to see its market share reduced and perhaps even fail. This is true regardless of whether the staff of the company has been organized by a union. In government, employee compensation is determined administratively. In the context of compensation, government behaves like a monopoly and thus has no competition. Government administrators and unions may compare their compensation packages to those of other jurisdictions; however, that process seems likely to lead to higher compensation levels than would occur if there was genuine competition. Some government agencies have sought to deal with this problem by using competitive contracting, by which some services can be provided at competitive wages and benefits rates, which can lower costs.37 Political Influence: Finally, government employees have an ultimate advantage over their private counterparts in their access to the political system to seek better salaries and benefits. This gives

Nationally, state and local government employees use

approximately

one-third more sick days than private employees.

Page 17 of 24
government employees virtual insulation from the market-based compensation determination that necessarily applies in the private sector. Government employee unions make contributions to the very elected officials who make the final decisions on employment conditions. Nationally, three large government employee labor unions (AFSCME, the National Education Association and the American Federation of Teachers), along with the Service Employees International Union, which has a large number of government employee members, contributed $130 million to political campaigns between 1989 and 2009. Each of these unions was among the top 13 single contributors and their overall contributions were divided between Democrats (96 percent), Republicans (2 percent) and others (2 percent).38 Moreover, government workers can provide considerable assistance (such as staffing phone banks and walking precincts) to election campaigns of candidates they believe will be more sympathetic. Because government employees represent a substantial share of the electorate, their efforts can sway election results especially when there are low voter turnouts. All of this assists government employee unions in lobbying elected officials, whose interests can, therefore, converge with those of government employees. As a result of this and other factors, governments around the nation have agreed to employee compensation packages that are not sustainable. They are not affordable, which is demonstrated by the rampant underfunding of pension and retiree health care funds and the nowpervasive budget crises. This political advantage is not available to private employees or their unions. A communication to a local elected official will have virtually no impact on the management negotiating position of a private company. Indeed, if political officials were to seek to interfere, the targeted business would be encouraged by market conditions to either move from the jurisdiction or to direct its business expansions to more business-friendly jurisdictions. Employees and their unions are not able to serve the interests of management by making election campaign donations (because there are none) or assisting them in elections (also because there are none). As a result, there is little possibility of a convergence of interests between the management of the company and the unions in labor negotiations that could result in a labor settlement that is not aligned with budget realities.

There is strong evidence that government employees are better compensated than private employees in comparable jobs.

Conclusion.
It is important to acknowledge that the contribution of public and private sector employees is critical to making Illinois successful in an increasingly competitive economy. Nonetheless, there is strong evidence that government employees are better compensated than private employees in comparable jobs. These differences, as noted above, are principally the result of the dynamics of the two sectors, including the relative lack of real-world competitive influences in government employment and the superior political access government employee organizations have to the elected officials who manage units of government. Government Employee Compensation: Unsustainable Trends The existing and expanding compensation gap between government and private employees is unlikely to be sustainable in the long run, especially with the economic and fiscal challenges facing Illinois in both the government and the private sector. There is a need to undertake reforms to evolve toward parity between government and private employee compensation, taking into full consideration monetary and non-monetary factors, so that government employees are compensated at no more than the rates determined in the market. The use of employee turnover rate comparability should be used to measure the success of these reforms.

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Comprehensive Employee Compensation Reports We appreciate the efforts of the state employees who were so helpful in providing information that made it possible to produce this report. They appear to have faced often-insurmountable difficulties, however, in providing the comprehensive information that we sought on employee compensation. There appears to be no comprehensive state personnel report detailing employee wages, salaries, employer-paid benefits and overall number of employees. Freedom of Information requests had to be filed with multiple state offices, and data often was incomplete or inconsistent. Some information was simply not available. For example, it was reported that there is no central source for sick day usage information. The lack of comprehensive and readily available data on state employment is a serious problem. The governor, other executive officers, legislators and the public should have access to this information. Further, without such readily available information, there are necessarily serious roadblocks to managing the huge enterprise that is the state of Illinois. If the state of Illinois were a private corporation, it would rank approximately 100th in the world in annual revenue, and any of those companies would be likely able to quickly provide detailed and comprehensive employee compensation information to those requiring it. The first step in identifying options for achieving fairness in government worker compensation is to understand its present cost. As noted above, such information does not appear to be readily available through present reporting systems. A comprehensive state employee compensation reporting system should be implemented without delay. Similar-sized Pennsylvania provides a valuable example. Its annual Governors Workforce Report39 provides much of the necessary management information and could be used as a model for Illinois. An Illinois State Government Workforce Report: A comprehensive, independent annual employee compensation report could be prepared by the State Comptroller. This report should include at least the following information, both at the aggregate level and for broad employee classifications: Annual and per work hour wages and salaries Annual and per work hour employer-paid benefits Annual and per work hour compensation Average full-time, part-time and full-time equivalent employees Average employee turnover rates Average annual sick days used per full-time employee Allocation of pension fund and retiree health care fund payments based upon liability in addition to actual disbursements In addition, an alternate table of total employee benefits and employee compensation should also be shown, indicating pension fund and retiree health care fund obligations (rather than disbursements). This table would include wages and salaries (from above) and employee benefits (including pension and retiree health care obligations summed to indicate total employee compensation).

If the state of Illinois were a private corporation, it would rank approximately 100th in the world in annual revenue, and any of those companies would be likely able to quickly provide detailed and comprehensive employee compensation information to those requiring it.

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Other employee compensation reports (such as the Pennsylvania Governors Workforce Report) should be reviewed to identify additional issues to be included. An Illinois Local Government Workforce Report: Perhaps just as importantly, there should be an annual, centralized personnel report containing information for all units of government in the state. The state and its taxpayers have a legitimate interest in local government employee compensation, not only because all governments in the state are authorized by the state, but also because the state provides substantial funding to units of local government. If local governments can become more efficient, there will be less demand for funding from Springfield. Already, the states local jurisdictions make annual financial reports to the State Comptroller. These reports could be expanded to include personnel issues, with data made available on the Internet (as is the case now with financial information). The local government workforce report should be modeled on the proposed Illinois State Government Workforce Report.

There should be an annual, centralized personnel report containing information for all units of government in the state.

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Appendix:.Detailed.Compensation.Estimates
Table A-1 provides estimated average state government employee compensation by major function.40 Compensation exceeds $75,000 in nine of the 17 listed functions (judicial and legal, police officers, higher education instructional, other government administration, highways, health, water transport and terminals, social insurance administration and financial administration). The lowest-paid state government functions were higher education (non-instructional employees) at $49,500 and natural resources at $59,200. The largest functions were higher education instruction employees, with 13 percent of employment (average compensation $89,200) and other higher education employees, with 31 percent of employment. Table A-2 provides estimated average local government employee compensation by major function.41 Compensation exceeds $75,000 in eight of the 30 listed functions (firefighters, higher education instructional employees, sewerage, electric power, air transportation, transit, solid waste management and water supply42). The lowest-paid local government functions were other elementary and secondary employees at $39,700 and gas supply at $38,800. The functions with the largest number of employees were elementary and secondary education instruction, with 39 percent of employment (average compensation $66,500) and other elementary and secondary education, with 16 percent of employment. Table A-3 provides estimated private sector employee compensation data for major industries in Illinois.43 In seven of the 19 private industries, the average compensation is estimated at more than $75,000 (utilities, management of companies, wholesale trade, finance and insurance, information, manufacturing and professional, scientific and technical). The lowest-compensated industries are real estate and forestry, fishing and related activities. Both of these industries have average compensation of less than $20,000 annually. The largest industries are retail trade, with 11 percent of employment (average compensation $33,400) and health care and social assistance with 12 percent of employment (average compensation: $52,800).

Estimated.State.Government.Employee.Annual.Compensation.by.Function:.2008,

Table.A-1

Ranked.by.Wages.&.Salaries.per.Full-Time.Equivalent.Employees
Function
Judicial and Legal Police Officers Only Higher Education Instructional Employees Other Government Administration Highways Health Water Transport and Terminals Social Insurance Administration Financial Administration Corrections Other Police Employees Public Welfare Other Education Hospitals Parks and Recreation Natural Resources Higher Ed Other Employees Other Employees All Employees

Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Share of State Employees

2.0% 1.8% 13.2% 1.9% 5.2% 2.0% 0.1% 1.6% 4.2% 9.4% 1.3% 7.8% 1.6% 8.5% 0.4% 3.0% 30.9% 5.3% 100.0%

Wages & Salaries

$95,503 $77,610 $70,447 $64,067 $63,247 $61,799 $60,939 $59,950 $59,580 $58,299 $58,187 $57,897 $56,561 $55,665 $50,958 $46,738 $39,142 $57,169 $54,873

Exhibit: Estimated Total Compensation (Including Benefits)

$120,885 $98,236 $89,169 $81,094 $80,056 $78,223 $77,135 $75,883 $75,414 $73,793 $73,651 $73,284 $71,593 $70,459 $64,501 $59,160 $49,545 $72,363 $69,456

Source: Wages and Salaries: U.S. Census Bureau, Employer paid benefits estimated from Bureau of Economic Analysis data. Full-Time Equivalent Employees, All Functions with Employees Reported. Employee benefits ratio assumed to be the same for all functions. Excludes adjustment for underpayment of pension and retiree health care obligations (Employee benefits).

Page 21 of 24

Estimated.Local.Government.Employee.Annual.Compensation.by.Function:. 2008,.Ranked.by.Wages.&.Salaries.per.Full-Time.Equivalent.Employees
Share of Local Government Employees
3.2% 1.6% 1.1% 0.2% 0.4% 3.1% 0.9% 1.1% 6.6% 2.2% 39.0% 1.9% 0.4% 0.7% 1.6% 1.8% 2.3% 2.6% 1.5% 0.2% 2.8% 1.7% 3.0% 0.0% 1.8% 1.2% 15.9% 0.0% 1.3% 100.0%

Table.A-2

Rank

Function

Wages & Salaries

Exhibit: Estimated Total Compensation (Including Benefits)

$92,966 $91,426 $83,964 $80,773 $80,629 $78,837 $78,028 $75,946 $74,890 $70,955 $66,492 $65,393 $65,211 $64,539 $64,284 $64,268 $63,891 $63,685 $61,027 $58,690 $54,752 $53,530 $53,446 $49,734 $45,526 $43,843 $39,716 $38,811 $68,056 $63,098

1 2 3 4 5 6 7 8 9 10 12 13 14 15 16 17 18 19 21 22 23 24 25 26 27 28 29 30

Firefighters Only Higher Education Instructional Employees Sewerage Electric Power Air Transportation Transit Solid Waste Management Water Supply Police Officers Only Hospitals Elem & Sec Instructional Employees Corrections Natural Resources Housing and Community Development Financial Administration Other Government Administration Highways Judicial and Legal Health Other Fire Employees Higher Ed Other Employees Other Police Employees Parks and Recreation Water Transport and Terminals Local Libraries Public Welfare Elem & Sec Other Employees Gas Supply Other Employees All Employees

$72,069 $70,875 $65,091 $62,617 $62,506 $61,116 $60,489 $58,875 $58,056 $55,006 $51,546 $50,694 $50,553 $50,032 $49,834 $49,822 $49,530 $49,370 $47,310 $45,497 $42,445 $41,498 $41,432 $38,555 $35,293 $33,988 $30,789 $30,087 $52,758 $48,915

Source: Wages and Salaries: U.S. Census Bureau, Employer paid benefits estimated from Bureau of Economic Analysis data. Full-Time Equivalent Employees, All Functions with Employees Reported. Employee benefits ratio assumed to be the same for all functions. Excludes adjustment for underpayment of pension and retiree health care obligations (Employee benefits).

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Estimated.Private.Sector.Employee.Average.Annual.Compensation.by.Industry:. 2008,.Ranked.by.Wages.&.Salaries.per.Full-Time.Equivalent.Employees
Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Table.A-3

Industry
Utilities Management of companies and enterprises Wholesale trade Finance and insurance Information Manufacturing Professional, scientific, and technical services Construction Transportation and warehousing Health care and social assistance Educational services Mining Administrative and waste services Retail trade Other services, except public administration Arts, entertainment, and recreation Accommodation and food services Real estate and rental and leasing Forestry, fishing, and related activities All Employees

Share of Private Employees

0.4% 1.5% 5.0% 7.1% 2.0% 10.2% 8.1% 6.0% 4.7% 12.1% 2.7% 0.3% 7.7% 11.2% 6.6% 2.3% 7.2% 4.7% 0.2% 100.0%

Wages & Salaries

$118,420 $126,688 $77,188 $75,740 $70,577 $67,548 $67,948 $49,323 $44,961 $43,643 $38,384 $33,539 $31,567 $27,479 $28,562 $22,436 $21,899 $16,379 $12,547 $47,154

Exhibit: Estimated Total Compensation (Including Benefits)

$159,145 $152,887 $89,722 $89,222 $85,834 $85,304 $78,441 $58,871 $56,306 $52,784 $45,547 $40,284 $36,941 $33,379 $33,325 $25,946 $25,421 $18,820 $15,965 $56,518

Full-Time Equivalent Employees, All Functions with Employees Reported. Source: Wages and Salaries: U.S. Census Bureau, Employer paid benefits estimated from Bureau of Economic Analysis data.

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Endnotes.
1 2 Estimated from U.S. Census Bureau governments database (2008), adjusted to include estimated additional cost of employer paid benefits. Both agencies are part of the U.S. Department of Commerce.

3 There is no single report that provides complete data on either state or local government employee compensation in Illinois. Generally, except where otherwise noted, it was therefore necessary to rely on national reports, which was also the case for private employee compensation. 4 Assumes a 40-hour workweek. Unless otherwise indicated, the term employee means full-time equivalent employee when used in this report. 5 Estimated from U.S. Census Bureau Government Employment and Payroll data and Bureau of Economic Analysis Regional Economic Accounts. 6 Estimated from Bureau of Economic Analysis Regional Economic Accounts.

7 The appendix provides private employee compensation data by industry, along with state and local government employee compensation data by function. 8 Six years seniority equals average state government employee tenure at the national level. Data from the Bureau of Labor Statistics (http:// www.bls.gov/news.release/tenure.t05.htm). We were unable to obtain average tenure data from the state of Illinois. 9 Data derived from Pew Center on the States: The Widening Gap: The Great Recessions Impact on State Pension and Retiree Health Care Costs (2011), http://www.pewcenteronthestates.org/uploadedFiles/Pew_pensions_retiree_benefits.pdf. 10 Excludes Teachers Retirement System (which is principally a local government employee pension that is a state responsibility).

11 Data derived from Pew Center on the States: The Widening Gap: The Great Recessions Impact on State Pension and Retiree Health Care Costs (2011), http://www.pewcenteronthestates.org/uploadedFiles/Pew_pensions_retiree_benefits.pdf. 12 13 Analysis of Comprehensive Annual Financial Reports of Cook County and the City of Chicago. State of Illinois, Comprehensive Annual Financial Report: 2009.

14 The Teachers Retirement System, which covers local school district employees, is similarly underfunded. The state paid $940 million in interest on the net pension obligation in 2009, though underpaid the annual pension cost by more than $875 million. As a result, the 2010 interest payment is likely to exceed $1 billion. 15 16 17 18 19 20 21 Chicago Transit Authority, Comprehensive Annual Financial Report: 2009. Unless otherwise noted, all financial data is in 2008$. Estimated from Bureau of Labor Statistics data. Estimated from U.S. Census Bureau data. Estimated from Bureau of Labor Statistics data. Estimated from Bureau of Economic Analysis data. The compensation increases do not include pension and retiree health care underpayments, which could increase employee compensation.

22 Center for State and Local Government Excellence, Out of Balance: Comparing Public and Private Sector Compensation Over 20 Years, 2010, http://www.slge.org/index.asp?Type=B_BASIC&SEC={22748FDE-C3B8-4E10-83D0959386E5C1A4}&DE={BD1EB9E6-79DA-42C7-A47E-5D4FA1280C0B}. 23 Department of Personnel Administration, State of California, Total Compensation Survey,2006 (http://www.dpa.ca.gov/tcs2006/ key-findings.htm). 24 A Pew Center for the States report (Government Performance Project: Grading the States: Illinois, 2008, http://www. pewcenteronthestates.org/uploadedFiles/PEW_WebGuides_IL.pdf ) indicated that Illinois had a lower than average employee turnover rate.

Page 24 of 24
25 Bureau of Labor Statistics (http://www.bls.gov/news.release/archives/jolts_03092010.htm). Illinois information obtained through a Freedom of Information request. 26 This report does not conclude that all state and local government employees receive higher compensation than they would receive in comparable jobs in the private sector. However, the evidence is strong that higher government compensation is more often than not the case. 27 28 This projection is based upon the continuation of past trends. Should those trends not continue, materially different results could occur. The comparable employee analysis does not include any allocation for underfunded annual pension and retiree health benefits.

29 Calculated from Bureau of Labor Statistics and State of Illinois Personnel Rules information. Private sector data is for the nation. Illinois data is not available. 30 These provisions would be likely to reduce job growth in the private sector by making businesses less competitive, both within the state and internationally. Sectors where similar provisions have been available, such as heavy manufacturing, have generally declined in recent decades. 31 Bureau of Labor Statistics (http://www.bls.gov/news.release/archives/jolts_03092010.htm). Illinois information obtained through a Freedom of Information request. 32 From information provided in response to a Freedom of Information request.

33 Chicago Breaking News Center, Tribune Watchdog: Retirement Perks Cost Towns Millions, Sept 17, 2010, http://www. chicagobreakingnews.com/2010/09/tribune-watchdog-retirement-perks-cost-towns-millions.html. 34 Susan Urahn, Promises with a Price: Public Sector Employment Benefits, Pew Foundation Center for the States, http://www.pewtrusts. org/uploadedFiles/wwwpewtrustsorg/Reports/State_policy/pension_report.pdf. 35 36 37 38 Bureau of Labor Statistics, Household Data: Annual Averages, ftp://ftp.bls.gov/pub/special.requests/lf/aat47.txt. Overpaying for other factors of production could have the same consequences. See, for example, E. S. Savas, Privatization in the City: Successes, Failures, Lessons (2005). Calculated from data at Open Secrets, http://www.opensecrets.org/orgs/list.php.

39 State of Pennsylvania, Governors Workforce Report: 2010, http://www.portal.state.pa.us/portal/server.pt/gateway/ PTARGS_0_2_17646_2034_282252_43/http;/pubcontent.state.pa.us/publishedcontent/publish/cop_general_government_operations/ oa/oa_portal/hrm/bsppp/policy_and_program_planning/p_pp_library/gawfr_files/gawfr_2010_final.pdf. 40 Wages from U.S. Census Bureau data. Benefits from the Bureau of Economic Analysis. All functions are assumed to have the same benefit to wage ratio. 41 Wages from U.S. Census Bureau data. Benefits from the Bureau of Economic Analysis. All functions are assumed to have the same benefit to wage ratio. 42 The high transit compensation ($79,000) is counter to the perception that government employees are better educated than their peers in the private sector and is curiously high, for example, in comparison with university instructional personnel, who tend to be highly educated. 43 Data from the Bureau of Economic Analysis. Benefits are for each business classification.