By: Ted Dabrowski
A recent ruling by the Illinois courts in the ongoing State vs. AFSCME saga shows just how impossible it’s become for the state to get its state worker labor costs under control. Not only have the courts consistently ignored the dire fiscal situation Illinois is in, but they’ve also ignored the plight of the Illinois private sector worker who must pay for those ever-rising state costs.
Two years ago it was the Illinois Supreme Court that ruled the Illinois constitution protects the pension benefits of government workers,even those benefits that have yet to be earned. That expansive ruling – protecting unearned benefits – has handcuffed the state from reducing its massive pension shortfall. It’s also contributed to the state’s ongoing credit rating freefall and its near junk rating. More than a quarter of the state budget now goes to pension costs and that’s wreaking havoc on taxpayers with higher taxes, reduced services and a dysfunctional government.
Now, the latest ruling by an Illinois appellate court says the state has illegally withheld step increases, a type of raise, from state workers – even though there’s been no contract in place between the state and AFSCME for more than two years. AFSCME has used the courts to deny the implementation of the state’s last, best offer for the past year.
The court’s ruling is the next blow to taxpayers. If eventually upheld, the ruling will force taxpayers to dole out even more money to AFSCME workers who are already some of the most highly compensated of any state workers across the country. And it ignores the realities behind the current impasse between AFSCME and the state.
Here’s what the courts are ignoring:
Illinois is in terrible financial shape. The state is in no position to pay for AFSCME’s demanded step raises, nor for the full $3 billion extra the union’s contract demands would cost compared to the state’s last, best offer.
The state’s 2018 budget is already out-of-balance by $1.7 billion despite the imposition of a record $5 billion permanent income tax increase. Illinois’ state and local governments have a combined, growing retirement shortfall of nearly $400 billion.
And the state itself is flirting with a junk credit rating and all the increased costs that it implies. The state needs to lower its costs dramatically, not raise labor costs.
AFSCME worker total compensation, on average, already exceeds $108,000. AFSCME’s demands under the current negotiations include additional state worker salary, health care and pension benefits, including raises ranging from 11.5 to 29 percent, a 37.5-hour workweek, up to five weeks of vacation and enhanced health care coverage.
Those new benefits would come on top of the generous benefits state AFSCME workers already receive. Illinois state workers enjoy the nation’s highest state worker salaries when adjusted for cost of living. On top of that, state AFSCME workers receive subsidized health care benefits, generous pensions and social security, and a majority receive free retiree health insurance.
In total, the average AFSCME state worker received nearly $110,000 in total compensation in 2015.
Illinois’ struggling private sector has to pay for state workers’ growing benefits. AFSCME worker salaries have grown significantly over the past decade. The average AFSCME median salary increased 41 percent from 2005 to 2015.
During that same period, Illinoisans’ median private sector earnings remained virtually flat. Factoring the higher cost of state workers and inflation, private sector workers are being forced to do more with less.
Meanwhile, the average state AFSCME worker received a base salary of nearly $66,000 in 2015. Those employees are part of a broader state workforce that has the highest average pay of any state workers in the country, when adjusted for cost of living.
And at the same time that health care premiums are rising dramatically in the private sector, Illinois state workers continue to receive heavily-subsidized health care. The average AFSCME workers has 77 percent, or nearly $15,000, of his or her entire health care costs paid for by taxpayers.
And retiree health benefits are even more generous. The state pays for 5 percent of a future retiree’s health insurance costs for every year the employee works for the state. If a state employee works for 20 years or more, their retiree health insurance costs are completely paid for by Illinois taxpayers. That’s worth anywhere from $200,000 to $500,000 in today’s dollars, depending on the worker.
What’s the point of negotiating?
The appellate ruling hasn’t required the state to make the step payments going forward nor has it ordered any back pay for employees. Instead, the ruling sends the state and AFSCME back to the Illinois Labor Relations Board for review.
But if the state is forced to eventually make these payments while there’s still an impasse in the negotiations, that renders taxpayers’ struggles and the process of negotiations moot.
If workers can still get raises (possibly unappropriated) from an expired contract because the union has blocked implementation of the state’s last, best offer, then what’s the point of negotiating in the first place?
If the state can’t achieve savings by reforming workers benefits, then the only path left open to it is to reduce its payroll. And that means layoffs.
Ted Dabrowski is President of Wirepoints.