It is understandable how public employees may feel like punching bags. They are subject to jabs claiming there are too many of them on the public dole, that they don’t work hard, don’t get much done and are overpaid. While Assistant State Treasurer, I encountered a number of state employees and those perceptions were not the reality I experienced in the majority of cases.
In every instance elected officials created these public jobs. Faced with the age-old conundrum of how to get and keep a good workforce our legislators opted for a tradeoff many years ago that looked attractive at the time but now threatens our state’s nancial viability.
North Carolina decided it would save current dollars by not paying teachers and state employees current market wages, instead enticing them with better than private sector bene ts, especially retirement and health insurance bene ts. Like everything else, sooner or later the bill comes due when the employees retire, but perhaps the lawmakers of that day weren’t worried, guring they wouldn’t be in office when the money was needed and someone else would have to face the problem.
One of those promised benefits was that any employee that worked 5 years or more for the state would receive free health insurance for the rest of his or her life when they reached age 60. A few years ago lawmakers recognized the unsustainability of this promise and modified it to say only those employees hired after a certain date, worked a minimum of 20 years and who reached a certain age would get free health insurance. Those who worked between 10 and 20 years would pay half the cost of the insurance when they retired.
Even this promise is unsustainable. Actuaries now say North Carolina has an unfunded nancial liability of $25.5 billion resulting from this benefit. Even worse, projections show the liability will grow to $37.5 billion by 2020. Understandably, our current legislature wants to change this situation but the solution they are considering isn’t any better. The Senate budget would do away with the retiree health insurance benefit altogether.
State employees, who were not being paid market wages to begin with, have had little to no pay increases since The Great Recession. Making matters worse, their health insurance premiums, deductibles and copayments have increased significantly. Working for the state is no longer as attractive as it once was and agency managers report having a hard time nding qualified technical and specialized skills employees. If North Carolina reduces employee benefits further employee recruitment will be even more difficult and those who are hired might not be as desirable.
Lawmakers need to find a solution by reconsidering basic compensation metrics. Like the old Fram Oil Filter commercial we need to decide whether to pay now or pay later. We can attract the workforce we want by paying market wages, offering benefits in line with those in the private sector or we can continue to pay less than market wages by offering more generous benefits.
Less than market pay and less than private sector benefits could be disastrous. One way or another the taxpayers will foot the bill. Our elected officials need to decide which trade-off they choose but one thing is certain: they cannot choose to blame state employees for a situation they didn’t create.