How California’s State and Local Governments Can Save $50 Billion Per Year

Back in the early 2000s, in the aftermath of the internet bubble’s collapse, California’s state and local governments endured a period of austerity that resulted in “furloughs,” where, typically, employees would take Fridays off in exchange for a 20 percent cut in their pay. That is, they worked 20 percent less, and made 20 percent less in pay – but their rate of pay was not cut.

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This display of “sacrifice” was an eye opener for private sector workers, especially salaried employees of small businesses, who endured cuts to their rates of pay at the same time as their hours of work increased. Most people in the private sector back in the early 2000s felt lucky to have a job, even if it meant working harder and making less.

There’s a lesson to be learned from the period of state and local government “furloughs” in California: California’s government functioned just fine with 20 percent fewer hours spent at the job, overall, and California’s government workers got by, overall, making 20 percent less money. So since we know these cuts are feasible, it is interesting to estimate just how much money Californians would save, if there were a 20 percent reduction to California’s state and local government workforce, and then there were a 20 percent reduction to the pay and benefits collected by those state and local government workers who remained employed.

Getting information on just how much California’s state and local workers make is notoriously difficult. California’s state controller’s Public Pay database collects the data, but presents “averages” that include part-time employees in the denominator, and do not consolidate the data. Transparent California, a public information project jointly produced by the California Policy Center and the Nevada Policy Research Institute, provides very good information on individual pay and benefits, but also does not consolidate the information.

A California Policy Center study, “How Much Do California’s State, City and County Workers Really Make?” uses 2012 raw data from the state controller that screens out part-time workers to develop averages for city, county and state workers.

California’s State and Local Government Employees
Average Compensation by Entity – 2012

A recent UnionWatch analysis of Los Angeles Unified School District provided a baseline estimate for total teacher compensation – although in variance to the table, please note the same analysis adds an estimated value of $4,033 per teacher to take into account the state’s direct contribution to CalSTRS. As a representative example of total teacher pay, LAUSD is pretty good; the California Dept. of Education reports the Statewide Average Teacher base salary averaged $69,324 during 2014, nearly identical to the LAUSD analysis.

Los Angeles Unified School District
Average Compensation by Job Class – 2013

Armed with this information, and cross-referencing with the U.S. Census Bureau’s estimate of current numbers of full time state and local government employees in California (ref. Government Employment & Payroll, and select “state” and “local,” in each case selecting “California”), we can make a reasonable estimate of how much our full time state/local workforce is currently costing taxpayers. We can also estimate how much a 20 percent reduction in workforce combined with a 20 percent reduction in total compensation would save taxpayers each year:

California State and Local Government Employees, Est. Total Cost per Year
Projected Annual Savings via 20% Reduction to Headcount and to Compensation

While this thought exercise may seem to be an exercise in futility, the fact is, we’ve tried it once already, and it worked. That is, during the furloughs of the early 2000s, California’s state and local government workers got by just fine with a 20 percent reduction in pay, and California’s state and local government services functioned adequately even though 20 percent of the workforce was absent (i.e., they were all taking Friday’s off).

It is fair to ask why the focus must always be on austerity. Why not pay everyone more in the private sector? That’s a good question and the answer is simple: It’s impossible. The average total compensation in California’s private sector is roughly half what public employees make. There isn’t enough money in the world to pay everyone this much money, and it is grossly unfair to taxpayers and private workers to treat public sector workers as a privileged class, exempt from the economic challenges facing everyone else.

The problem is even deeper than just one of inequity and insolvency. The problem with creating a privileged class of government workers is that they no longer make common cause with the people they serve. This consequence should trouble social liberals at least as much as it troubles fiscal conservatives, because the most powerful bloc of voters in California, unionized, politically active government workers, are putting their personal financial interests ahead of other worthy government projects. Imagine what $52.7 billion could buy.

The solution is to combine cutbacks in government employee compensation with investments in infrastructure and reductions in regulatory hurdles in order to reduce prices for goods and services. Government created artificial scarcity has raised the price of housing, energy, water and transportation to levels that only the elite can easily afford. If government workers were compelled to make common cause with other workers, instead of this elite, maybe they would finally support reforms to lower the cost of living.

Ed Ring is the executive director of the California Policy Center.