The Elephant in the Room
By Nick Fritsch
CLEARWATER - What is one of the few things that defy gravity and “always” goes up? The answer is fully paid or nearly fully paid benefits for city employees. The council and the city manager realize “the elephant” is in the room. Repeatedly, we hear that employee cost is 66-67 percent of the General Fund budget. Surprisingly, it remains at that level, even after the budget cuts of the last two years.
For the past two decades, in the private sector many retirement and health care benefits have disappeared or shrunk substantially in value. Most of their employees, as well as retirees, have to make out of pocket contributions for their own families.
At the recent city council work session, one of the contract benefits managers reported to the council and senior city management. They stated that “Defined benefit, aka retirement, costs presently amount to about 13-14 percent of payroll costs above paid wages.” Note that this does not include the cost or the percentage of health care benefits.
The managers advised “for budgeting purposes that in the near future, it was going to rise to about 20 percent for general employees. However, for employees working in hazardous positions, the rise is expected to become 28 percent.”
When the benefit managers were questioned “How does that compare to private industry?” Their response was “Private sector employers spend in the range of 4-7 percent for their retirement costs.” Doing the math, that is a gap of added cost for government employers of 3–7 times, above the cost for private sector employers.
Why single out city employees? Part of the answer lies above in the 3-7 times above other employer’s cost. Another reason is that many of the taxpayers who are ultimately paying for these benefits, are not receiving those same benefits. And those who do enjoy them, are self-paying an increasing burden with increases almost every other year.
In all fairness, this inequity of the “have-nots paying for the haves” is not exclusive to the city, but also exists for other local, state and federal employees. The late 20th and the 21st Century employment economics have been implemented in almost every other sector. But so far, civil servants have been given immunity from the world of international competitive forces, with lowering employment costs and still get the job done. Name a business enterprise, even a small business that is not utilizing a mix of part-time employment, contractors in lieu of employees; all while eliminating or reducing the benefits and/or increasing the employee share for the remaining full-time employees.
In the future, it would not be surprising to see citizens upset with this growing burden of inequity, rise up with yet another challenge to the high cost of their tax bills. So far, the council is being advised, there is nothing they can legally do. That again is in stark contrast to the private sector. “ We” were also told about our benefits and also received details of them in writing. Later, business conditions changed. And our benefits changed.
The city is blessed with a lot of great employees, but are the city employees, their unions, city management and the council ready to face the reality of 21st Century employment and take a bite out of the elephant? Or will they nibble it or just plain continue to “gum” it?
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