How much of the state budget goes to state employee pay? Here’s the answer…
Jason Mercier
One of the major points of contention this past year in the Legislature was the impact state employee compensation has as a cost driver of state spending and whether changes should be made to help rein in costs. Based on the razor thin margin the June revenue forecast has left for the state’s budget balance sheet, it is likely this conversation will continue in the future.
So how exactly does state employee compensation impact state spending?
There are a couple of ways to look at this question. One way is as a percentage of total spending. Another is as a percentage of spending after making adjustments for pass through grants to K-12 since those that work in public schools are not state employees but instead local employees and their compensation totals are not reflected in state data.
Here is a summary of how the data breaks down from 1997-99 to 2007-09. (Data for 2009-11 will not be finalized until mid summer so it is excluded from the comparison at this time.)
Total budget (dollars in thousands):
- FTEs increase: 16% (96,461 to 111,981)
- Salaries and wages increase: 67% ($7,455,654 to $12,463,774)
- Employee benefits increase: 91% ($1,872,692 to $3,573,893)
- Total Compensation increase: 72% ($9,328,346 to $16,037,667)
- Total budgeted spending increase (all objects): 74% ($39,449,322 to $68,492,870)
- 1997-99 total compensation as % of total spending: 23.6% ($9,328,346 of $39,449,322)
- 2007-09 total compensation as % of total spending: 23.4% ($16,037,667 of $68,492,870)
Total budget accounting for K-12 pass-through funds (dollars in thousands):
- 1997-99 total compensation as % of total spending minus Public School Grants, Benefits, & Client Services: 31.2% ($9,328,346 of $29,894,050)
- 2007-09 total compensation as % of total spending minus Public School Grants, Benefits, & Client Services: 30.4% ($16,037,667 of $52,760,048)
As previously mentioned, public school grants, benefits, & client services are removed for comparison since those are pass-through dollars to local K-12 education, which are not state FTEs but local FTEs so their compensation totals are not included in the total compensation figures for the state.
These pass-through K-12 funds equal $9,555,272,000 in ’97-’99 and $15,732,822,000 in ’07-’09.
This means state employee compensation costs accounted for 23.4% of total spending in 2007-09 or 30.4% of spending when accounting for K-12 pass-through funds.
Drilling down even further, however, there is a clear distinction between state employee compensation costs as a percent of spending when comparing general government employees versus higher education employees.
Looking at just general government employees and spending (excluding higher education), the percentage of compensation costs to spending drops to 15.5% in 2007-09. Comparing just higher education employees and spending, the percentage of compensation costs to spending was 64% in 2007-09.
This illustrates that when looking at compensation as a percent of spending, higher education employee compensation is a much larger cost driver for higher education spending than general government compensation is for general government spending.
Here are additional details on the base data used to make these calculations.
As for whether this percentage trend has held true for 2009-11, though still preliminary data, as of April state employee compensation costs accounted for 23.2% of total spending or 30.2% of spending when accounting for K-12 pass through funds versus the 23.4% and 30.4% in 2007-09.
Whether these compensation figures are too high or too low will remain the subject of much debate but the fact remains state employee compensation costs are one of the budget cost drivers policymakers have totally in their control to make adjustments to.
Many thanks to staff at the Legislative Evaluation Accountability Program (LEAP) and the Office of Financial Management for their help in calculating this analysis of state employee compensation costs.
For those wanting to dig even deeper into state budget information you can visit the state’s budget website at www.fiscal.wa.gov.
Jason Mercier is the director of the Center for Government Reform at the Washington Policy Center. He serves on the Executive Committee of the American Legislative Exchange Council’s Tax and Fiscal Policy Task Force and is the private sector chairman of ALEC’s Fiscal Federalism Working Group. He is a contributing editor of the Heartland Institute’s Budget & Tax News, serves on the board of the Washington Coalition for Open Government, and was an advisor to the 2002 Washington State Tax Structure Committee. In June 2010, Governor Gregoire appointed Jason as WPC’s representative on her Fiscal Responsibility and Reform Panel. Jason holds a Bachelor’s degree in Political Science from Washington State University.
Oh, boy! This must be one of the least illuminating items in the “news” in the last decade. So the state pays so and so much to employees. What should or could it do instead? And, gee, a higher education employee, that might be one of the country’s top in his or her field (and would earn much more elsewhere) is paid a lot (compared to what?). And, you know, one of these days it’s going to rain because we live the Northwest. Thanks for the news.
Of course, employees cost – they make the state run, and if they can’t eat or pay the rent, they won’t be able to work either. How about we fire all of them? We save a bundle – but, unfortunately, we also all have to move to Alabama or somewhere as this place shuts down for good.
If you are suggesting that they cost too much, you have to find a much better argument. If not, did you have too much time on your hands today?
I read this earlier this morning, and scratched my head. Upon returning to it just now I noticed Fred’s comment, which hits the nail on the head. There is almost no context, and what little context you allude to (“all” state spending), you ignore. Are there more people living in the state who need public service? Did the legislature add new programs (for us, the people), which would require additional administration? Where do you explain that the % rise in the cost of state employees is lower than the rise in the non-employee costs, and where is your analysis of those other “out-of-control” costs? How about the salaries of legislators and their staff?
As “Fred” points out, government is necessarily labor intensive. How about a neat little section about how WSDOT is getting away from the old-fashioned labor-intensive methods of toll collection by moving to modern electronic collection methods, which are far more efficient and trouble-free?
While the total dollar amounts for spending either increases or decreases over time the % of compensation costs to the total has remained steady at roughly 23% or 30% depending on adjustments for K-12.
The question for policy makers is whether that % of total spending should increase or decrease. Your answer will likely hinge on whether you believe the primary role of government is as an employer or instead only as a facilitator of essential services. If the former you may think that more of the budget should go toward compensation; if the later you may want to reduce the % through alternative service delivery models to direct a higher percentage of spending to other activities.