The real cost of hiring public employees is in their pension funds.

A recent article in the Sacramento Bee outlined where the City’s money will have to be allocated during the next fiscal year in order to keep current employees employed. Bottom line, 85 cents out of every dollar spent in the $386 million California general fund would go to pay for the salaries, health care and retirement benefits of more than 3,000 city employees.

The “cuts” of course will then have to come from a corresponding reduction in Sacramento city services and supplies --which drop from an average of about 22 percent during the last six years to about 5.5 percent of the annual fund. Good news for people who need to keep their jobs; bad news for taxpayers.

But an equally important point made in the article might just be overlooked if one were to miss focusing on all of the ramifications of budget parsing. The overwhelming cost of pension obligations incurred by the city in hiring more full time employees is almost mindboggling for those demanding more efficiency and accountability.

What’s more, according to the proposed budget released last month, the stock market's fall has battered the value of the Sacramento City Employees' Retirement System, and the hit will need to be offset next year to the tune of an $8 million contribution by the city. Then, in the 2011-2012 fiscal year, the city is preparing for a $12 million hike in its annual contribution to the California Public Employees' Retirement System to make up for investment losses in city funds held by CalPERS.

"We're concerned and we would hope that the city, as all cities, will look very seriously at ratcheting down their pension contributions," said Jon Coupal, president of the Howard Jarvis Taxpayers Association told the Bee. “Still, the numbers – especially the amount of the budget being spent on salaries – aren't surprising,” Coupal said. "California is the land of milk and honey as far as public employees go," he said. Adding to the mix, said Coupal, is that Sacramento is a government town where local politics are dominated by the labor-friendly Democratic Party.

As you might expect, Bob Blymyer, the executive director of the Sacramento County Taxpayers League, sees it differently. He told the Bee: "The public won't stand for" inequity between public and private sector compensation. It was never the taxpayers' intention to upgrade public workers' salaries and benefits to where they are better than private enterprise.”

All of which points out the following reality: Every time the state hires a new public engineer (who makes more money than if he or she worked in a private engineering firm, and then joins the public engineers employees union to fight for his or her “rights”) the state (you and I) are also signing on for a pension obligation that can run into the $1 to $2 million range, depending on salary levels.

So, rather than just saving jobs, perhaps we taxpayers should be focusing our attention away from just salary to consider another real cost of hiring more public engineers – especially when we let their union lobbyists garner favors from state legislators to, for example, prevent the state from outsourcing the work when and where they can.

By the way, the truth is that in recent years thousands of engineers working in the private sector have already lost their jobs. Much of that failure can be attributed to their comparatively poor and

underfunded private unions who failed miserably in “achieving” the same kind attention and support from the California legislature. Perhaps that kind of inequity should be added to the growing list of reasons to make some official changes in the next election?

Tom Blackburn
President-Elect ACEC California
Blackburn Consulting