You Cannot Control Pensions Unless You Control Salaries

As Illinois taxpayers face the impossible task of how to pay at least $250 billion worth of pension taxes over the next 25 years, the question arises: how did we get to this point?

The villains have been many but as we have discussed before the biggest culprit has been excessive, out of control salaries. If public salaries had increased at the same rate as Social Security wages over the last 20 years there would be no pension deficit (see here).

Option 1: If it’s non-academic why don’t we outsource it?

In 2009 the top teacher salary was $189,434 but he is just one of many overpaid so-called “teachers”. If we look at the Top 10 Teacher Salaries for 2009 we something unusual:

Notice none of the Top 10 teach an academic subject despite averaging a mind-boggling $181,137 or $20,000/mo. No English teachers, no history teachers, no physics teachers or algebra teachers. These are school employees who have been added to the “teacher” list over the years even though they don’t really teach anything important. There is no reading, writing or arithmetic in the whole group. Four phys ed teachers but no physics teachers

So part of the problem is adding more and more school employees to the “teacher” list, allow them to work only 9 months a year, pay them high wages and allow them to retire as part of the lucrative Teachers Retirement System even though they don’t really teach anything.

One money-saving possibility is outsourcing as many subjects as possible. Instead of adding new categories of teachers let’s start subtracting them. Certainly we can find skilled musicians to teach our children trombone and how to march at half-time of the football games for less than $189,000/yr plus pension plus fringe benefits plus tenure.

Other obvious outsource possibilities include: Drivers Ed, Art, Drama, Phys Ed, Librarians, Nurses, Language and Behavioral.

Option 2: Limit pay for non-academic teachers to the 90th percentile nationwide.

The BLS (Bureau of Labor Statistics) puts out data by job title. Expanding on the previous paragraph if we are going to keep the non-academic workers then let’s limit their pay to what other people with their skill set make in the private sector.

In the case of the two instrumental teachers in the Top 10 the BLS has a title called “Conduct, direct, plan, and lead instrumental or vocal performances by musical groups, such as orchestras, choirs, and glee clubs. Include arrangers, composers, choral directors, and orchestrators.” Sounds about right

So what do people in this category make in the real world the rest of us non-teachers live and work in? According to BLS the average is $53,410 and the 90th percentile for this occupation is $85,020 – and that’s for a 12-month work year.

So let’s make a rule that no public employee can make more than the 90th percentile of what his peers in the private sector make as defined by the BLS statistics. There are few taxpayers who would think $85,020 for a music teacher working 9 months a year with tenure and an extravagant pension available at 55 is inadequate pay for that particular job.

The constitution guarantees pensions not salaries.

The Illinois constitution states that pensions cannot be “diminished”. However it does not say that salaries cannot be “diminished” and since pensions are directly correlated to salaries the one legal way to “diminish” pensions is to diminish salaries. And from the look of the salaries of the so-called “teachers” in the above table their salaries could and should be diminished by a significant amount.

If we had the “90th percentile” rule in effect, Illinois taxpayers would save $2.6 million pension tax dollars just from that one music teacher.

What the next governor should do.

The next governor needs to forcefully put salary limits into play at every level of government. One place to start is the high end. No public employee, including school administrators and college professors, can make more than the governor ($177,000).

Every other job should have a limit of the 90th percentile for that job description. Overtime should be limited to those making less than the average household income in Illinois or about $65,000/yr. If you make more than that you work overtime as part of your job description. Over a certain amount of overtime you could get comp time off. Comp time off would not add to pensions.

The governor must emphasize the need for public sector pay, pensions and benefits to match those in the private sector. It is not only an issue of fairness but also the only way to avoid bankrupting the state.

The 5% of Illinois workers that are in the state pension system cannot continue to have better pay, pensions and benefits than the 95% who pay for them.

Bill Zettler is a free-lance writer and consultant specializing in public sector compensation. He can be contacted at this email address. Click here to read more by Mr. Zettler.