Today’s report shows our teachers, police officers, firefighters, and nurses are still feeling the worst of the Bush recession — while Republican leaders demean them as ‘special interests’ and try to block legislation that will grow our economy.
Nancy Pelosi, Pelosi Statement on July Jobs Report, August 6, 2010
July’s abysmal employment report confirmed the stalled recovery and fed fears of a second recession. Heedless, Ms. Pelosi is intent on convincing voters that a recovery is underway, and that the real problem is government workers who have not shared in the private sector’s post-recession prosperity.
The just-passed $26 billion Education Jobs and Medicaid Assistance Act that occasioned the speaker’s remarks provides $10 billion to states to prevent 161,000 teacher layoffs, and $16.1 billion to Medicaid to free up funds to pay for 151,000 other public sector employees, including police, firefighters, and nurses. The math is not difficult. The bill spends over $62,000 per teaching job saved, and over $106,222 per police, firefighter, and nursing job saved. Teachers should feel cheated.
The fiscal crisis that puts state and local government jobs in jeopardy is not new, is not going to go away, and is exacerbated by state and local governments’ refusal to make tough changes mandated by the recession. States and localities continue to offer pay and benefits wildly in excess of the private sector because they know they can count on federal handouts to guarantee the incomes of their employees.
How enormous is the compensation disparity between government and private sector jobs? In March 2010, the employer cost for a private sector employee averaged $27.73 per hour. The cost for state and local government employees was $39.91 per hour , an additional annual cost of over $25,000 per employee.
The benefits offered by states and localities are in large part responsible for their excessive employment costs. 90% of state and local government employees are eligible for retirement benefits, compared to 65% of private industry employees. For full-time government employees, 99% are eligible for health care and retirement benefits. 
Unlike the private sector, public sector pay and benefits put state and local governments, and their taxpaying citizens, on the hook. The steep price tag drags down budgets and adds to already enormous unfunded pension liabilities that the recession has pushed to near catastrophic levels as investments fail to reap anticipated returns:
Estimates of states’ unfunded pension liabilities span a wide range, but some researchers put the figure as high as $2 trillion at the end of last year. States’ unfunded liabilities are significantly higher than before the recession and financial crisis because many pension fund investments have declined in value, and because many states have found it difficult to maintain pension contributions while their budgets are under stress. 
Ms. Pelosi’s home state of California, known for its generous “CalPERS” public employee retirement system, has an unfunded pension liability reported to be as high as $500 billion. Of the $10 billion provided for teachers by the new bill, California will receive $1.2 billion to fund unaffordable teaching positions.
Organized labor has powerful allies in Congress and the White House, as we witnessed when the health care bill’s “Cadillac Tax” implementation was delayed because of union demands. Unions are heavily represented in the ranks of government employees, particularly the teachers, police, and firefighters whose jobs are being funded by this bill:
The union membership rate for public sector workers (37.4 percent) was substantially higher than the rate for private industry workers (7.2 percent). Within the public sector, local government workers had the highest union membership rate, 43.3 percent. This group includes workers in heavily unionized occupations, such as teachers, police officers, and fire fighters.
Neither taxpayers nor the Federal Government should be in the welfare business for state and local government employees. Congress’ allocation of $26 billion to guarantee incomes and appease organized labor is an egregious use of funds not made acceptable by applying the “deficit neutral” stamp to this bill. $26 billion is $26 billion, and spending is spending.
Organized labor is voracious and union demands for wage and benefit increases are ceaseless, regardless of the state of the economy. Congressional Democrats sympathize with the plight of teachers, police, firefighters, and nurses, because in a few months their jobs will be on the line, too, and they need the election year PR of preserving the incomes of public servants and union employees.
If state and local governments cannot afford their employees, they should take their lead from the private sector and cut wages and benefits to levels commensurate with their budgets. If the cuts do not reap sufficient savings to pay for these employees, states and localities have another option which truly is deficit neutral. Fire them. That is what the private sector did, and according to our House Speaker, the private sector is on the happy road to recovery.
1..Bureau of Labor Statistics. Employer Costs for Employee Compensation – March 2010. June 9, 2010. p. 1.
2..Bureau of Labor Statistics. Employee Benefits in the United States – March 2010. July 27, 2010. p. 2.
3..Chairman Ben S. Bernanke. At the Annual Meeting of the Southern Legislative Conference of the Council of State Governments, Charleston, South Carolina. August 2, 2010. Challenges for the Economy and State Governments.
4..Bureau of Labor Statistics. Union Members Summary. January 22, 2010.