Pay cuts too steep
June 9th, 2009 by David ShapiroI was determined to stay away from the news during my vacation, but couldn't resist tuning in to part of Gov. Linda Lingle's speech announcing that she'll make up nearly all of the latest $700 million budget shortfall by sticking state employees with unpaid furloughs of three days a month.
I agree with the governor that state employees must share in the sacrifices everybody else is making in the worst economy since statehood.
Arguments by state workers that they should give nothing to balance the budget while their brethren in the private sector are facing record layoffs, pay cuts and loss of hours are thin and self-serving.
This is especially so when the only way to keep them whole would be to significantly increase excise taxes on hard-hit private sector workers who have already been subjected to widespread increases in state and county taxes and fees.
That said, the magnitude of cuts Lingle wants from state employees is excessive and unfair.
Three furlough days a month equate to a pay cut of about 14 percent, which along with possible increases in health insurance premiums could reduce take-home pay by 20 percent — way too much for any Hawai'i family to reasonably absorb with our high cost of living.
By comparison, Advertiser employees recently took a pay cut that was considered steep at 10 percent.
When Lingle initially broached public worker pay cuts with the Legislature, she was talking only half the amount she's demanding now.
Yes, state revenues have continued to sink since then, but dumping all the burden of balancing the budget on state employees is no more fair than to let them off without any contribution.
The governor needs to get the pay cuts back to the 8 percent range she initially proposed. She and the Legislature can achieve this without further major tax increases by tapping the Hurricane Relief Fund, which has outlived its purpose, and the Rainy Day Fund.
If this isn't a rainy day, what is?
Tags: budget, Legislature, Linda Lingle, public workers
June 9th, 2009 at 4:34 am
Very well said Dave.
June 9th, 2009 at 6:15 am
Wait a minute, Dave, there's a flaw in your soup!
You say, "I agree with the governor that state employees must share in the sacrifices everybody else is making in the worst economy since statehood."
I agree, also, that we (yes, me) state workers should share in the balancing the budget. But, must disagree that state workers should pay for it by themselves.
You say, "This is especially so when the only way to keep them whole would be to significantly increase excise taxes on hard-hit private sector workers who have already been subjected to widespread increases in state and county taxes and fees."
Wait a minute, if you increase taxes and fees, don't I, as a state worker, ALSO pay those same taxes and fees? I don't recall being offered a waiver.
What is fair in this situation is for EVERYONE to pay an equal amount to fund services enjoyed by all in the state. I should not be made to pay more to keep those services afloat so that others may enjoy them.
And I should point out that as a state employee, I am making a hell of a lot less money than I was when I was working for a private sector company. I took a massive pay cut when I left that private company to work for the state only two years ago. I did it to be of service to my community. Now I'm being asked to take another massive pay cut so that those who benefit from my working for the state don't have to pay for that benefit? Hogwash!
We need to stop with the cliche that state workers are a bunch of overpaid, lazy bums. I am not, and my coworkers are not, overpaid at all. And we are not sloths. We work passionately hard for the betterment of our beneficiaries.
In fact, I work no less hard for the State of Hawaii than when I worked for you! Only now, I do it for a lot less money.
June 9th, 2009 at 7:09 am
Good column today, Dave. What a lot of folks out there seem to think is that government employees should take the hit to balance the budget because they are the ones getting paid by taxpayer's money. However, what these people fail to understand is that the employees do the work of government, and government benefits everybody, not just the employees.
Additionally, so often we hear people from the private sector saying, "Run government like a business. When businesses have hard times they start laying people off." What they don't realize is that most businesses have hard times because their customer base shrinks and the business can't pay for expenses. With government, the customer base is not shrinking (in fact it may be growing). Government still needs to do what it needs to do - the services still need to be provided, the workload is not reduced. So when people say "run government like a business," the simple fact of the matter is, you can't.
Don't get me wrong. I think the public sector people still need to sacrifice, but definitely not to the extent the governor is calling for now. Not only is it unbalanced, (especially when you also consider they're going to absorb a 23%+ increase in their health premiums), but it takes away the trade off of working for government. That trade off is that you work for a lower salary relative to the private sector, but you get more security in terms of employment. If I were a 30-year employee, and the governor were telling me I'm going to have to take a 15% pay cut and pay $2500 more a year in medical, I'd wonder why I'd been wasting all this time working for government.
June 9th, 2009 at 7:12 am
Aloha, Dave,
Good to see your comments. I know some great, dedicated state workers...and I know some others ('nuff said).
While I agree with some of your post-I think there's another factor which needs to be added to your comparison of the Advertiser's pay cuts vs. the Gov's proposal. How many layoffs did the Advertiser have before/during/since the paycut? I remember it was a lot!
I own a small business and saw my health premiums rise almost 40% last year; this year, it looks like another 26% will happen. I can't raise my prices (e.g."taxes") to cover that, then or now, nor raise prices to cover the other increases we've all suffered. Here in Maui, businesses are closing constantly, and those still open are hurting terribly. Any more tax increases will accelerate the demise of more family owned businesses--and that's not a good result either.
June 9th, 2009 at 9:21 am
ZZ said, "I took a massive pay cut when I left that private company to work for the state only two years ago. I did it to be of service to my community."
Now that's the biggest pile of bull I've ever heard! Oh, great sacrificing martyr who gave up big pay all to altruistically serve the public. lol!!! Ya, right! You either got let go or were going to be laid off, were unable or unwilling to produce sufficient quality work, or just wanted a cruise job with maximum job security. What a joke you are!
June 9th, 2009 at 9:28 am
Manawai, you don't know what ZZ's motivations were. And don't go characterizing the job as "cruise," when you don't know what he/she does. I know plenty of state employees who bust okole every day and most weekends (without extra pay) because the work needs to get done.
June 9th, 2009 at 9:39 am
Dave:
Unlike furloughs, tapping the Hurricane Relief Fund or the Rainy Day Fund is not something the Governor can do unilaterally. So please direct some of the blame at our legislators, who have not, as yet, been willing to call a special session to explore these options.
June 9th, 2009 at 11:18 am
I (State worker) used look at Lingle in a favorable manner, like she was someone I could count on and when I've spoken to her in person (couple of times), this feeling was confirmed. Now I feel like she is betraying us. I'm ok with furloughs of one day, maybe two, but for her to present a 3 day furlough shows me how out of touch she is. I can't wait until her term is over next year.
June 9th, 2009 at 12:32 pm
The problem with draining those funds is that the bond rating for the state gets worse; that is, we will have to pay more in interest since our financial footing is less stable.
Secondly, not every private sector company is facing massive layoffs, furloughs, etc. Indeed, according to a Gallup poll done recently, 2% of workers were laid off in the past 6 months along with 12% having been furloughed.
Granted, it's tough if you're one of those affected but to imply that ALL companies are laying off and furloughing workers is simply not accurate.
What the governor is proposing would affect a much higher percentage of workers in the public sector. Whether or not this is the direction to go is up for debate. But to use the argument that since all private sector workers are feeling the pain, then all public sector workers should do likewise is a false premise.
Lastly, for those who want to run government like a business, they may want to take at look at the financial industry and auto industry and judge whether the corporate model is one that governments should follow.
June 9th, 2009 at 2:20 pm
Charles,
Could you point to the Gallup poll you mentioned? I've not found one which has the numbers you included. Instead, I've found ones citing much more negative outlooks and numbers. An example is the stat published in Pacific Business Journal, citing that nationwide each job currently has the potential of 5.4 applicants. The Dept. of Labor's last numbers rate unemployment at 9.4% nationwide. This is of course not a "total" number, as those who do not qualify for unemployment benefits aren't counted, nor those who are underemployed (working a reduced schedule and/or salary to keep the job).
Consider too, if you will, that each small business (the local store, restaurant, auto shop, etc.) which has few or no outside employees still adds to the tax collection base. Each one that closes not only results in reduced revenues to the State, but many of the owner/employees can't receive unemployment and other benefits. What will they do to pay their mortgages and feed their families?
Raising the GET will force those already near the edge over it, I fear. If they've already taken every measure possible, but aren't making enough to pay rent, utilities, and (perhaps) employees, then how will they pay an increased tax? They won't--they'll do the same many already have, and close.
Here in Maui, larger businesses haven't had a good haul either.The Makena Prince and Resort group just laid 49 people off last week. ML&P laid hundreds off in January. Every hotel I know has reduced staff, either through layoffs, furloughs, early retirement packages, schedule cuts, etc. Retail and grocery stores are also trying to save wherever possible, and we won't even talk about the tourist related companies like Hilo Hattie's and the activity companies. In other words, the pain is quite widespread and has been for many months now.
I think it is a delicate balancing act. Push expenses too high, companies will close, thereby reducing tax revenue even more. Reduce government spending without the employees' support, the complaints will increase and we will lose some good people.
Personally, I think there needs to be a closer look at where savings could be found. But I do think there needs to be a reduction of the state payroll, through intelligent and reasoned thinking by all parties concerned.
June 9th, 2009 at 2:53 pm
I disagree with your analysis and conclusion, Dave.
To balance any budget, whether in government or the private sector, you start by cutting back on bodies. Now, if the HGEA does not want to discuss this, then the governor has no choice but to cut back on the number of hours people can work.
At least government workers had a choice. Let some people go or everyone agree to reduced hours. HGEA said no way to letting people go. This left only one option: reduce hours for all to make up for the deficit.
I support the governor's decision. If she has to reduce people's salaries by 20 percent, that's fine. Take a reduction in pay or take no pay at all.
This is not the time to be asking us to pay more takes to support a bloated government.
The directors and others making more than 80k/year should take a 25-30 percent reduction and the workers making less than 80k/year should take a 15-20 percent reduction.
June 9th, 2009 at 3:20 pm
Manawai, trust me that ZZ is one of the hardest working individuals I've ever known.
June 9th, 2009 at 5:59 pm
Aloha Dave,
As you know, my spouse and I are state workers. Our pay cut will be about $20K/year for both of us. I already reduced my electric bill from $551/mo to $59 per mo. by unplugging all electrical appliances not in use for the past 7 months. I saw this on Oprah, it really works! I have a solar water heater; CFL's in all of our lamps; try not to use the air conditioner (very hard these hot days!). With this huge paycut effective 7/1/09, we longer will eat out, purchase clothes or purchase anything not absolutely necessary. Hope we still have enough money to buy food. Helping our child through college is zapping much of our income.
I have been wanting to lose 50 lbs. Thanks to the Governor's furlough plan, I will be on a forced diet due to no money for food! By 6/30/11, I should be slim again. I must think of the positive things that will happen as a result of this huge paycut! We most certainly will learn how to stretch a dollar.
June 9th, 2009 at 8:48 pm
How do these small businesses stay alive if people like Linda can't afford to spend? I don't know what the answer is, but the furlough will cause a bigger slowdown.
June 9th, 2009 at 9:09 pm
I think Linda Kato is being too dramatic.
June 9th, 2009 at 10:45 pm
According to a 5/29 article in the HA, "Overall, since last year, the council's forecasts have been off by $2.7 billion." If 70% of the state budget is payroll, I do not think taking $688M out of $2.7B in reductions is excessive.
June 10th, 2009 at 6:15 am
Scott,
I can tell you are not putting a child through college on the mainland and you must have a huge savings account. We live paycheck to paycheck like many other residents of this state. Try cutting your monthly expenses knowing you will have $20K less per year. Tell me how you would do it?
Linda Kato
June 10th, 2009 at 6:48 am
El Guapo got my point. As I wrote, I think it's a balancing act. But why not take a wide view, and include other ideas than furloughs or layoffs? Many states, cities, and companies have offered early retirement packages, which seem more expensive-until you realize that the savings are great. First, senior employees usually receive the highest pay and benefits; second, by not filling the positions, reductions are achieved over the long run. Earl of Sandwich wrote about a 30 year employee facing the cuts--well, perhaps that employee could retire??? Hopefully such an employee doesn't have three mortgages and kids in school.
June 10th, 2009 at 7:52 am
Linda, I don't think you're doing yourself too many favors by telling us you and your husband are going to be taking a $20k annual pay cut. If we go with the 14% reduction scenario as a result of furloughs, that means 100% is $143,000.
As everyone has known about me from my comments in the past, I'm generally a supporter of state workers and public servants in general. But even I've got to say you're not going to garner much sympathy crying to people when you've got that kind of income. I realize it's not rich by Hawaii standards, but it's not exactly a hardship situation, either. I know you've got kids and a mortgage, and are living "paycheck to paycheck" but there are obviously choices you have made that put you in that situation.
Having said all that, I do hope the pay cuts don't end up being so drastic, and I feel for you and your family, even if just on the principle that the Governor's plan is quite inequitable.
June 10th, 2009 at 4:49 pm
Taking money out of the hurricane emergency fund would be a mistake.when the big one hits us. it takes discipline andcourage for the state government to meet the shortfall requirement.it means doing things politically unpopular for the political and ruling class.but it absolutely has to be done.Cut taxes across the board for everyone.no exceptions.cut spending across the board.no exceptions.have the politicians craft legislation to make Hawaii a "right to work state"People shouldn't be forced to join a union as a condition of employment.Gambling casinos and off shore banking and decriminalizing drug use for adults.we can have so much prosperity in our state.
June 11th, 2009 at 10:19 am
Earl of Sandwich,
Thanks for your comments. Not only will the paycut be a forced change of lifestyle for many of us financially, the stress of getting our work done in 4 days/week when you have more than enough work for 5 days is very stressful. It will be difficult to service the public on less hours per week.
We chose to help our kids through college. When they realize their careers goals, our financial sacrifices will be well worth it.
Let's hope things don't get worse than they already are.
June 12th, 2009 at 7:13 am
Linda,
No doubt it's going to make everything harder. I wonder if she'll try to pursue making employees take holidays as furlough as she suggested earlier. I hope not, because working the same number of days for less pay is no furlough, that's just a pay cut. There's nothing inherently wrong with that, but if you're going to do a pay cut, you shouldn't try to disguise it as a furlough.
June 17th, 2009 at 12:34 pm
I can not believe that Lingle is thinking about cutting the workers pay, that includes teachers. The teachers out here in Hawaii are on the lowest end of the pay scale, and most take money out of there own pockets to help the students. Lingle has decided education is less important than advertising in the mainland for tourism. I think Lingle has lost touch with reality as long as she can still have money coming in who cares about the state workers who work so hard to keep our streets cleaned, parks beutiful and our lands worth while. The keeper at Makapuu is now losing the other 2 people who help him maintain that land.
Real smart move, she wants to increase tourism but who wants to come to a place where they can not even maintain there own lands. It does not make sense.
Keep the money here with the teachers, the ones who maintain our lands,help the youth, and that will help increase our economy.