Sunday, March 13, 2011

Employee compensation not a deficit problem

The Center for American Progress:

The conservative explanation for state budget deficits is that employee compensation for public-sector workers is out of control. But a close look at the facts demonstrates these claims are unjustified. Public-sector pay is not the cause of state budget deficits because public-sector compensation did not significantly increase in recent years. Instead, state tax revenues declined sharply amid the Great Recession—shortfalls made worse in some states by ill-advised tax cuts for businesses and the wealthy, as happened most famously in Wisconsin before its governor began pushing to eliminate public-sector collective bargaining rights.

To be sure, most states face severe budget problems—an average projected shortfall of 16.9 percent of fiscal year 2012 budgets. And there are some headline-grabbing cases of government employees receiving excessive wages and benefits. But budget shortfalls today were largely driven by the downturn in state revenue due to the Great Recession. State revenue is 12 percent below prerecession levels even as the demand for services and benefits such as unemployment insurance is high.

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