Public employee pay not targeted at local level yet

CEDAR RAPIDS - Listen to Mayor Ron Corbett and City Council member Don Karr enough, and you might think every city employee spends some of the work day fixing broken water lines late at night in subzero weather.

Corbett and Karr each have conjured recently the image of the shivering, big-shouldered public servant and the spewing water pipe as they have adamantly defended a new city budget - with pay raises, quality benefits, solid pensions and other new spending and without steep cuts, freezes, furloughs or apologies.

“I'm glad I'm not out there in the cold trying to fix a water line,” said Corbett, a Republican.

Meanwhile, Gov. Terry Branstad and Republican governors in other states have been sharpening their budget axes while calling into question the cost of public employees.

“We're ahead of the curve,” Corbett said last week. “We (built a budget) in a peaceful way.”

He's leaving the budget hullabaloos to others, and at the Statehouse, Branstad is more than willing to oblige. The governor has tapped into a vein of nationwide sentiment that government is too big and public employees can earn too much pay and benefits.

Branstad's talked about reopening union contracts, using private-sector wage-and-benefit packages as comparisons when negotiating those contracts, modifying public-employee pensions and examining automatic pay-step increases.

“Governor Branstad believes that (state employee) contracts as they stand are not sustainable and the state cannot afford them,” said Tim Albrecht, the governor's spokesman. “He believes management has given away all of its negotiating power and rights in recent years. ... This, in effect, took away bargaining rights from taxpayers.”

The tone at City Hall in Cedar Rapids and Iowa City couldn't be more different.

Iowa City

Tom Markus, city manager in Iowa City since Dec. 1 after 22 years in Michigan, said he saw the financial distress coming for Michigan's public sector over several years.

Economic troubles in a state's private sector, he said, tend to bleed over into the public sector, and that's been the case in Michigan, Wisconsin and neighboring states, he notes.

“Clearly, Iowa isn't Michigan,” Markus said. “Iowa has managed its affairs better than Michigan has.”

Still, he said, changes in political leadership can shift the budgetary storyline. The tendency is Democrats want to raise revenue, Republicans want to cut expenses, he said. Republican Branstad replaced Democrat Chet Culver.

Markus said Iowa City's proposed budget doesn't come with any uproar. It supports a new fire station, eight additional firefighters and five additional police officers, cuts a few open positions and increases property taxes 3.95 percent for homeowners.

“It's a fairly balanced approach,” he said.

Cedar Rapids

The story is similar in Cedar Rapids, where City Manager Jeff Pomeranz said “status quo” explains much of the budget he has proposed. The council has said it is comfortable with the budget, which will be balanced with the help of an 8 percent increase in what homeowners pay in property taxes.

Corbett said much of the tax increase comes because property values in Cedar Rapids have increased 5 percent, despite the 2008 flood. Pomeranz said it's incorrect to suggest Cedar Rapids is not being cautious with taxpayers' money.

Defined-benefit pensions

John Gilliland, senior vice president for government relations at the Iowa Association of Business and Industry, said there is plenty of room for debate in Iowa and across the country about the cost of government and public employees.

He points to Iowa's public-employee pension systems, into which taxpayers and employees pay and which guarantee public employees a monthly retirement check, or a defined benefit. Private-sector employers across the nation have dropped such pensions in favor of defined-contribution plans, like the 401(k).

“The private sector moved away for a reason. It simply wasn't sustainable,” Gilliland said.

Of particular challenge in Iowa is the state's pension for police officers and firefighters, the investments of which have taken a hit in recent years on the stock market.

In the current year, Cedar Rapids pays $4.2 million into the system, or an amount equal to 19.9 percent of the salaries of its police officers and firefighters. In the fiscal year beginning July 1, the city will contribute $5.4 million, or an amount equal to 24.76 percent of salaries.

The additional $1.2 million is about equal to the annual revenue the city will net next year in its much-debated traffic-camera program.

The projection is that Iowa cities will need to contribute 29.3 percent and 37.3 percent of salaries in the two subsequent years to get the police and fire pension fund where it needs to be.

Iowa City is swallowing similar percentage increases.

Pay-step raises

Gilliland also questions the built-in, pay-step increases for longevity that public employees get, even if a slow economy results in pay freezes for many in the private sector.

At the state level, the pay-step increases are 4.5 percent for most union employees (3.5 percent for state law-enforcement officers), with many jobs having some 12 pay steps.

In Cedar Rapids, pay-step increases for longevity represent 2.5 percent salary increases, though they had been 4.5 percent until 1997. Non-bargaining positions with the city have 14 pay steps, union positions fewer.

Peter Fisher, a research director for the Iowa Policy Project, acknowledges that a national mind-set holds that government spends too much and public employees get paid too much compared with private-sector employees.

His group issued a statement last week, however, that in comparable positions, public-sector employees get paid less than private-sector employees.

As for pay steps, Fisher points to teachers, noting that schools are flat organizations in which many teachers choose to teach for their entire careers rather than move into the relatively few administrative jobs. Teachers, though, would never see their incomes grow much in real terms if all they received were cost-of-living increases and not longevity increases, he said.

Fisher said the nation's and state's focus should be on getting people back to work in good jobs with good wages and benefits, not in “dragging the public sector down with the private sector,” he said.

‘Rolling downhill'

Cedar Rapids' Pomeranz and Iowa City's Markus caution that a day of reckoning may be just around the corner for their cities.

Pomeranz has warned his City Council that the amount of debt the city has had to take on could begin to have a significant impact on the tax rate in upcoming years.

The trend lines in Iowa City - property values aren't increasing as they had, interest on investments is down, pension costs are up, some operating costs covered in the past by annual revenue have been shifted to long-term debt - suggest that building a budget may be tougher a year from now, Markus said.

“It seems to me, like most things in life, gravitational pull results in things rolling down hill,” he said, “and I don't think for a moment that this isn't coming the way of the municipality. … We're watching things with a more cautious eye than we were.”