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Beware Child Care Providers & RI

BEWARE! The independence of 580 home child care providers will be decided in an upcoming election about whether they will be forced to unionize under SEIU.  Our report highlights what providers, other service professionals, and taxpayers should know …

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REPORT: What Taxpayers Should Know About the Unionization of the Home Child Care Industry

Stenhouse discusses issue on WPRI-12 NewsMakers … 

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MEDIA RELEASE, 9/16/13

Providence, RI — With the independence of almost 580 home child care providers to be decided in an upcoming election about whether or not to accept the Service Employees International Union (SEIU) as their exclusive union representative, the Rhode Island Center for Freedom and Prosperity published a report today highlighting the risks to the home child care profession, to taxpayers, and to other independent small business owners and contractors in the state.

With record of broken promises and negative consequences in other states and with severe structural budget deficits, both child care professionals and taxpayers in Rhode Island should beware. The report, which reviews data from other states where similar unionization has occurred, documents the associated decrease in child care participation rates and discusses the future risk to other professions in the state.

The Center is partnering with the Coalition of Union Free Providers, a national organization comprised of child care professionals from other states, to provide information about the impact that unionization may have on the family child care profession.

“Across the country, child care providers have found themselves stuck paying high union dues and fees with little to no benefit in return. These providers often didn’t realize their businesses were targets of the SEIU until it was too late”, said Jennifer Parrish, founder of the multi-state Coalition. “Every provider has the right know all the facts, including what this will cost them and how this may impact their profession, prior to casting a ballot. When providers have access to this information, they overwhelmingly oppose unionization.”

The Rhode Island Center for Freedom and Prosperity, a nonpartisan public policy think tank, is the state’s leading free-enterprise advocacy organization. The Center works to make a profound, positive impact on the lives of every family and business in the state through the exchange of market-based ideas and reform solutions aimed at restoring economic competitiveness, educational opportunities and – ultimately – hope for a brighter future.

Report Summary

Hundreds of home-based child care professionals, who started their own businesses to build better futures for themselves, may soon lose their independence and the freedom to provide services in the manner they see fit. Most never considered that unionization would be part of their work; nor do they see themselves as incapable of operating their businesses without union representation.

Today, they are independent small business owners; in the coming weeks, if a majority of those who vote at a small special election opt to unionize, every one of them will see herself transformed into a quasi-government worker, forced to pay compulsory union dues or fees and subject to the agenda of a national and international political entity: the Service Employees International Union (SEIU).

The successful unionization of this group of providers, however, will not end the matter, with consequences reaching into industries throughout the state. Other independent service providers who receive subsidized payments from the state may also be forced to unionize against their will, including small business owners or independent contractors in other areas of child or home care, health services, real estate, or even in the retail industry.

Regarding home child care providers, this report reviews results from other states and discusses a number of important considerations and projections of which these providers and the general public should be aware, especially those who are eligible to vote in the upcoming election. If patterns observed with similar efforts in other states hold true in the Ocean State, there are a number of reasons for the child care industry, other professionals, and taxpayers to be concerned:

  • Broken promises: Unions are usually not able to fulfill the promises they make to providers.
  • Individual rights: Child care providers may be severely restricted.
  • Reduced services: In other states, when home child care providers are unionized, the number of providers and children served usually shrinks.
  • Legality: Involuntary representation by a state-selected monopoly union may be unconstitutional.
  • Increased union clout: The financial and political power of the statewide union stands to be substantially increased, with up to $500,000 or more to further advance its political agenda.
  • Trojan horse: The stated mission of the AFL-CIO labor union is to expand its membership in Rhode Island, targeting other independent contractors and small businesses in the state.
  • Burden on taxpayers: As unions seek to provide benefits to a newly unionized professionals, it will come at taxpayer expense.
  • Missed opportunities: Other alternatives do exist for child care and other service providers that might be better for everybody involved.

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See Also:

Center Calls on Labor Relations Board to Revise Child Care Unionization Ballot Language

Unionization of RI Childcare Providers May Be Unconstitutional

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Unionization of Child Care Providers May be Unconstitutional

Recently, Rhode Island passed a law requiring childcare providers caring for children from low-income families to accept monopoly union representation. The Service Employees International Union (SEIU) has petitioned for an election to become the monopoly union representative. This may be unconstitutional.

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Center Calls on Labor Relations Board to Revise Child Care Unionization Ballot Language

View the official petition to SLRB here … 

The Rhode Island Center for Freedom and Prosperity is calling on the State Labor Relations Board to revise the proposed language on the ballot in the upcoming election that will determine whether or not upward of 580 private contractors – that provide child care services in their home to clients who receive state-subsidized assistance – will become unionized.

The Center recommends a simple revision that more clearly defines the reality of the the options that these childcare providers are being forced to consider. Per a recent report in the Providence Journal, the ballot question currently reads: ‘Do you desire to be represented for the purpose of collective bargaining by Service Employees International Union, District 1199, NE or by no provider representative.”

This language is devoid of the word ‘exclusively’, and, therefore, does not appropriately highlight an important provision that child care providers should be made aware of; that such representation would be exclusive to SEIU, and that by voting to unionize, providers will be forced to petition their state government through an involuntary association. As previously argued by the Center, this may be in violation of their constitutional right to freedom of association.

The Center recommends that the ballot language should be revised to read: ‘Do you desire to be represented for the purpose of collective bargaining exclusively by Service Employees International Union, District 1199, NE or by no provider representative.’

“Many providers, who today proudly call themselves independent business owners, free to make their own decisions about how best to operate their business, are concerned that, after the election, they may be involuntarily reduced to the status of unionized state employees, subject to the agenda of national and international unions, forced to pay dues, and forced to be represented exclusively by the state’s hand-picked monopoly union”, said Mike Stenhouse, CEO for the Center.

Following remarks this past weekend (@ 9:00 minute mark) on WPRI-12’s Executive Suite by AFL-CIO union boss, George Nee, the Center is also concerned that the child care unionization effort is a ‘Trojan Horse’ and just the first of of many planned steps of organized labor where other independent contractors and small business owners across the state will soon also be forced to unionize (e.g., child care centers, home health care providers, landlords), providing even more financial and political clout to unions, and creating a further drag on the state’s already stagnant job market and bloated budget.

Related Links:  Unionization of Child Care Providers May Be Unconstituional

Unionization of RI Childcare Providers May Be Unconstitutional

An attorney from the National Right to Work Legal Defense Foundation provided the following analysis for the Rhode Island Center for Freedom and Prosperity regarding the current effort in the Ocean State to unionize over 550 childcare providers, many of whom are moms running their own independent small businesses.

Recently, Rhode Island passed a law requiring childcare providers caring for children from low-income families to accept monopoly union representation.  The Service Employees International Union (SEIU) has petitioned for an election to become the monopoly union representative. If the SEIU wins the election, it will negotiate with the state over reimbursement rates for child care providers and other conditions of their businesses and have the right to confiscate dues from childcare subsidy payments.

Rhode Island is violating providers’ First Amendment rights by forcing them into an unwanted relationship with the SEIU. The First Amendment protects the right of freedom of speech and to petition government. The government does not have the power to force citizens to accept handpicked lobbyists for small businesses.

Childcare providers are small, independent business owners. They set their own working conditions and hours and hire their own employees. Caring for children on state assistance does not transform them into public employees, nor does it create an employment relationship with the state government.

Forcing providers into a union is no different than if Rhode Island tried to force all small businesses to accept the Chamber of Commerce as their mandatory lobbyist. Providers have the right to lobby the state government though voluntary associations, rather than through the state’s handpicked monopoly union.

Similar schemes in Michigan, Illinois, and Minnesota have been challenged as unconstitutional. Michigan eventually ended its scheme after a lawsuit was filed, while the Illinois case is pending review at the United States Supreme Court.

Aaron Solem, is a staff attorney for the National Right to Work Legal Defense Foundation in Springfield, Virginia.

Related Links:

Center-calls-on-labor-relations-board-to-revise-child-care-unionization-ballot-language

ProJo OpEd: Not Too Late to Block Union Grab

(The Current) Opinion:  Take It From Someone Who’s Been There: Don’t Unionize

(GoLocalProv) Childcare Unionization Battel Heats Up in RI

Coalition of  Union Free Providers (general information)

 

 

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RI Medicaid Abuse Puts New Spin on “Laundering” Taxpayer Dollars

MEDIA: NBC- Channel 10, ABC Channel 6

The State of Rhode Island has developed a new spin on the idea of “laundering” money, as part of the cycle of taxpayer dollars that end up in the pockets of the special few, according to a follow-up post today on The Ocean State Current, the journalism wing of the RI Center for Freedom & Prosperity.

According to the post by Justin Katz, some unionized laundry workers at the Eleanor Slater Hospital, and throughout the Department of Behavioral Healthcare, Developmental Disabilities and Hospitals (BHDDH), routinely double or even triple their salaries to take home over $123,000 per year, due to suspiciously high overtime payments.

The post follows an investigative article published yesterday in The Ocean State Current about six-figure overtime payments to government employed nurses and psychiatrists.

These new laundry worker revelations depict the waste and abuse in the laundering scheme where local and national taxpayer dollars are recycled first through the government via collection of taxes, then, in the Eleanor Slater case, sent to state-run facilities in the form of excessive Medicaid payments, with the money then further cycled directly into the pockets of privileged union employees – in this case, to laundry workers via exorbitant overtime payments.

Result: our hard-earned taxpayer dollars legally recycled to lavishly benefit government workers.

The data for The Current’s article and post was collected by the Center, as part of its transparency effort.For more information about salary and overtime payments made to other state employees, please visit our popular transparency website, www.RIOpenGov.org.

High Overtime, Evasion Raise New Questions About Medicaid Fraud and Waste

Related Links: GoLocalProv, New Allegations Surface in RI Medicaid Fraud

In the wake of an investigative article published this morning in The Ocean State Current about suspiciously high overtime payments to government employed nurses and psychiatrists, the Rhode Island Center for Freedom and Prosperity plans to publish additional related information in the coming week.

Considering that public dollars are being paid to government workers who, for years, have collected six-figures in overtime from a facility that was cited in a recent Medicaid fraud and waste report, “one really has to wonder if the State of Rhode Island is defrauding itself: at taxpayer expense”, commented Mike Stenhouse, CEO for the Center.

The recent Block Report cited the Eleanor Slater Hospital in Cranston, a state-run facility that charges abnormally high fees, as a potential source for abusive Medicaid spending. In her article, Suzanne Bates, a freelance journalist, details how nine employees at that same facility received over $100,000 in overtime compensation alone, pushing gross annual pay for some to over a quarter-of-a-million dollars.

The article also describes the difficulties Bates and the Center faced in getting an explanation and in obtaining the data. The investigative article raises questions that go to the heart of our state government’s inability to manage its budgets in a way that serves all Rhode Islanders:

  • Why would the state-run Eleanor Slater Hospital, in Cranston, be so short-staffed that it must pay over one million dollars in overtime to just 9 employees year after year?
  • Is our state truly being served well if union contracts make it more cost-effective for the Dept. of Behavioral Healthcare, Developmental Disabilities and Hospitals (BHDDH) to pay exorbitant overtime to some, rather than to hire more people during these hard economic times?
  • If taxpayers are ultimately paying almost the entire bill for this expensive workforce through both state and federal Medicaid dollars, where is the oversight to keep these costs under control?

Later this week, the Center plans to publish a broader list of overtime payments made to other state employees. Next week, the Center plans to launch a new module – that lists regular and overtime compensation for all state employees – to its popular transparency website, www.RIOpenGov.org .

The Ocean State Current is the journalism wing of the RI Center for Freedom & Prosperity. The data for The Current’s article was collected by the Center.

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Second-Year Report Card: Lack of Bold Action = Lack of Improvement

Related Links: 2012 Report Card

It isn’t surprising that a year of no bold legislative or executive action to free the Rhode Island economy or education system from its shackles, or to lighten the heavy hand of government, was a year of no significant improvement in the RI Center for Freedom & Prosperity’s annual Report Card on RI Competitiveness.

What changes the Ocean State saw in the report card’s ten major categories came in large part due to changes of the subcategories, a technical change in the Center’s methodology, and tiny shifts that were able to cross a line into a new letter grade.  In 2012, Rhode Island had five grades of F, two of D-, two of D, and one of D+. In 2013, the tally is three of F, four of D-, one of D, and two of D+. (One of the lost Fs was purely a change in the method of ranking states.)

The sheer number of below-average grades does much to explain Rhode Island’s continuing economic decline and population exodus.

“For all the talk last year about the positive legislative steps we supposedly took, the state’s dismal grade point average has barely moved”, said the Center’s CEO, Mike Stenhouse. “We’ve all seen the depressing headlines, but when compiled into a single report, the report card shows how poor public policy is strangling economic opportunities for families in our state.”

The report card organizes 53 national rankings into the following major categories:

  • Tax Burden (D-)
  • Business Climate (F)
  • Spending & Debt (D-)
  • Employment & Income (D-)
  • K-12 Education (D+)
  • Energy (D+)
  • Infrastructure (F)
  • Public Sector (D)
  • Health Care (D-)
  • Living & Retiring in RI (F)

Whether the decision is thoroughly researched or simply based on impressions, these are the categories on which the Ocean State is judged when businesses and individuals make important decisions about their lives and their economic well-being. Having the information all in one place may be discouraging, but it gives those with a vested interest in the health of the State of Rhode Island clear guidelines for what problems must be addressed.

Press Release: Public vs. Private Sector Compensation in RI

Press Release
Public vs Private Sector Compensation in RI

High-Pay Government Workers Supported by Low-Pay Private Workers

FOR IMMEDIATE RELEASE

November 28, 2012

Government workers in the Ocean State collect significantly higher compensation than their private sector counterparts – across the board – according to data recently compiled as part of national study for the RI Center for Freedom & Prosperity, a non-partisan local think tank.
Among the findings in the report published today by the Center, Ocean State public sector employees enjoy compensation levels that are 26.5% higher than their private sector counterparts; a rate 41% higher than the New England average and 78% higher than the national norm. These results were calculated via a statistical regression analysis after controlling for factors such as education and experience. On average RI government workers receive 58% more in ‘benefits’ than private workers in RI.

Further, within the New England region, RI public employees: are unique in collecting a higher “base” pay than private employees; work the fewest total hours; receive a higher paid time off value than in the private sector; and benefit from a 41% higher total compensation premium than the regional average.
“Rhode Islanders want a government that works for all citizens. But it may not be so much that state and municipal employees are grossly overpaid, but more that our state’s private sector has such shockingly low compensation levels,” said Mike Stenhouse, CEO for the Center. “This is yet another clear indication of how public policy in the Ocean State has favored certain groups while severely harming our economy and our business sector.”
According to the study conducted by economists William Even, of Miami University, and David Macpherson, of Trinity University, government workers in RI, on average, collect $100,217 in total compensation as compared with $83,419 for private employees. Respectively, base-pay breaks out to $61,046 vs $58,664, with benefits at $39,171 vs $24,755. A preliminary review of the effects of the state’s 2011 pension reform showed its effect to be negligible on these comparisons.
The data raises serious questions about the sustainability of a system where a low-pay private sector is supporting a high-pay public sector. “Are we heading towards a Central Falls type situation where pension benefits have to be cut dramatically, or even worse, a Scranton, PA situation where city worker pay was cut to minimum wage”, inquired Stenhouse. “It is evident that new policies that promote economic growth and increase our tax base are the best way to ensure that we can afford to maintain current public employee compensation levels”, concluded Stenhouse.
The full report, with additional data, tables, analysis, and methodology can be found at http://www.rifreedom.org/2012/11/ri-public-and-private-sector-compensation-comparison/.
The Rhode Island Center for Freedom and Prosperity, a non-partisan public policy think tank, is the state’s leading free-enterprise advocacy organization. With a credo that freedom is indispensable to citizens’ well-being and prosperity, the Center’s mission is to stimulate a rigorous exchange of ideas with the goal of restoring competitiveness to Rhode Island through the advancement of market-based reform solutions.

Media Contact:
Mike Stenhouse: 401.429.6115, info@rifreedom.org

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RI Public and Private Sector Compensation Comparison

Related Media: Report Finds RI Government Workers Out-Earn Private Sector (GoLocalProv), Guest opinion: Public employees would benefit from pro-growth policies (The Herald News), Tie the Public to the Private  (GoLocalProv), Mike Stenhouse on the Helen Glover show (920 WHJJ);  RI Owes $81 Million in Unused Sick, Vacation Time (GoLocalProv)

Download: Executive summary; full report with methodology (PDF)

Executive Summary

State and local government workers enjoy significantly higher compensation levels than their private sector counterparts, according to data compiled for Rhode Island as part of a national study conducted by economists William Even, of Miami University, and David Macpherson, of Trinity University.

Even and Macpherson apply the most complete controls for such variables as education, experience, and broad job category and the most accurate accounting of benefits to date. They find that state and local government workers across the country receive a “premium” above their private-sector neighbors, but Rhode Island amplifies the difference:

  • Rhode Island: 26.5% higher total compensation
  • New England: 18.8% higher total compensation
  • United States: 14.9% higher total compensation

Furthermore, a preliminary review of the effects of Rhode Island’s pension reform suggests that the changes to their retirement benefits did not appreciably reduce government workers’ advantage, only reducing the premium for government work to 26.24%.

Looking at base pay alone shows that job security and better benefits in government do not correspond with lower salaries, at least in Rhode Island and New England, where state and local workers receive:

  • Rhode Island: 10.4% higher base pay
  • New England: 2.8% higher base pay
  • United States: 1.5% lower base pay

Averaging all jobs at every level, total public-sector pay and benefits in Rhode Island are competitive with Massachusetts and Connecticut, but private-sector workers earn nearly 25% less than their peers across state borders. Consequently, comparing averages within Rhode Island yields the following results:

  • Total compensation: 20% higher for government workers
  • Pay (base salary): 4% higher for government workers
  • Benefits: 58% higher for government workers
  • Hours worked: 5% less for government workers
  • Value of paid time off: 5% higher for government workers

Compared with the New England region, Rhode Island’s government employees are unique in having a higher average base salary than the private sector as well as a higher value for paid time off. They also enjoy a total compensation premium well above the regional average, even as they work the fewest total hours.

If there is to be any hope of keeping current compensation levels and benefit promises to government workers, the state must experience an immediate boom in the private-sector economy. Without rapid economic growth and a boost to their prosperity, taxpayers’ tolerance and capacity to pay for government beyond their means will continue to wane.

Data Analysis

Overall Averages

Rhode Island’s state and local government employees receive higher compensation than their private-sector neighbors by every measure, according a study comparing public-sector and private-sector compensation that the RI Center for Freedom & Prosperity requested from economists William Even, of Miami University, and David Macpherson, of Trinity University.

Chart 1 shows the average real earnings and benefits (in 2010 dollars) for state and local workers versus private-sector Rhode Islanders. Benefits take into account pensions, health insurance (including post-employment/retiree), other insurance, legally required benefits, like Social Security payments, and paid time off. The total compensation for the average public-sector employee in Rhode Island was $100,217, which was more than 20% higher than the private-sector average of $83,419.

Rhode Island Average Pay and Benefits for Public and Private Sector Workers, 2010

Rhode Island is inarguably in a high-cost, public-labor-friendly region, but even so, it is unique within New England. Chart 2 shows that Rhode Island is the only New England state in which the average wage earnings (base salary) of all state and local workers, on its own, was greater than that for all private-sector workers.

The most conspicuous reason for Rhode Island’s poor showing, here, is the huge gap between its economy and that of the two states that envelop it. While the Ocean State’s public sector is competitive with Connecticut and Massachusetts (with earnings only $4,294, or 6.6%, below the region-leading Bay State), its private sector has a $15,398 (23.3%) deficit.

New England Average Pay for Public and Private Sector Workers by State, 2010

Even when benefits are factored in, the private sectors in Massachusetts and Connecticut outstrip government employees. In contrast, Table 1 shows that Rhode Island adds a relatively large amount of compensation via benefits in its public sector and a relatively low amount in its private sector.

Another significant perk to working in Rhode Island’s public sector is time off. According to the data collected by Even and Macpherson, Rhode Island is the only New England state in which the value of the public sector’s paid time off ($7,208) is greater than the private sector’s ($6,857). (These numbers are included in the total for benefits.)

And while government workers in all New England states put in fewer hours than their private-sector neighbors, Rhode Island’s public employees put in the fewest. Moreover, only in Vermont is the gap between the sectors larger. (Note: Annual hours are calculated from weekly-hour responses on employee surveys.

Variable-Controlled Premiums

A common objection to such comparisons of average pay is that the types of jobs available within the public sector lend themselves to more-highly educated employees. Therefore, the argument goes, it is entirely appropriate for them to make more than the average of all private-sector jobs, because they skew toward the higher end of the workforce.

To investigate this explanation, Even and Macpherson performed a regression analysis for Rhode Island, the New England Census division, and the United States in order to compare similarly situated employees. Chart 3 shows a summary of the results.

The percentage shown is the premium for working in the public sector — that is, the percentage advantage in compensation from working in the public sector, taking into account employee characteristics (such as education and experience) as well as broad job category (such as management versus office and administrative support). (See Table 2.)

On salary alone, state and local employees enjoy a 10.4% premium in Rhode Island, even when controlling for other variables like education, experience, and broad job category. For New England overall, the premium is 2.8%. Nationwide, the public-sector actually has a salary penalty of 1.5% below the private sector.

Rhode Island, New England, and U.S. Premium for State and Local Public Workers in Pay and Total Compensation, 2010

Adding in the total value of benefits (before pension reform), Rhode Island’s state and local workers receive a premium of 26.5% over their similarly situated private-sector counterparts. That compares with 18.8% for New England as a whole and 14.9% nationwide.

A significant consideration that Even and Macpherson were unable to quantify due to a lack of data is job security. Given higher rates of unionization and the ability to affect their employers through political activities, government workers are generally understood to face less volatility than do private-sector employees. In theory, economists could apply a monetary value to that intangible benefit, but such an investigation would be beyond the scope of this study.

 

Pensions & Pension Reform

One important adjustment that Even and Macpherson have made to the raw compensation data is to determine the current value of pension benefits using a 4% discount rate. In a defined-benefit system, actuaries value the guaranteed level of income that employees will receive during retirement by assuming that investments will produce a certain return.

Rhode Island currently assumes a 7.5% return. Prior to the adjustment that spurred the 2011 pension reform at the state level, the assumption was 8.25%. Because this study uses data from 2010, that is the starting point for this data. By comparison, the average private-sector assumption is 6%.

In all cases, therefore, Even and Macpherson had to mark up benefit values to account for the likelihood that investment profits will fall short of predictions. It may seem counterintuitive that a benefit is worth more when invested money receives less profit. However, in the case of guaranteed pensions, the benefit is defined in the future, not the present.

Therefore, lower profits from investments would require greater payments by the employer, making the benefit of greater value to the employee now. In effect, the employer is promising a greater return to the worker than he or she would be able to achieve by investing on his or her own.

Because pensions make up 10-20% of the typical government employee’s total compensation, compared with 4-6% in the private sector, large reforms can greatly affect the premium that public-sector workers receive over the private market-place. For this study to be complete, therefore, some accounting of the effect of the Ocean State’s pension reform on the value of state employees’ benefit packages had to be included.

However, the imposing complexity of pension calculations is such that an accurate estimate of the reform’s effects would be well beyond Even and Macpherson’s scope. In particular, during the transition from the defined benefits pension to the newly developed hybrid plan, each individual employee’s benefit will be different, and results vary from job to job and across state and local governments. It will be a matter of years before accurate data is available.

Consequently, the public-sector premium given above can be considered the outcome if the lawsuit currently pending on behalf of the relevant labor unions succeeds in overturning the reform. For some sense of the result if the state prevails in its defense of the reform, the Center for Freedom & Prosperity asked Even and Macpherson to provide a rough calculation.

It’s important to note, here, that the pension data throughout this study assumes that all municipal employees are receiving the same weighted average contribution as those in the state’s two largest plans — state workers and teachers — with and without 2011’s reform.

Be that as it may, the effect of the reform on this study was relatively minor. The guaranteed payments provided through the defined-benefit portion of the state’s new hybrid pension system have gone down. But the state has increased the percentage of payroll that it must contribute each year, to make up for the 5% of their pay that employees are putting toward their defined-contribution plans. The state has added a 1%-of-payroll contribution to those plans, as well.

Consequently, the annual value of government employees’ pension benefit has only decreased from $10,692 to an estimated $10,476. In terms of the “premium” that state and local workers receive over similarly situated private-sector Rhode Islanders, the percentage advantage has decreased from 26.49% to 26.24%.

Policy Analysis

Living Beyond Our Means

When a family comes to a decision about purchasing any product or service, it doesn’t merely accept the seller’s sense of what’s reasonable. In addition to the market rate, consumers must take into account the quality of the thing they’re buying as well as their own ability to afford it.

With deteriorating infrastructure, doubts about the quality of government services, and the high-profile specter of unfunded municipal and state retirement liabilities looming over the state during this current period of economic stagnation, the compensation of public-sector employees has become a subject of heated debate about fairness and affordability.

Rhode Island is the only state in New England in which public employees have higher base salaries than the private sector. At the same time, state and local workers in the Ocean State work the fewest hours in the region. When benefits are factored in, Rhode Island has the highest premium for public-sector workers over private-sector workers, even if pension reform survives the lawsuit that unions have filed to overthrow it.

Meanwhile, the state’s economy is reeling, with arguably the worst employment picture in the United States, certainly the region. With dwindling taxable incomes and general economic activity, the state and its cities and towns will not long be able to continue to squeeze more revenue from a population that is losing ground economically and seeing many of its productive residents and college graduates flee to states with healthier economies.

Adjustments around the edges that do not take on the significant public policy issues we face will not be sufficient to turn the state around. Without rapid economic growth and a boost to their prosperity, taxpayers’ tolerance and capacity to pay for government beyond their means will continue to wane. Painful struggles between powerful insiders and the average citizen will worsen. Even more taxpayers may decide that the battle is not worth the benefits of living within the Ocean State’s borders.

Economic Growth Benefits Public and Private Sectors

With all of the emphasis on improving economic development in Rhode Island, there have been two conspicuous omissions.

The first is the need for a complete change in the way that state and local governments treat taxpayers and businesses — as a matter of regulation, as a matter of spending, and as a matter of taxation.

The second, as emphasized in the data revealed in this study, is the fact that government workers should be out in front of the crowd advocating for change — not for tax-the-rich schemes that will never produce sufficient revenue, but for precisely the policies founded in economic liberty that will close the gap between private-sector Rhode Island’s earnings and those of its nearest neighbors.

If there is to be any hope of keeping current compensation levels and benefit promises to government workers, the state must experience an immediate boom in the private-sector economy.

Even the dramatic pension reform that sent unions to their lawyers and made state Treasurer Gina Raimondo a national policy star barely nudged Rhode Island’s public sector toward the national ratio of public-to-private workers. It hardly even brought the tiny Ocean State nearer to the average for the union-stronghold region of New England.

While additional compensation cuts and even deeper benefit reforms will be necessary in the public sector, the more significant factor in the public-private imbalance, locally, comes from the substandard economic conditions in which the Rhode Island taxpayer in the private sector is forced to survive. That is where dramatic improvement is most necessary, and most attainable, if public policy can be properly aligned.

Central Falls retirees discovered all too painfully that unsustainable compensation arrangements, whether salaries or benefits, are by no means guaranteed if obvious warning signs are not acted upon responsibly. The comparison of the public sector and the private sector in Rhode Island is one such sign of unsustainable compensation levels.

The people of Rhode Island depend upon government workers for the appropriate and necessary functions of government, but those workers depend upon the private sector to maintain a healthy economy and, in turn, sufficient government revenue. The top priority for employees on both sides of Rhode Island’s taxing and spending, therefore, should be reasonable reform that makes public-employee compensation sustain-able combined with the elimination of policies that restrain economic growth in the Ocean State.

Methodology

Download the PDF version of this report for Even and Macpherson’s full methodology.