DPPI Study Shows Cost of Public Employee Compensation

By James DeChene
This week the Delaware Public Policy Institute released a study comparing the compensation packages between state employees and their private sector counterparts, excluding teachers and public safety officers as their compensation and benefit plans may differ from the rest of other state employees. The study found that on average, state employees receive 12.4% less in their paycheck, but that their compensation benefits package, including health care and pension, averages 53-102% over those working in the private sector.
The purpose of the study was not to make a statement as to the role state workers play, their effectiveness or to their necessity. Rather, the intent of the study was to provide budget and policy makers critical information they need to ensure Delaware’s long term fiscal health. It is conventional wisdom that state workers make a little less, but enjoy robust benefits compared to the private sector. The actual numbers surrounding how much is spent on benefits come as a surprise, however. Driven by increases in health care coverage costs and guaranteed pension funding, a large percentage of overall compensation resides in areas requiring reform.
We hope this study is helpful for budget and policy makers to get a true and impartial sense of how the numbers look for over 52% of the budget—personnel costs. Both the Expenditure Review Committee and the Delaware Business Roundtable drew attention to these cost drivers. The State Chamber of Commerce has supported the Markell administration concept of transitioning to Health Savings Accounts for new state employees and to have state employees contribute an increased amount to their health care coverage.
The issues regarding long term financial liabilities the state faces with regards to state employee compensation are not going away, and they will continue to increase each year. This week DEFAC released their economic forecast and state revenues are not expected to increase more than 1% over the next three years. With a flat economy and escalating health care and pension costs, this issue will reach a critical mass sooner rather than later. We urge policy makers to make the difficult decisions now while they are hard versus waiting until they become impossible.