Thursday, October 27, 2011

Public Worker Overtime Binge in California Contributes to the State's $19 Billion Deficit

BLOOMBERG -- "Jean Keller earned $269,810 last year working as a nurse at a men’s prison on California’s central coast by tripling her regular pay with overtime hours. Keller got more overtime in 2010 than any other state employee. In all, California’s public workers collected $1.7 billion of extra pay last year, more than half of it in overtime, state payroll data show. The rest was for unused vacation and union-negotiated benefits such as uniform allowances, physical-fitness incentives and special compensation in recognition of a “complex work load.”

“It’s outrageous,” said 29-year-old Gilbert Ramirez, one of about 30,000 teachers fired in California since 2007 because of budget cuts. “It boils my blood that I’m out of work and they claim they don’t have enough money to pay me.”

California paid the additional wages -- enough to fund the average salaries of about 25,000 teachers -- as it faced a $19 billion deficit and cut school spending and services for poor children and the elderly. The state may have to trim the academic year by seven days and eliminate some student busing if revenue shortfalls persist.

The extra compensation underscores a broader trend in California, where government workers are paid more than in other states for similar duties. Among them: city managers whose pay is higher than the governor’s, prison doctors who make more than counterparts in other states and Los Angeles firefighters who collect twice the national mean."

MP:  Nurse Keller wouldn't quite qualify for the "top 1%" based on her income of $269,810, but would certainly easily qualify for the "top 5%," which required an income of "only" $154,643 in 2009 (data here). No wonder California has a $19,000,000,000 deficit.  

HT: Matt Bixler

23 Comments:

At 10/27/2011 11:01 PM, Blogger Benjamin said...

Public uniformed employees, whether local, state or federal, are able to get fabulous pay and benefits. Usually the GOP acts like little girls around any guy in a uniform, and the Dems like spending money.

So you get unionized cops who can retire after just 20 years in, or firefighters working two days on, and five days off. Soldiers who get $1 million pension after 20 years, and that is not counting VA health care.

 
At 10/28/2011 6:21 AM, Blogger cluemeister said...

I'm guessing the state employees in question are loading up on overtime as they are nearing retirement. Many public union pensions are based on just a few year's wages. So in addition to the huge overtime, the taxpayers are on the hook for pensions linked to these exorbitant paychecks.

Follow up for Mark: How much will the pensions be for these state employees?

 
At 10/28/2011 6:45 AM, Blogger Pants Around The Ankles said...

Sounds to me that one should become a nurse in the California Prison system.

 
At 10/28/2011 7:57 AM, OpenID moneyjihad said...

At least with overtime, you're not paying extra benefits (health care, pension, etc). That's why the teacher interviewed in the story is pissed. He wants the work, but its cheaper to pay an existing employee more to do the work of two people.

 
At 10/28/2011 8:03 AM, Blogger juandos said...

From the site CalPensions: Cities: repeal landmark pension legislation

A League of California Cities representative yesterday urged a legislative committee to repeal two decade-old bills allowing local governments to negotiate higher pensions, saying the benefits are “too rich” and “unsustainable.”

 
At 10/28/2011 8:11 AM, Blogger juandos said...

Obviously California isn't the only state saddled with the pension time bomb...

From the Better Government Association is this incredible situation out of Illinois: Sticker Shock

Illinois taxpayers are on the hook to pay millions of dollars in guaranteed pension benefits to former statewide office holders, including a couple of governors, and hundreds of retired lawmakers. And the meter is still running...

 
At 10/28/2011 8:52 AM, Blogger Walt G. said...

Overtime is usually worked to keep from hiring additional employees or from poor planning on how to get the work done with the current employees on straight time. Most fringe benefits are figured in the first 40 hours pay per week, so the only overtime cost is straight wages at 1.5 times the base rate. Limited overtime costs have to be subtracted from the full cost of hiring additional employees with benefit packages to determine true labor costs.

Of course, it is more popular and easier to blame lazy employees than it is to solve the problem. The solution is simple but maybe not cheap: either hire more employees or hire better managers that can get more work from the employees they already have.

 
At 10/28/2011 9:32 AM, Blogger Buddy R Pacifico said...

OK, Nurse Keller ranked #1 in California state public employee overtime but where did she rank in 2006?

Accoriding to SFgate.com (SF Chronicle) Nurse Keller ranked #3 in overtime with $152,347 in overtime for 2006.

Nurse Keller must have been determined to beat out the two doctors who were #1 and 2 in "06", for first place.

Jean Keller may be the most dedicated state employee in California, but can't the state schedule another nurse or two in Men's Colony 8?

 
At 10/28/2011 12:51 PM, Blogger Paul said...

Walt G,

"The solution is simple but maybe not cheap: either hire more employees or hire better managers that can get more work from the employees they already have."

There are plenty of other options besides the "heads unions win, tails taxpayers lose" solutions you always advocate.

 
At 10/28/2011 5:53 PM, Blogger Walt G. said...

Paul,

Let hope they find those solutions, but my point was that overtime is often cheaper than hiring another worker and easier than finding good managers. In that case, overtime is part of the solution and not the root cause of the financial problem. Having more cost than revenue is always a problem for anyone who cannot mint money.

 
At 10/28/2011 6:03 PM, Blogger Paul said...

Walt,

"but my point was that overtime is often cheaper than hiring another worker and easier than finding good managers."

Maybe,but not as cheap as being able to fire dead weight,reducing benefits, and limiting the very concept of overtime. I work more than 40 hrs a week. I get no overtime and don't cry about it.

 
At 10/28/2011 7:45 PM, Blogger Walt G. said...

Paul,

Who hired the dead weight and why? I am glad you are happy with how you are compensated for your work. I am happy with my compensation in both my current union and non-union jobs.

 
At 10/28/2011 8:36 PM, Blogger cluemeister said...

Anyone who says overtime is cheaper than hiring additional help has never run a business. Let's say your labor costs are 20%. If you increase your labor costs by 50%, your labor goes to 30% on the additional production, taking 10 full points off your margins. It only works when your labor needs are temporary, and the increased production (without the additional overhead) still makes it worth it.

Overtime is a HUGE profit killer.

 
At 10/29/2011 3:07 AM, Blogger juandos said...

"Anyone who says overtime is cheaper than hiring additional help has never run a business"...

In these days of massive government overreach (taxes, regulations, fees) its obvious cluemeister hasn't run a business ever or for a very long time...

 
At 10/29/2011 5:43 AM, Blogger Walt G. said...

cluemeister,

Almost all thinking in business is temporary. Once a minimum staffing level is reached, (we call it "RTR" or required-to-run) overtime costs have to be weighed against hiring another employee. The misconception of comparing overtime costs to zero does not work out in practice, but it make good headlines and theory.

 
At 10/29/2011 6:14 AM, Blogger cluemeister said...

Juandos,

I've only got 28 years as a part owner or sole owner of a company. So you're right, I have no idea what I'm talking about.

 
At 10/29/2011 10:52 AM, Blogger Walt G. said...

cluemeister,

A lot of jobs have $10,000 to $100,000 worth of training costs employers have to absorb in the first 2 to 5 years of employment as well as other overhead cost. We are not always talking about non-skilled production work. It’s possible a nurse is doing work that would normally be done by an additional nurse or even a doctor, so only a deeper analysis would show whether the bottom line cost is being added or saved from the additional overtime pay. A lot of times it is both easier and cheaper to use the employees you already have on the payroll. Of course, as you well know, efficiency must always be optimized to make sure you have as much valued-added work as possible.

 
At 10/29/2011 11:44 AM, Blogger juandos said...

"I've only got 28 years as a part owner or sole owner of a company"...

So you claim cluemeister but when was that? Back in the fifties?

 
At 10/29/2011 12:50 PM, Blogger cluemeister said...

Walt - I understand and agree with what you're saying. But overtime is only a temporary solution. For instance, in this economy it's better to work overtime than hire, as you don't know if you're going to have the work in a few months with this administration.

juandos - I run a business right now and meet payroll every week. I know several businesses that run overtime, but never seen one that uses overtime as a standard model of operating a business every day. It's just too expensive long term.

 
At 10/29/2011 1:10 PM, Blogger Walt G. said...

cluemeister,

If you have a business that requires 160 hours of training per year per employee and 160 hours of vacation per year per employee, and you have no "extra" employees on the floor, would you backfill with overtime or additional employees?

Adding headcount is considered a $1million lifetime committment per social security number over wages in many industries. We have a hard time getting the company to hire because of that. We fight for each additional job we can get.

I think most business owners consider your "this economy" to be the new normal and adjust accordingly (with methods such as overtime).

 
At 10/29/2011 3:07 PM, Blogger juandos said...

Now the cluemeister starts to change his stance: "I know several businesses that run overtime, but never seen one that uses overtime as a standard model of operating a business every day"...

Who said anything about overtime being a standard model?

 
At 10/29/2011 4:35 PM, Blogger cluemeister said...

Juandos - not changing my stance. The claim was that it's cheaper to run overtime than to hire employees, due to today's government overreach.

Believe what you want, but this is simply not true. Overtime eats profits.

 
At 10/30/2011 3:02 PM, Blogger juandos said...

"Believe what you want, but this is simply not true. Overtime eats profits"...

Hmmm, so cluemeister are you saying that hiring another individual which requires more local, state, and federal paperwork to be handled, social security taxes to be paid, workmen's comp coverage to be paid and in some cases both health insurance (either in part or all of it) and liability insurance to be paid doesn't cut into profits?

 

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