Gov. Jennifer Granholm cried poverty recently, claiming that her administration already cut 11,000 state employees and that the state cannot make further cuts without lowering "critical services that struggling families count on to survive in this tough economy."
However, the claim is misleading. There are fewer employees, but the reduction hasn't saved taxpayers any money, because due to higher compensation levels we're paying more overall even with less workers on the job. Indeed, total compensation costs jumped from $3.9 billion in fiscal year 2001 to $4.7 billion in 2008, the most recent year for which information is available. The average state employee now costs taxpayers $93,039 to employ for a year.
To put that in context, the $787 million cost increase since 2001 is more than enough to triple the appropriations to community colleges. It also puts a different spin on the governor's claim that she "negotiated more than $650 million in employee concessions."
In addition, it's hard to argue that reducing some of these costs, such as the $1.1 billion spent on state and school retiree health care, would represent a reduction of "critical services," since these retirees are no longer providing any.
Lowering other government employee costs would also have no effect on services or poverty programs. Bringing state, school and local government employee fringe benefit levels down to private-sector averages would save $5.7 billion, without cutting a penny from welfare checks or Medicaid reimbursements. That's enough to eliminate the Michigan Business Tax and surcharge, cut the state income tax rate in half, and provide $2 billion in local property tax relief.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.