The Balance of the Budget Under Collective Bargaining

portsmouthRI-unionexcess-FY16-featured

Today, the RI Center for Freedom & Prosperity released a major study that I coauthored with Penn State business professor Dennis Sheehan about the effects of collective bargaining in the public sector on the cost of government.  Using both statistical estimates and reviews of specific contract provisions and budgets, we found that the state government’s cost of labor is $96–299 million too high, with an additional total for all municipalities, school districts, and fire districts coming in at $228–825 million.

Our “best estimate” for the combined total excess for the whole state is $888 million, or 21%.  This is money that state and local governments should be able to use for other purposes, including tax relief.  In this sum, we see the primary reason that state and local governments never seem to have enough money to accomplish basic objectives like maintaining buildings, roads, and bridges and why our taxes are still among the highest in the country.

There is a lot to the report, and we’ll be laying it out in detail and building on it over time.  The ultimate conclusion, however, can be seen in the following chart.  We chose Portsmouth for our most-detailed analysis because it is the median town for taxes and population and also makes a good amount of the required information publicly available.

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portsmouthRI-unionexcess-FY16

One way to understand this chart is to take the two largest segments as the baseline budget that the town must have to do everything it currently does, with market-rate employee compensation in green and the budget for everything else in dark blue.  Right now, every wedge on the chart in between those two goes toward employee pay and benefits.

If the report’s “low-end estimate” of excess compensation is correct — that is, if we use our most conservative methodology — the second-darkest blue wedge could shift from employee compensation in order to pay for other expenses or to provide tax relief.  At the other end, if even our “high-end estimate” of excess is accurate, nearly one-quarter of the town’s entire budget could be shifted away from paying employees.



  • ShannonEntropy

    TL;DR

    Just kidding, Justin !! It’s a masterpiece but it’s gonna take some time to digest the whole thing

    Good thing you guys didn’t do this using my home town of Warwick as your base. Frickin former mayor Scott Avedesian steered this city right into an iceberg and then was the first one off the boat by jumping to a cushy six-figure job with RIPTA. Maybe Dante can think up a special circle of
    Lo Inferno just for him

  • ShannonEntropy

    Just got back from Norton Mass; had 630AM’s Tara Granahan’s show on and Speaker Mattiello was her guest. She brought up this very report.

    After she gave a brief, accurate but superficial summary of its findings, Matty remarked that of course it’s cheaper to not have unions than to have them, but that’s not the question. The question is, are public employees paid fairly. He thought they were, rendering your entire report basically a waste of pixels in a 20 second sound bite

    Next he took on the League of Cities & Towns. Apparently they have some ad that makes some claims he thought were specious. Their complaints he says are just generalities like “Our hands will be tied”, but they never give any specifics

    As for the claims that the firefighter OT & evergreen bills will cost “millions of dollars”, he said that was “… just dishonest.” Now it was *his* turn to not provide any specific refutation of a statement that seems pretty facially obvious to me

    This guy can double-talk in the same sentence. He claimed he knew nothing about some inflammatory press conference someone had re: the PawSox leaving Pawtucket [ I have no idea what they were talking about ]; then stated he wouldn’t have done it the way the guy did.

    Sheesh! How stoopid do you think we smell, Matty ??

  • Rhett Hardwick

    Good work Justin, although I will need time to absorb it; the numbers do not immediately explain themselves, or make sense to me. I think much might be learned by a study of Britain in the 70’s, perhaps 80’s. In order to “save it” the government took over the heavily unionized auto industry. They immediately went on strike and the government could find no way to counter it (the byword is that a “government cannot win a strike” The Boston Police Strike may seem contrary, but had the support of the public). Basically, the industry collapsed and is now owned by Germans, Indians, Chinese, Ford, GM, etc.
    Massachusetts has on line, the state payroll, and pensions by name. As well as many municipalities. I do not see this making a huge difference, but it must be an integer somewhere. Perhaps if taxpayers could see the salaries being defended. I looked at it and found very few State Troopers making less than $150,000. That seemed excessive to me (but then, I have been arrested). I thought salary and pension should be “tied” so that you could look in only one place.
    I just found this for RI salaries:
    https://www.openthebooks.com/search/?PensionCode=4401

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