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2009-03-30 Equality between public and private-sector compensation would have prevented county budget deficit

Equality between public and private-sector compensation would have prevented county budget deficit

March 30, 2009
By Arthur G. Purves
President, Fairfax County Taxpayers Alliance

Madam Chairman and Members of the Board:

We acknowledge that this is a difficult budget year for county administrators and employees alike.  We also appreciate the opportunity given us to participate in the community dialogue sessions last fall.  Likewise this is a year of uncertainty for taxpayers.

We ask you set the real estate tax rate at 72 cents, rather than the $1.065 rate that you have advertised.  Setting the rate at 72 cents would rescind the $1500 tax increase that you have imposed upon homeowners since the start of the housing bubble in 2000.

The $650M budget shortfall faced by the county this year is not the result of too little money; it is the result of too much money.  During the housing bubble, the supervisors used higher assessments as political cover to double real estate taxes.  With the resulting extra hundreds of millions of dollars in revenue, county inflation-adjusted spending has increased more than twice as fast as population.  Fairfax County Public Schools inflation-adjusted spending has increased three times faster than enrollment.

If the county and schools had increased spending at the same rate as inflation, population, and enrollment between FY2000 and FY2009, the county would be facing a $50M shortfall instead of a $650M shortfall.

How was the extra $600M spent?  In particular, how much went to employee compensation?  The answer we received from the county Office of Management and Budget was this:  “As to your question, unfortunately, we don't have available the summary information you have requested …” (9/24/08 email to FCTA).

So, the FCTA attempted its own analysis.  What we found is that of the $600M spending increase, $480M went to county and school salaries and benefits.  Another $120M went to increase school staff twice as fast as enrollment.

Moreover, we found that the county doubled real estate taxes to give county and school employees bigger raises and better benefits than taxpayers get.

Between 2000 and 2007 county employees had average annual raises of 4 ½ percent.  School employees, other than teachers, had average annual raises of 5 ½ percent.  Teachers’ average annual raise was 6 percent.  According to numbers provided by the county executive in his presentation on the FY2008 advertised budget, homeowner incomes had risen only 9 percent since 2001.  That works out to an average annual increase of 2 percent, which is less than inflation.

According to the Bureau of Labor Statistics, nationally 79 percent of state and county employees but only 20 percent of private-sector employees have defined-benefit pensions.

Again, the Bureau of Labor Statistics reports that nationally 72 percent of state and county workers but only 52 percent of private workers have employer-provided health insurance.  As the cost of health insurance increases, private employers drop it, but government raises taxes to continue it.

When we ask if it is fair to raise taxes so county and school employees can get higher raises and better benefits than the taxpayers, we are told that this is necessary to compete with neighboring counties and school districts.

This suggests that generally local governments raise taxes so their employees can be better compensated than taxpayers.  As a Feb. 1, 2008, USA Today front-page article stated, “State and local government workers are enjoying major gains in compensation, pushing the value of their average wages and benefits far ahead of private workers … .”

We think that the competition with neighboring counties is artificial and unnecessary.  The schools get eight resumes for every job opening.  The county gets 100 resumes for every job opening.  Higher-paying jurisdictions would probably have more applicants.

We then are told that many of the applicants are unqualified.  However, are not most of these applicants graduates of what you characterize as our excellent public education system?  If they are indeed qualified, then are we getting our money’s worth from increasing school staff twice as fast as enrollment?

Public schools recognize no accountability other than competition.

The Virginia Standards of Learning (SOL) accountability system is based on students scoring at or above the “proficient” level on SOL tests.  However, proficient corresponds to passing, or “D” level work.

All parents want their children to graduate from college.  However, when we asked the school superintendent what percentage of FCPS seniors will get four-year college degrees, he stated that he did not know.  Based on college attrition data available from the State Council of Higher Education in Virginia, it appears that 50 percent of FCPS seniors will obtain four-year college degrees.

According to the ACT college admissions test, only 38 percent of FCPS seniors tested last year were prepared for college.

We asked the superintendent what percentage of Learning Disabled children are successfully remediated.  He stated that he did not know.

This year, the county faced a $400M+ budget shortfall and the schools a $200M+ shortfall. The county addressed its shortfall through $100M in spending reductions and about $300M in tax increases.

We recommend that rather than raise taxes, the schools and county rescind the salary increases attributable to the housing bubble.  Even with a ten-percent reduction in salaries, county and school employees would still fare as well as the private sector since 2000.

While the county executive’s proposed budget reduces personnel costs through position reductions, it increases spending on fringe benefits.  Rather than cut benefits, we recommend that county and school employees pay ten percent more for defined-benefit pensions and health insurance.

We estimate that these two actions would save $300M and could replace the $300M tax and fee increases in the advertised budget.

The schools have addressed their $200M shortfall by proposing increasing class size by two students to save $57M.  Another $20M in reductions will affect special education, alternative education, and sports.

We would propose a different set of spending cuts that would not increase class size, not cut special and alternative education, and not cut sports.

We recommend ending the seven-period day and high school academies.  The school superintendent defended the seven-period day by stating it was necessary for students to graduate on time.  However, with a six-period day, a high school student can take 24 courses, which is the number of courses required for a diploma.  High school academies shifted the emphasis of vocational education from non-college bound students to both college-bound and non-college-bound students.   We are not sure that this extra is worth increasing class size.

We also recommend reducing the number of elementary school guidance counselors, social workers, psychologists, and high and middle school guidance counselors.  A sixty percent reduction would save $50M.  We recommend a fifty percent reduction in technical specialists and clerical staff, to save another $50M.  This would reduce the use of computers in the classroom, but it is not clear that computers have been generally effective in the classroom.

These savings could be used to prevent the reduction in police, fire and rescue, and Community Service Board personnel.

We repeat that this traumatic budget year could have been prevented if the supervisors had controlled costs and increased spending no faster than inflation, population, and enrollment.  We hope that you will follow this guideline in the future.  We also hope that you will support equality between public-sector and private-sector compensation.

Thank you.

Updated April 12, 2009

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