We don’t like having to be the ones to say “told you so,” but sometimes things happen that make it impossible not to point out the obvious.
For months the Buckeye Institute has made the case that there are only three ways to deal with the ever escalating costs of government worker compensation: tax hikes, layoffs or comprehensive reform.
The case was made prior to the introduction of Senate Bill 5. In fact, our Grand Bargain is Dead report was issued in July, 2010. That was four months before John Kasich was elected governor and seven months before SB 5 was even introduced, much less passed and pushed onto the ballot.
In that report, eleven different cost savings options were presented. All revolved around real, fundamental reform. Several options included realigning public sector closer to private sector pay through cuts or by freezing it until the private sector caught up to it, eliminating longevity pay, requiring “use it or lose it” for unused leave balances and multiple changes to the state pension formulas.
In the wake of SB 5’s repeal this November, we are back to the drawing board.
Examples of the resulting pain are not hard to come by. The Multi-County Correctional facility that is in Marion County Marion County is now looking to layoff nine officers.
As we mentioned in one of our previous blogs, Marion City is facing a “radical reorganization” that could include the layoffs of 15 police officers and 12 firefighters. Already, the police department is having to advising residents how to be more vigilant in the wake of the layoff since “…it’s going to take us longer to get there.”
While recent news reports indicate the local firefighters’ union is offering concessions in order to avoid layoff such as: not filling several vacant positions, paying seven percent of salary towards pension rather than the current four, reducing holiday pay from one and a half to regular rate, and giving up 144 hours of sick leave sell back benefits.
These types of concessions do save money in the short run, but they are far from fundamental reforms. They merely postpone rather than prevent the day of financial reckoning. They are temporary and do not create a sustainable foundation for local governments seeking to manage long-term personnel costs. This is because they can easily be dismissed the moment any revenue upticks are seen, which kick-starts the vicious cycle of overspending once more.
Of course, there is news flowing out from school districts right and left about layoffs. Lorain Schools looks to be moving into “Fiscal Emergency” and may be about to layoff twenty-seven additional teachers on top of the eighteen that were already given pink slips effective on January 23.
Again, there were concessions made,
“Teachers have agreed to about $2 million in health care benefit concessions in the last two years, and in September agreed to a one-year wage freeze and 10 percent pay cut in the next year for extracurricular activities like coaching, saving about $2 million.”
Yet, it remains worth pointing out again that while there are savings here, they are not fundamentally realigning. There is pay cut… for extracurricular activities. But why is there not an across the board base pay cut? That would not only save money on each employee, but it also reduces the amount of money the local government (ie. local taxpayers) must contribute toward public pensions.
Here’s another sobering story from Westerville City Schools in Franklin County.
In the absence of a new levy, administrators presented the school board with $19 million in potential cuts including: 204 teaching positions, eliminating physical education and arts programs at the elementary and middle school levels, cutting elective courses and foreign languages at the high school level and reducing the number of guidance counselors, media specialists, high school deans and intervention teachers.
Seeing a pattern develop? And despite what many local government and school officials are saying, this is not all about mean politicians in Columbus denying them necessary resources.
If one recalls, the Buckeye Institute showed that in October of 2010, Ohio’s 613 school districts were projecting a collective $7.6 billion deficit by 2015. On average, 96 percent of revenues were swallowed up by compensation made up of salary, benefits and pension contributions.
Those were projections made by the districts themselves and sent to the Ohio Department of Education before John Kasich was elected and the Ohio House of Representatives shifted party control. In other words, districts were projecting themselves into massive deficits prior to any significant change in policy came from new leaders in Columbus.
Clearly, there is a systemic, structural problem here that must be tackled. Nibbling at the edges will not allow Ohio to get its fiscal ship straightened out.
The pain is here, but it didn’t just show up overnight. It has been slowly building up for a very long time. The outcome of Issue 2 is simply ripping away any veneer of normalcy and showing all Ohioans how dire the fiscal problems are in Ohio.
So, will tax levies pass in order to counter-balance this? Perhaps, over time they will. Of course, while Ohioans were rejecting Issue 2, they were also rejecting over 70 percent of new levies for schools. Thus, we are now at the juncture in the road where its either layoffs or compensation reform.
Which will it be?
Once more, we hate to say we told you so, but this outcome was clearly visible. Now, what will Ohio do?