As part of his proposed $ 1.9 trillion aid bill, President Biden plans to send $ 350 billion in unrestricted cash to state and local governments to help fill their budget gaps. While Covid-19 has depressed state tax revenues, the prospect of state aid has encouraged many of these supposedly impeccable states to keep the costs piling up. Nowhere has this been more evident than in the pay rises that have been paid out to government employees in recent months. As private companies hold onto their fingernails, public sector unions have reached out and called for the wage increases set out in labor contracts negotiated before the pandemic devastated public finances.
In Connecticut, where unemployment was 8% in December after exceeding 10% this summer, government officials pocketed two rounds of increases: a 3.5% increase in July and another about 2% earlier this year Month. Governor Ned Lamont had originally proposed postponing the increases – “to lead by example” – but the 1199 SEIU union flashed The airwaves with TV commercials accused nameless politicians of wanting to “take away” their wages. Mr. Lamont folded.
In December, Maryland Governor Larry Hogan allowed the planned 2% increases to continue, claiming revenue had “improved enough to meet our obligations to government officials.” Andrew Cuomo, Governor of New York, used special powers to postpone certain planned walks for government employees. But Mr. Cuomo did specified He will use federal aid to pay for those increases retrospectively, and let others go ahead directly. Most New York school districts made increases this summer.
Automatic wage increases regardless of economic conditions are unimaginable in the private sector. Many government workers received their full wages and benefits while not working during the spring 2020 lockdowns. The pandemic has uncovered a fundamental problem with public sector collective bargaining: Taxpayers should never bet on increases that do not reflect future economic realities – especially when politicians have a personal interest in driving costs into the future.
This is essentially what happened in New Jersey, where Governor Phil Murphy withdrew his threat to fire state employees after his largest union agreed to take vacation days and postpone raises – but not to go without them. Affected employees will receive three salary increases totaling 6% starting this summer. However, most will not be due until after Mr Murphy faces voters in November.