US civil servants dont make peanuts

Written by Bloomberg | Updated: Jul 30 2010, 04:25am hrs
Joe Mysak

The search is on for the next $800,000-a-year city manager. The taxpayers of Bell, California, a 2.5-square-mile city just outside Los Angeles forced the resignations last week of three public officials who made too much money. The taxpayers were responding to a Los Angeles Times article that asked the question, Is a City Manager Worth $800,000 I think we all know the answer.

The story reported that the citys chief administrative officer was on a salary of $787,637, his assistant $376,288, the police chief $457,000. These paydays struck the Bell citizenry, and many other Californians, as a bit bloated. Ideas in public finance blow in from the West, an old municipal market saying goes. If the watchdogs where you live arent on the hunt for public officials making king-size compensation, they soon will be.

People were already angry about the guaranteed pensions that so many state and local employees get. Its a surprise that some civil servants also collect super-size salaries, which will only spur even more populist backlash. Unlike the rage expressed over banker bonuses, you can expect taxpayers to demand action. This time, they can do something about it.

The fury over banker bonuses was a short-lived phenomenon, fuelled by the taxpayer bailout of the nations financial system. Americans respect high salaries in business rather than resent them. After all, (in most cases) if business turns sour, or goes bust, so do those salaries.

The dynamic is different when it comes to government. Americans think that civil service makes up in security what it lacks in pay and for the most part they are fine with that. Now they find out that only half of what they know is accurate. Yes, governments dont go out of business and they fire workers only as a last resort.

Americans are slowly being disabused of the idea that civil servants make peanuts. This quaint notion dates from the 1960s. The Bureau of Labour Statistics reports on its Web site that total employer-compensation costs are $27.73 per hour in business, $39.81 in state and local government.

Californians are on the cutting edge. For years now, they have been treated to stories about how public pensions are going to be the ruin of the states economy. Now they find out that current government employees arent doing so badly in terms of salary, either.

How much is too much If Bells city manager made $250,000 a year, would it have made headlines

How about $300,000 Im not sure.

Im quite certain $400,000 would have raised eyebrows.

In his only statement to the press to date, the $787,637 man, Robert Rizzo, said, If thats a number people choke on, maybe Im in the wrong business. I could go into private business and make that money. This council has compensated me for the job Ive done.

Well, that may not be so. There are darned few $787,000 salaried positions anywhere in the private sector for managers who run an organisation of similar size, said Girard Miller, a public-pension and finance consultant at PFM Group in Los Angeles. Bell has 80 full-time employees, according to its latest financial report.

What would make for an interesting law would be a statute prohibiting excessive compensation in the public sector, with a clawback provision, Miller said. That could apply to excessive-pay union contracts as well.

This is what happens when nobody is watching. Rizzo joined Bell in 1993, on a salary of $72,000. The city council, most of whose members make $100,000 for their part-time labours, decided in their wisdom to keep giving their city manager raises, and nobody called them on it.

I guess nobody knew. Thats not unusual; a lot of public finance, as we have seen, is conducted in private. Whats worse is that nobody cared. For years, the public has professed profound indifference to all aspects of state and local finance, including borrowing, compensation and pensions. The sole exception has been taxes, which everyone cares about.

Perhaps indifference is too strong. Maybe its just that the public has trusted public servants to do the right thing. This is about to change and its about time. How much do your city managers make