Maine can find savings by bringing its personnel costs down.

It is good news that Gov. John Baldacci plans to cut 219 state positions in order to close the current $840 million biennium budget deficit. The bad news is he has another 4,278 positions to go, in order to bring Maine’s state work force in line with the national average.

Based on data from the U. S. Department of Commerce’s Bureau of Economic Analysis, Maine employed 5.19 state government workers for every 100 private sector workers in 2007 (20 percent above the national average of 4.34). Lowering Maine’s state work force to the national average would save Maine taxpayers up to $189 million, based on 2007 payroll data.

Where are all of these excess employees?

Using supplemental data from the U.S. Department of Commerce’s Census Bureau reveals that 90 percent of the difference with the national average comes from two government functions, Public Welfare (Medicaid, etc.) and Non-instructional Higher Education.

However, the story does not end there. In addition to over-employment, Maine’s state work force is also over-compensated relative to the national average. According to BEA data, the average state government worker took home $51,073 in 2007, including wages, overtime and benefits, which is $8,943 more than the national state worker average of $42,130. This over-compensation costs taxpayers up to $245 million, according to 2007 payroll figures.

Unlike over-employment, which is concentrated in two government functions, the over-compensation problem is much more extensive. Overall, 12 government functions rank in the top 10 highest state government compensation relative to the private sector in the country.

One government function that shows up as both over-employed and over-compensated is public welfare, which includes MaineCare, the state’s Medicaid program. This is not entirely surprising given that previous research findings by The Maine Heritage Policy Center and others have pointed out that Maine has the nation’s most expensive Medicaid program.

Real reductions in Medicaid spending would have a double-benefit in budget savings. First, there are direct budget savings resulting in lower Medicaid outlays, and second, there are indirect budget savings from lower personnel costs.

What is an example of a position in need of cutting? The state of Maine has declared a hiring freeze, yet the Department of Health and Human Services has advertised an opening for “Director, Office of Multicultural Affairs,” with a salary range of $49,961.60 to $68,577.60. Adding in benefits detailed in the job posting, the cost to taxpayers ranges from $71,748.98 to $94,929.63. There are 79 other persons working at DHHS at the “director” level already.

With Maine facing a gap of at least $840 million and the state’s Medicaid spending at the top of the nation, why is DHHS filling this highly compensated position, which according to its job description, provides services to non-U.S. citizens?

In addition to cutting Maine’s extremely generous “entitlements,” this type of extraneous and over-paid position should make it clear that it is time to enact a fundamental restructuring of the state work force. During the next five to 10 years, 40 percent of current state employees will retire. If Maine undertakes a careful review of state positions beginning today, as workers retire, the state government will have a road map as to which positions get re-filled and which positions are scaled back or eliminated.

In addition, as older, higher-paid employees retire and new, lower-paid employees are hired, the state government should abandon the old-fashioned seniority-based pay scales in favor of merit-based compensation, and replace the old retirement system with employee-directed savings plans such as 401(k)s and health savings accounts.

The governor has taken an important baby step in the right direction. He should seize the moment and begin a comprehensive work-force restructuring. If he does not, others will push their own anti-taxpayer agenda. The Maine State Employees Association has already offered its alternative – which is to raise taxes instead of cutting any state jobs. This is particularly hard to defend, when the average Maine worker already earns less than the average state worker.

What would Robin Hood have to say about that?

J. Scott Moody is the chief economist with The Maine Heritage Policy Center. Moody will speak in Paris on Feb. 18. For more information, call 321-2550 or visit www.mainepolicy.org.


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