Fox & Friends hosted Gov. Tim Pawlenty in a segment attacking public employee unions by using misleading data on public sector compensation and by blaming unions for states like California's budget problems. In fact, experts have attributed California's budget shortfalls to the state tax system and the economic downturn, and the claim that public sector employees make twice that of private sector employees is based on a discredited apples-to-oranges comparison.
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Fox & Friends Hosts Pawlenty To Push Misleading Claims About Federal Workers' Pay
Pawlenty: Federal Employees Make "Twice The Average" Salary Of A Private Sector Worker. In a Wall Street Journal op-ed, Pawlenty claimed, "The rise of government unions has been like a silent coup, an inside job engineered by self-interested politicians and fueled by campaign contributions." Pawlenty falsely claimed, "Federal employees receive an average of $123,049 annually in pay and benefits, twice the average of the private sector," and that "[u]nionized public employees are making more money, receiving more generous benefits, and enjoying greater job security than the working families forced to pay for it with ever-higher taxes, deficits and debt." Pawlenty made similar claims on Fox & Friends, claiming that public sector union employees are "over-benefited and overpaid," compared to their private sector counterparts. [The Wall Street Journal, 12/13/10; Fox & Friends, 12/13/10]
Claim That Federal Workers Make Twice As Much As Private Workers Is Based On False Comparison
Pawlenty's Claim About Federal Pay Echoes Misleading USA Today Analysis. Pawlenty's claim echoes a USA Today article which used data from the Bureau of Economic Analysis (BEA) to report that "[f]ederal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation." [USA Today, 8/13/10]
PolitiFact: Simply Comparing Federal Employees' Compensation With Private Sector Compensation "Is Not An Apples-To-Apples Comparison." From a February 3 PolitiFact article rebutting the claim that "federal employees are making twice as much as their private counterparts":
[I]t's important to understand that a big reason for the disparity is the different mix of jobs in the federal work force. It has more higher-paying white-collar jobs, experts told us, while there are more lower-paying, blue-collar jobs in the private sector that bring the average down. So it is not an apples-to-apples comparison. [PolitiFact, 2/3/10]
USA Today Article Acknowledged That Its "Analysis Did Not Consider Differences In Experience And Education." The USA Today analysis compared the average pay and compensation for all federal employees to that of all private employees. The analysis did not attempt to determine if a private sector worker earns more or less than a federal worker with a similar job. USA Today noted that its analysis of private and federal pay "did not consider differences in experience and education":
The average federal salary has grown 33% faster than inflation since 2000. USA TODAY reported in March that the federal government pays an average of 20% more than private firms for comparable occupations. The analysis did not consider differences in experience and education. [USA Today, 8/13/10]
BEA: "Skill Levels And Educational Attainment Tend To Be Higher" For Federal Workers. A PolitiFact article on federal pay reported that the BEA -- the source for USA Today's data -- said that the numbers used by USA Today "do not tell the complete story," in part because in recent years, "the federal government is hiring more highly skilled workers who tend to make more money." From the PolitiFact article:
The BEA notes that its private-sector data includes employees of all professions. That means everything from minimum-wage jobs to the salaries of chief executive officers. Federal employees typically work in professional occupations that pay more, such as accountants, attorneys and economists, according to Congressional Budget Office research.
The BEA also noted in recent years that the federal government is hiring more highly skilled workers who tend to make more money. Many of the lower-paid positions, the BEA found, have been contracted out to the private sector. [PolitiFact Georgia, 8/18/10]
Indeed, the BEA website lists "a number of factors that explain why average compensation for federal government non-postal civilian employees is higher than average compensation for private-sector employees":
- The mix of occupations held by Federal Government civilian employees is different from that of occupations held by the entire private-sector workforce. The private-sector workforce ranges from jobs that pay a minimum wage to highly paid CEOs. According to studies conducted by the Congressional Budget Office (CBO), jobs in the Federal Government civilian workforce are concentrated in professional (e.g., lawyers, accountants, and economists), administrative, and technical occupations. In addition, skill levels and educational attainment tend to be higher, on average, for Federal Government civilian employees than for private-sector employees because of the occupational requirements in the Federal Government.
- Over the past several years, there has been a shift in Federal employment toward higher-skilled, higher-paid positions as lower-skilled (and lower-paid) positions in the Federal Government have been contracted out to private industries. This trend has contributed to higher average pay for Federal Government civilian employees than for private-sector employees..
- On average, Federal Government employees receive higher benefits in the form of pensions and health insurance contributions than private-sector employees, with certain private-sector employees receiving no benefits. This is highlighted by comparing the difference between the average compensation and the average wage of Federal Government civilian employees ($37,774 in 2006) with the difference between the average compensation and average wage of private-sector employees ($9,544 in 2006).
- Moreover, federal compensation estimates include sizable payments for unfunded liabilities that distort comparisons with private-sector compensation. For 2006, for example, the value of these payments for unfunded liability were $28.6 billion or 10.7 percent of total federal civilian compensation. [Bureau of Economic Analysis, accessed 12/13/10]
Washington Post: "[G]overnment Sets Pay Scales Based On What Private Employers In Different Regions Pay For Comparable Levels Of Work And Experience." A Washington Post article reported: "Because the government workforce is more skilled on the whole than labor used by private companies that include McDonald's and Wal-Mart, comparing all jobs skews private-sector salaries down, government officials say. The government sets pay scales based on what private employers in different regions pay for comparable levels of work and experience." From the Post article:
So are federal employees overpaid? It depends on who's measuring. Democrats say a public-private pay gap exists, but in the other direction: The government lags behind the private sector by 22 percent.
"If the American public knew the data that was the basis for these outrageous claims," said John Berry, the government's personnel chief, "they'd see how ideologically biased it is." With four out of five hires under Obama to defense and homeland security jobs and the Department of Veterans Affairs, "I'd ask, which one of those people would you like to fire?" [Washington Post, 9/25/10]
Carlson, Pawlenty Agree: Union Contracts To Blame For CA Fiscal Crisis
Carlson: California Is "Going Totally Broke" Due To "Huge Union Contracts." On the December 13 edition of Fox & Friends, Pawlenty discussed his Wall Street Journal op-ed and claimed that public employees "used to be over-benefited and underpaid, now they're both over-benefited and overpaid." Pawlenty further claimed that "their post-retirement benefits and salaries and pensions are really one of the driving forces of the financial troubles of cities and counties and school districts and states all across this country." Co-host Gretchen Carlson added, "California, Illinois, New York -- those are just some of the states that could be facing bankruptcy, going totally broke, because of these huge union contracts that they have to pay out." [Fox & Friends, 12/13/10]
In Fact, Experts Trace CA Fiscal Crisis To State's Tax Structure, Economic Downturn
Schwarzenegger: The "Economic Meltdown And The State's Unbalanced Tax System Are Largely Responsible" For Current Fiscal Crisis. The Sacramento Bee reported that "[f]acing a $24.3 billion deficit after signing a $92 billion spending plan in February, [Schwarzenegger] accepted some blame for what has transpired since he was elected on the promise of fiscal rescue. But he said the world's economic meltdown and the state's unbalanced tax system are largely responsible." The Bee further reported that "[t]he governor said the state's tax structure, which depends on income and capital gains taxes, is too volatile." [Sacramento Bee, 6/6/09 accessed via Nexis]
NY Times Explains "Origins Of The Crisis" Stem From State's "Disastrously Imbalanced" Tax Structure, Which In Part Comes From Proposition 13, A 1978 "Voter-Led Initiative That Artificially Depressed Property Taxes And Shifted School Financing Burdens To The State." The New York Times reported on the "[o]rigins" of California's fiscal crisis, stating that "[w]hile the state's property taxes are below average, its personal income tax rate and levies on capital gains are among the highest; so unlike states that pass the tax burden around, California can become disastrously imbalanced." The Times further reported that "the protracted national recession delivered a big hit on the state's greatest source of revenue, income taxes on rich people":
All of this did not creep up overnight. Expansive growth in the first half of the 20th century led to rising housing prices and infrastructure growth, which came with higher taxes to pay for it all.
Those increases created an anti-tax rebellion that begot Proposition 13 in the 1970s, a voter-led initiative that artificially depressed property taxes and shifted school financing burdens to the state. It also led to the onset of a culture of ballot initiatives that have hamstrung state budgeters by earmarking money for programs with one vote and taking away the ability to pay for them with others.
The state's population -- over 38 million today from 23.6 million in 1980 -- has also meant a growing need for costly services for the poor, especially when revenues are declining.
While the state's property taxes are below average, its personal income tax rate and levies on capital gains are among the highest; so unlike states that pass the tax burden around, California can become disastrously imbalanced.
And the protracted national recession delivered a big hit on the state's greatest source of revenue, income taxes on rich people. Further, the state's structural deficit has become exceedingly pronounced after years of accounting tricks and borrowing. [New York Times, 12/10/10]
Cohen And Dreier: CA Has "Three Overlapping Budget Problems" -- "Declining Revenues," "Irresponsible Fiscal Policies," And "Most Important[ly] ... The Fiscal Straitjacket Created By Proposition 13." In an American Prospect article, Donald Cohen, president of the Center on Policy Initiatives, and Peter Dreier, professor of politics and director of the Urban & Environmental Policy program at Occidental College, wrote that "[p]olitics, not plummeting prosperity, are at the root of California's dysfunction." They further wrote that California has "three overlapping budget problems," including "declining revenues resulting from a long, deep recession"; "irresponsible fiscal policies"; and "the fiscal straitjacket created by Proposition 13." From the article:
California actually has three overlapping budget problems. The first -- declining revenues resulting from a long, deep recession -- is shared with every other state.
The second is the result of its own irresponsible fiscal policies, which Steve Levy, head of the Center for the Continuing Study of the California Economy, calls "our special hell." In the late 1990s when the dot-com boom boosted California's economy, state lawmakers increased spending by about $10 billion, mostly to play catch-up on K-12 education and to expand health and social services. But they also foolishly cut taxes by about $10 billion. When the boom busted, revenues fell, but Sacramento neither rolled back the tax cuts nor repealed the spending increases. Desperate for revenues, Gov. Gray Davis, a Democrat, in 2003 tripled the vehicle license fee, which generated $4 billion a year by boosting fees by $130 on a typical car. Schwarzenegger, a Republican, swept into office that same year in part by promising to roll back the unpopular increase in the "car tax." He kept his pledge and plunged the state into an even deeper budget crisis. [American Prospect, 2/1/10]
Prop. 13 "Capped Property Taxes" And "Created A Constitutional Requirement That All Tax Increases Pass The [State] Legislature By A Two-Thirds Majority," Which "Made California Virtually Ungovernable." Cohen and Dreier further explained that the "most important budget problem is the fiscal straitjacket created by Proposition 13, the original tax-revolt ballot proposition that voters approved in 1978, which capped property taxes and made it extremely difficult to raise revenues." They explained that the law "did more than simply limit property taxes. It created a constitutional requirement that all tax increases pass the Legislature by a two-thirds majority," which Cohen and Dreier argue "has made California virtually ungovernable." From their American Prospect article:
The third and most important budget problem is the fiscal straitjacket created by Proposition 13, the original tax-revolt ballot proposition that voters approved in 1978, which capped property taxes and made it extremely difficult to raise revenues. As a result, even before the recession, California had steadily disinvested in its once world-class education system and physical infrastructure.
Politics, not plummeting prosperity, are at the root of California's dysfunction. And there is plenty of blame to go around.
Proposition 13, crafted by right-wing political operatives Howard Jarvis and Paul Gann, did more than simply limit property taxes. It created a constitutional requirement that all tax increases pass the Legislature by a two-thirds majority. (The state already had a two-thirds requirement to pass the annual budget, dating back to 1933.)
Jarvis and Gann meant to put the state in a fiscal straitjacket. They succeeded. Now, three decades later, this change has made California virtually ungovernable.
Though the Democrats now have a 51-to-28 majority in the Assembly and a 25-to-14 majority in the Senate, it isn't enough to raise taxes and pass a budget. They need three Republicans in the Assembly and two in the Senate to cooperate. Unfortunately, the GOP has lost virtually all of its moderates and is dominated by rabidly anti-tax, anti-government conservatives -- giving a small minority veto power over the budget. [American Prospect, 2/1/10]
California Fiscal Crisis "30 Years In The Making" Because Prop. 13 Made It "Far More Difficult To Raise Taxes Or Pass A Budget In California Than In Other States," And CA "Didn't Resolve How To Pay For The Services That People Want." A Time article titled, "How California's Fiscal Woes Began: A Crisis 30 Years in the Making," reported that "the Golden State's budget problems are hardly new. The seeds of them were planted more than 30 years ago. They begin with the 1978 property tax revolt and the victory of Proposition 13." The article quoted former California Assembly speaker Bob Hertzberg saying of Proposition 13: "One side was to protect the people from the government suddenly and wildly raising property taxes. ... That was done. But we didn't resolve how to pay for the services that people want. So we have created this crazy government structure in Sacramento held together by duct tape and bailing wire. It's not coherent and needs to be changed." From the article:
[T]he Golden State's budget problems are hardly new. The seeds of them were planted more than 30 years ago.
They begin with the 1978 property tax revolt and the victory of Proposition 13. As California experienced a dramatic escalation in home values, property tax assessments skyrocketed. Especially vulnerable were seniors on fixed incomes. When then Gov. Jerry Brown and the legislature dithered, conservative activists led by Howard Jarvis put a seductively simple sounding proposition on the ballot. Under Proposition 13, the annual real estate tax on a parcel of property would be limited to 1% of its assessed value and this assessed value would only increase by a maximum of 2% per year, until a change in ownership. Voters responded and Proposition 13 scored a dramatic victory with 65% of the vote. Property tax rates dropped an average of 57%.
Proposition 13 has proved to be a two-sided sword. "One side was to protect the people from the government suddenly and wildly raising property taxes," says Bob Hertzberg, a former Assembly Speaker and co- chair of California Forward, a bipartisan reform group. "That was done. But we didn't resolve how to pay for the services that people want. So we have created this crazy government structure in Sacramento held together by duct tape and bailing wire. It's not coherent and needs to be changed."
Proposition 13 further altered California politics by requiring a two-thirds majority for tax increases either at the state or local level. This requirement along with a constitutional provision requiring a two-thirds majority to pass a budget -- the result of a proposition passed in 1933 -- means it is far more difficult to raise taxes or pass a budget in California than in other states. For more than 30 years California has been living with a system of minority rule in which 34% of the legislature or a local community can stonewall the majority. Facing this post-Proposition 13 system, California's various interest groups have increasingly used the ballot box to protect themselves -- but by so doing have mandated budgetary havoc. [Time, 7/01/10]
Former CA Assembly Budget Consultant: "The State Got Off Track In General After Prop. 13 In Terms Of Balancing Spending With Revenues." In a Sacramento Bee article, Dave Doerr, senior tax consultant for the California Taxpayers Association and a former California Assembly budget consultant, said that "[t]he state got off track in general after Prop. 13 in terms of balancing spending with revenues ... and once they did, it wasn't long before they were way off track." From the article:
From its beginning, California has had a kinetic economy. Gold propelled it into statehood. When the Gold Rush waned, there was wheat, fruit, real estate, movies, oil, defense, aerospace, computers -- and peaks and valleys with each.
That economy occasionally was reflected in state budgets. From 1945 to 1978, according to Department of Finance statistics, state government spent more general fund revenues than it collected in 11 of 34 years.
The relative kiddie carousel of budgetary ups and downs became a white-knuckle roller coaster in 1978, with the passage of Proposition 13, which cut property taxes and required a two-thirds vote of the Legislature to pass statewide taxes.
Of the 32 budgets passed since then, 19 have spent more than the state took in from tax revenues.
"The state got off track in general after Prop. 13 in terms of balancing spending with revenues," said Doerr, "and once they did, it wasn't long before they were way off track." [Sacramento Bee, 9/21/09]
Time: "California's Crisis Winds All The Way Back To 1978's Proposition 13" And Its "System Of Governance [That] Seems Designed To Thwart Any Solution Its Lawmakers Propose." Time detailed California's past and present budget woes and noted:
California's crisis winds all the way back to 1978's Proposition 13, which cut property-tax rates 57% and forced the state to rely more heavily on income tax revenue. When Californians were wealthy, the tactic generated a surplus, enabling politicians to cut taxes, pad budgets and bask in their popularity. But when times were lean, the state struggled to pay its bills. Governor Pete Wilson encountered this dilemma in 1991, as did Gray Davis in 2003. Now it's Arnold Schwarzenegger's turn to try to wrestle a highly partisan legislature into slashing enough programs to eliminate a towering deficit. Having raised taxes by $12.8 billion in February, the governor balked at a second hike.
California's system of governance seems designed to thwart any solution its lawmakers propose. With a two-thirds majority required to raise taxes or pass a budget, 40% of public funds earmarked for public schools and no method of overriding voter initiatives, California seems stymied by a complex puzzle that no one can solve. [Time, 7/27/09]