Martin County governments’ number one cost is people. While taxpayers greatly appreciate the services provided by our County employees, the cost of the county’s personnel have become a critical issue accentuated by the significant decrease in revenues. The budget shortfall for FY 2009 is now pegged at over $25 million dollars. The time has come for our government leaders to take action, and here’s why.

For many years, public sector employees were underpaid and this was offset by greater job security and benefits, but this is no longer the case. Studies show that public sector employees at the local, state and federal level now enjoy pay and even more lucrative benefits that have now outstripped that of most private sectors. Private sector employers have long since abandoned many of the current compensation programs in the public sector. For example, only unionized companies provide programs such as annual “cost of living adjustments”, granting of paid, banked sick time and/or vacations, highly subsidized health care programs and expensive pension plans.

Take pensions as one case in point. Most retirement plans in the private sector (where they even exist) are targeted at replacement income of about 65-75 percent of annual pay. In Martin County we find far too many instances where employees (mostly in unions) are retiring at more than 90 percent of annual pay - padded by the addition of overtime hours - a practice not permitted in the private sector. Employees are paid for their overtime hours, so why count them again in calculating pension plans? When these costs are added to subsidized plans, they simply become unaffordable, no matter how valuable they are as employees. Further, these costs create significant long-term consequences.

For example:

There are growing reports of states (South Carolina, Georgia, New Jersey and others) who are defaulting on retirement benefits or unilaterally eliminating, or reducing them due to the huge unfunded liabilities generated by these programs. In some states, the liability is nearly one trillion dollars. These “IOU’s” were used as “deferred compensation” in lieu of higher pay in order to retain employees. Although Florida and our County’s plans appear to be solvent, we could be heading in the same direction.

In terms of the County’s direct pay plan, a 2007 Florida survey conducted by the Society for Human Resource Management reported the average pay increase for all workers (including public, private, education and government) was 3.6 percent. The projected increases for 2008 are also about 3.6 percent. Martin County pay increases were almost double that figure, principally due to the addition of cost of living adjustments. While unions are still free to negotiate, it is the responsibility of County officials to bring compensation programs more in line with private sector practices, not just other governmental bodies. Another important issue that unions often lose sight of is the ability of the County to pay. There is no bottomless pit of money that flows from taxpayers.

The auto industry is a good example of what happens in a competitive environment when management abdicates its responsibility to its customers. An average priced American car costs thousands of dollars more than it should simply because for many years, car companies passed on increased union pay and benefits costs to their customers. Union negotiated pay of over $75.00 an hour are far out of line compared to the $45.00 non-union rates paid by foreign car companies in this country. Another important factor to consider is that organized workers only represent about 10-12 percent of the country’s total workforce and the largest segment is in government. The question then is this. In terms of fairness and equity, why should the 90 percent of non-union workers and taxpayers in Martin County be obliged to provide a better standard of living for those who serve, than they afford themselves? There is something wrong with this picture.

It is also time that our county leaders examine all options and one important step forward would be to implement a “pay for performance” system and abandon all compensation policies tied to tenure and automatic increases in any form. Teachers for example claim they are underpaid, but as in any workforce, not everyone is underpaid. Assuming differences in performance some are overpaid while many are not. In short, differences in pay should be used to recognize better teachers. They would be able to earn far more than they do now and others would be paid less? Paying everybody the same not only fosters mediocrity, but also protects poor performers and reduces productivity - all negative consequences. Most American workers believe in pay for performance, why not then our public servants?

Another important action by the County would be to hire a professional negotiator and set financial limits and/or guidelines for negotiating future union contracts. In order to control and reduce costs, the county should take a stance on negotiating give backs, creating lower tiered, or double tiered wage scales, redesigning pension plans and amending or drop outdated pay practices, etc. in order to reduce long term costs.

People work for more than just money. Culture, location, environment and good management have a lot to do with why people join organizations. Martin County has the ability to provide all. But, in order to do this, we need all county employees (and the unions) to become a part of the solution and not part of the problem. However, if human capital costs continue to rise, the county will be faced with decisions that would make union demands moot and layoffs the only option. .

In the end, we ask that our County leaders take a strategic position and consider actions that involve the restructuring of the workforce by eliminating unnecessary jobs, combining functions and reducing layers of management. We also ask that union leaders pay attention to the needs of the county and that in the process, fairness will prevail. Bringing together government leaders, County employees and taxpayers in providing the best possible services at the lowest possible cost to the taxpayers, should be our mutual objective. This would be a “win-win” outcome for all.