One of the major points of contention this past year in the Legislature was the impact state employee compensation has as a cost driver of state spending and whether changes should be made to help rein in costs. Based on the razor thin margin the June revenue forecast has left for the state’s budget balance sheet, it is likely this conversation will continue in the future.
So how exactly does state employee compensation impact state spending?
There are a couple of ways to look at this question. One way is as a percentage of total spending. Another is as a percentage of spending after making adjustments for pass through grants to K-12 since those that work in public schools are not state employees but instead local employees and their compensation totals are not reflected in state data.
Here is a summary of how the data breaks down from 1997-99 to 2007-09 (Data for 2009-11 will not be finalized until mid summer so it is excluded from the comparison at this time).
Total budget (dollars in thousands):
- FTEs increase: 16% (96,461 to 111,981)
- Salaries and wages increase: 67% ($7,455,654 to $12,463,774)
- Employee benefits increase: 91% ($1,872,692 to $3,573,893)
- Total Compensation increase: 72% ($9,328,346 to $16,037,667)
- Total budgeted spending increase (all objects): 74% ($39,449,322 to $68,492,870)
- 1997-99 total compensation as % of total spending: 23.6% ($9,328,346 of $39,449,322)
- 2007-09 total compensation as % of total spending: 23.4% ($16,037,667 of $68,492,870)
Total budget accounting for K-12 pass through funds (dollars in thousands):
- 1997-99 total compensation as % of total spending minus Public School Grants, Benefits, & Client Services: 31.2% ($9,328,346 of $29,894,050)
- 2007-09 total compensation as % of total spending minus Public School Grants, Benefits, & Client Services: 30.4% ($16,037,667 of $52,760,048)
As previously mentioned, public school grants, benefits, & client services are removed for comparison since those are pass through dollars to local K-12 which are not state FTEs but local FTEs so their compensation totals are not included in the total compensation figures for the state.
These pass through K-12 funds equal $9,555,272,000 in 97-99 and $15,732,822,000 in 07-09.
This means state employee compensation costs accounted for 23.4% of total spending in 2007-09 or 30.4% of spending when accounting for K-12 pass through funds.
Drilling down even further, however, there is a clear distinction between state employee compensation costs as a percent of spending when comparing general government employees versus higher education employees.
Looking at just general government employees and spending (excluding higher education) the % of compensation costs to spending drops to 15.5% in 2007-09. Comparing just higher education employees and spending the % of compensation costs to spending was 64% in 2007-09.
This illustrates that when looking at compensation as a percent of spending, higher education employee compensation is a much larger cost driver for higher education spending than general government compensation is for general government spending.
Here are additional details on the base data used to make these calculations.
As for whether this percentage trend has held true for 2009-11, though still preliminary data, as of April state employee compensation costs accounted for 23.2% of total spending or 30.2% of spending when accounting for K-12 pass through funds versus the 23.4% and 30.4% in 2007-09.
Whether these compensation figures are too high or too low will remain the subject of much debate but the fact remains state employee compensation costs are one of the budget cost drivers policy makers have totally in their control to make adjustments to.
Many thanks to staff at the Legislative Evaluation Accountability Program (LEAP) and the Office of Financial Management for their help in calculating this analysis of state employee compensation costs.
For those wanting to dig even deeper into state budget information you can visit the state’s budget website at www.fiscal.wa.gov.
[Reprinted from the Washington Policy Center blog.]