RALEIGH, N.C. – Substantial payroll cuts for state workers in the upcoming budget are likely unavoidable, according to the latest budget analysis by the Civitas Institute.

The Numbers Don’t Add Up

An examination of current revenue forecasts combined with state employee payroll data suggests state employee payroll is an inevitable target for cuts. Consider the following:

According to the annual Fiscal Research salary survey, budgeted base salary and benefits of state employees totaled more than $13 billion (as of Dec. 2008) – not including any state appropriations for the State Health Plan.

A revenue projection of $17.5 billion for FY 2009-10 leaves a difference of only $4.5 billion with which to finance non-payroll items (not counting federal stimulus funds and the use of various state trust funds).

By comparison, the salary survey indicated budgeted base salary and benefits in Dec. 2007 as $12.5 billion. The FY 2007-08 state budget totaled $20.7 billion, leaving a difference of $8.2 billion with which to fund non-payroll items. 
 
“State employee payroll obligations are the largest single state expenditure,” observes policy analyst Brian Balfour. “With the latest revenue estimates pegging the state deficit at a massive $4.6 billion for the coming year, the harsh economic reality is that current employee payroll levels appear unsustainable.”

“The 0.5 percent cut in state employee salary recently ordered by Gov. Perdue is likely just the beginning. Extended mandatory furloughs, across the board pay cuts or substantial layoffs are likely on the horizon,” added Balfour.

Voters Will Reject Tax Increases

State budget makers have spent themselves into a difficult spot. State employees are a politically powerful group, but implementing tax hikes to help maintain current payroll levels will be widely unpopular at this time.

According to recent Civitas poll results, 68 percent of voters believe the General Assembly should “cut existing programs” in order to balance the current budget, compared to only 16 percent that replied “raise taxes.” 
 
“The public is in no mood to have their taxes raised right now. Elected officials who support tax hikes will put their political future in jeopardy.” said Balfour.

RALEIGH, N.C. — Gov. Bev Perdue could soon have another weapon to help close the state’s multi-billion dollar budget gap for the next fiscal year.

State representatives introduced legislation Monday allowing state employee furloughs.

House Bill 708 gives the governor the power to mandate unpaid time off to save money and balance the budget.

The bill limits the furlough to 20 days.

Workers who make less than $30,000 a year would be exempt.

“I think it is far better to have a job than it is to be on the street,” said bill co-sponsor State Rep. Ray Rapp, (D – Madison County). “Until the recession turns around the possibility of laying off employees is very real. I want to try to soften the position by providing furloughs.”

Dana Cope, who oversees the State Employee Association of North Carolina, doesn’t see it quite the same way.

“Quite frankly furloughs and layoffs are not something the state of North Carolina can afford or absorb in this economic emergency,” said Cope.

He’s urging state workers to call their lawmakers to make sure they vote against mandatory time off.

“We are willing to temporarily sacrifice longevity checks, and we’re already sacrificing — look at all the vacant positions that are open.” said Cope.

But lawmakers said the furloughs would be rotated so agencies may be short-staffed, but no department would have to shut down.

Also, in an effort to keep permanent positions, Rapp said a furlough in no way affects benefits.

The furlough could also include legislative and judicial employees.

It allows the Legislative Services Commission and Chief Justice Sarah Parker the authority to furlough.

RALEIGH, N.C. – An overhaul of the state employee health insurance plan that’s supposed to be on the fast track keeps getting delayed as lawmakers and lobbyists try to resolve a flap over prescription drugs.

The Senate delayed Thursday a third time this week debate on legislation that would reduce benefits, increase premiums and inject $625 million in taxpayer money into the plan. The debate has been rescheduled for Tuesday.

Senate Majority Leader Tony Rand of Cumberland County says he’s giving colleagues time to come up with an alternative proposal to a new prescription drug program for people with chronic illnesses. It would save $90 million, but small-town pharmacists are worried it could put them out of business.

Rand said the bill still needs to be passed by April 1 to get full savings from the changes.

Gov. Beverly Perdue is trying to expand on some old ideas to close a proposed $3.4 billion budget gap for North Carolina next year.

Her spending plan recommends more than $200 million in savings by giving agencies less than 100 percent of their expected allotment to pay workers.

State government usually spends a little less than 100 percent because it’s not always at full employment. A few percentage points are used to pay for temporary workers, unexpected high utility bills or workers compensation claims.

Perdue said it’s time to pull back that money to its actual use for regular salaries to give the public a more accurate picture of how taxpayer dollars are spent.

Legislative leaders are not thrilled with the idea, saying it gives wiggle room for agencies when money is tight.

By MARSHA MERCER
Media General News Service

WASHINGTON – In his first month in office, President Barack Obama persuaded Congress to give out economic stimulus sweets totaling $787 billion.

Now, though, he may be poised to put the government on a long-term diet.

“We have to once again live within our means,” Obama told business leaders at the White House Feb. 13.
“We’re going to have to make some tough decisions that many of you are already making in your companies, but the federal government has not made.”

He makes it sound so reasonable.

But the federal government is unlike any other employer.

Exhibit A: a fellow named Bob Whitmore, who has been on paid administrative leave from the Labor Department since July 16, 2007.

That’s right. Whitmore, who makes $150,000 a year as director of record-keeping for the Occupational Safety and Health Administration, hasn’t worked a day since then while the government supposedly is investigating allegations of disruptive behavior.

Whitmore says he wants to work. He’s not a union member and could be fired.

You might think that once somebody in charge somewhere in the vast federal bureaucracy heard about

Whitmore, he or she would say, “This can not go on another day.” But you’d be wrong.

Writing about Whitmore in The Washington Post Thursday, columnist Joe Davidson noted that Whitmore testified last June to a House committee about his job situation. Whitmore also charged that the government allows companies to underreport injuries. That made a splash in newspapers and TV. And yet Whitmore is still sitting at home, getting paid.

Let’s stipulate that most people on the federal payroll go to work. And that the Whitmore case is highly unusual. And yet, it goes to a mindset that is as foreign to the business world as it is entrenched in government. The mindset makes it very difficult for anyone to bring real change to Washington.
The government plays with funny money. Oh, it’s real all right, but it just doesn’t seem real. That makes “living within our means” a remote concept.

No company would let such a situation like Whitmore’s drag on this long, paying someone to do nothing.

I read about Whitmore, saw a report that the federal deficit could reach nearly $2 trillion this year and then read that Obama is hosting a “fiscal responsibility summit” Monday.

Dozens of House members, senators and think-tank wonks from both parties and differing economic views will come to the White House to discuss the fiscal mess. On Tuesday, he will outline his budget priorities in his first, primetime address to a joint session of Congress.

And on Thursday Obama will send Congress his preliminary budget for 2010. Details aren’t expected until March or April.

The rollout of the new fiscal plan sounds well orchestrated, but the question is whether the president will be able to persuade members of Congress whose appetites have been whetted by stimulus sweets to accept the discipline of a new diet.

Obama has been unwavering in his belief that the country needs serious spending to get us out of the ditch. He also still says he wants to help millions of the uninsured get health care.

He also believes it’s important to think beyond the current situation and focus on the future.

“We’re going to have to have fiscal discipline,” he told the business people, adding that it would be impossible “to perpetually finance the levels of debt” that the federal government is accumulating.

He wants to expand health care coverage and preserve Social Security and Medicare while putting the government on a path to lower deficits.

To do all this, Obama likely will tackle health care and Medicare first by trying to rein in Medicare provider costs, a proposal doctors, hospitals and some patients will oppose.

The solution may be to take the long-term choices out of Congress’ hands.

A group of former budget officials recommended a bipartisan commission that would come up with a plan to deal with long-term fiscal issues. The commission’s plan would be presented to Congress for an up-or-down vote. This model has been used successfully to decide on military base closures.

The commission could hire Bob Whitmore.

RALEIGH, N.C.  – North Carolina’s state employee pension funds need an additional $359 million from the Legislature during the next two years to keep them financially sound, State Treasurer Janet Cowell said Thursday.

The news from Cowell, who became treasurer just last month, further burdens lawmakers drawing up a state government spending plan for the next two years by quantifying the retirement system’s needs.

The plan, which covers 820,000 state and local government employees, teachers, emergency responders and retirees, is cited regularly among the healthiest in the country. But the funds lost $17 billion in value in 2008 as the nation entered a recession, falling to $60 billion.

Cowell said recently she would ask the General Assembly for $29 million more in the next fiscal year than the roughly $400 million the pension funds already receive annually from the state. But she said a steeper increase probably would be necessary for the year that begins in July 2010 because of the recent losses.

With Thursday’s announcement, she is setting the need for additional funding for the 2010-11 fiscal year to about $329 million. The estimate follows an actuarial review of the plan by an outside consultant.

The Legislature will have to agree to make this contribution level.

“I understand that this news comes at a time when families, local and state governments and the private sector are tightening their belts,” Cowell said in a news release. “However, it is important for budget-writers to take these costs into consideration as they craft their respective budgets.”

The request doesn’t change how much money the 535,000 public employees covered by the plans must contribute to the pension. They are required by law to put 6 percent of their pay into the retirement system.

Richmond Times-Dispatch, 02-18-09
James V. Meath is a partner and member of the labor and employment practice at Williams Mullen. Contact him at (804) 783-6412 or jmeath@williamsmullen.com.

E ver since the presidential primaries ended, a storm has been gathering in the business community. Then-candidate Barack Obama’s talk of the “card check” bill (misleadingly titled the Employee Free Choice Act, or EFCA), energized labor unions and terrified businesses across the country.

This proposed legislation would completely revolutionize labor law as we know it and seriously damage the business community’s ability to maintain control over its work force and to satisfy the ever-changing needs of its customers in a demanding global economy. In short, this is bombshell legislation and it is not only on the horizon, but is teed up to be introduced any day now in the House, where it was passed in 2007. With an intense debate in the Senate looming, I began to ask myself, “What has changed so radically in our makeup to make this and other pro-union, anti-business legislation so prominent on the agenda of Congress?”

After practicing traditional labor law for 30 years, I know that this legislation would never have seen the light of day 15, 10, or even five years ago. What has changed? There has been a profound change in the business climate with regard to employee rights in the workplace. This, coupled with a dearth of union organizing over the past 20 years, has produced a whole generation of owners, senior executives, managers, supervisors, legislators, judges, lawyers, and employees who have not experienced any type of labor organizing situation, much less experienced any type of labor strife. Because of this, they are more open to discussing the union question.

COUPLE THIS WITH the fact that our educational system, to some extent, and our work environments have evolved into entities that train for and reward teamwork, tolerance, and collaborative thinking, all of which are noble objectives. In that context, many of our current stakeholders in business are more open and malleable when it comes to the old-school, black-or-white questions about unionization.

Of late, I have been asked to speak extensively on this topic and invariably two things happen at these sessions: (1) there are rarely more than three or four people who say that they have any significant experience with unions; and (2) in the course of the question-and-answer period, someone will ask, “Jim, how bad can this actually be?” Indeed, I am astounded by the number of senior executives and owners who opt not to advise their work force of their own personal position that a union could hurt the business and the employees. Seen in this light, it is understandable that legislation that is vaguely portrayed as being intended to “increase employee free choice” and “improve the lot of the middle class” does not set off the alarms that it once would have.

This, in turn, is closely related to the basic misunderstanding of what EFCA really does. PACs and labor
unions have executed a brilliant publicity campaign that has misled the general population about the legislation.

THE BILL IS actually very simple. The three main tenets of the bill include: (1) abolition of a secret ballot election, (2) compulsory binding arbitration for first contracts after 120 days of bargaining, and (3) punitive fines for violations of the National Labor Relations Act by employers. These elements strip not only the business of its rights, but the workers of theirs as well.

These principles that EFCA would change have been in place for more than 60 years — so “if it ain’t broke, don’t fix it.” Labor has complained for years that the system is broken, but is it truly broken?
The facts are that unions win anywhere from 45 percent to 50 percent of secret-ballot elections. That seems relatively balanced. Unions gain first contracts in one in three of the elections they win. The opposition argues that this number is far too low.

I happen to have considerable experience in the negotiation of labor contracts, specifically first contracts. The reason most first contracts fail is because unions come to the bargaining table and make demands that are excessive, demands that refuse to allow the business the flexibility it needs to meet the needs of its customers.

RESPONSIBLE businesses — knowing that these demands are anti-competitive and will diminish, if not eliminate, their ability to make a profit — refuse to concede to them and lawfully say, “No.” Those that do not, capitulate — and when the business cycle turns against them, or some profound business event (such as an increase in competition) occurs, they cannot be flexible and their business suffers, or — in the worst case — vanishes. If this sounds familiar, it should. The woes of the auto industry are one of the best examples of the above.

In sum, the unions’ core objective has always been to organize members. That is their sole mission. In the 1960s, they represented 23 percent to 25 percent of the work force. Today they represent less than 6 percent of the private-sector work force. Essentially, they have failed in their core business. They have replaced that core business with raising money for PACs, 529s, and political candidates. They are using that influence in an attempt to come full circle, back to their membership roots.

In short, unions don’t need EFCA, they just need minimal change in a system that actually has worked for the past 60 years, which will turn the tables in their favor. Increases in the number of union-organized employees in this country will occur. That will be due in part to modifications in existing labor laws, but also a great desire that we all have to just get along.

RALEIGH, N.C. – State Treasurer Janet Cowell has new information on what the state’s public employee pension funds need to stay financially sound.

Cowell scheduled a news conference Thursday to discuss the latest study of the $60 billion retirement system and how much lawmakers should contribute to it in 2010.
 
The new treasurer said last month she’ll ask the General Assembly for $29 million above the roughly $400 million it currently gives for the coming year. But she said a steeper increase probably would be needed the following year.

That’s because the pension funds performed poorly in 2008, their value falling $17 billion during the economic crisis.

The system covers 820,000 employees and retirees. It’s been cited among the healthiest in the country.

A conservative advocacy group is taking a stand against a bill under consideration in Congress that is backed by labor organizers.

“Americans for Prosperity” rallied Tuesday outside the General Assembly against the “Employee Free Choice Act,” often referred to as “card check.”

Labor unions say the bill would make it easier for workers to organize and pressure companies to negotiate wages and working conditions.

If passed, the measure would get rid of private ballot elections. Instead, employees would simply sign a card for or against.

Senator Richard Burr is against the measure. Burr spoke at the rally about the sanctity of voting rights to Americans. He didn’t talk about unions or about the legislation, and instead talked about voting in general.

Those rallying Tuesday, along with several state lawmakers, urged Senator Kay Hagan to vote against it.

“What the unions did to cripple the American automobile industry and what they did to Detroit, Michigan, we surely in North Carolina can’t allow unions to do that to the North Carolina businesses,” said North Carolina State Sen. Bob Rucho, R-Mecklenburg.

“Free choice would be severely restricted by subjecting workers to undue pressure and intimidation, by having to make a public decision for or against union representation,” said State Rep. Paul Stam R-Wake.

Hagan said the move will “level the playing field.”

“It doesn’t do away with the secret ballot; it gives employees the opportunity to decide which way they want to consider the vote,” she said.

Ralliers flooded the phonelines at Hagan’s offices in Washington and Raleigh to voice their opposition.

Democratic Party activist Will Cubbison of Raleigh said labor elections aren’t fair because of company intimidation in the days leading up to a vote.

State House and Senate republicans are sending a letter to North Carolina’s congressional delegation in Washington to ask them to oppose the bill on behalf of the state’s workers.

Listen to Hagan and Rurcho: