Cost drivers - automatic wage increases - must be addressed

CAUTION, BUDGET CURVES AHEAD: The Governor's individual income tax plan focuses on more money for a bigger government. With thousands leaving the state due to lost jobs in the private sector, the "new rich" in Alaska is anyone with a government paycheck. Click here for State payroll details, and tip your server over at Alaska Policy Forum.

APPROPRIATE, ALREADY: State labor contracts are subject to legislative appropriation. The Department of Administration generally brings union contracts to legislators for review. This year, however, it appears the contracts are being rolled into the governor's budget without the usual vetting. Irregular.

On March 14, House Finance members expressed concern about automatic, often dramatic, pay increases with the merit-and-step increments, ranging from 3.24 percent to 10.5 percent, for about 12,000 of the State's employees.

  • The cost of these raises are estimated to be more than $70 million.
  • 1,200 of the State's most costly employees (of more than $100,000 per year) cost the State $166 million per year.
  • 300 of the highest paid employees ($145,000 per year) cost the state $66 million per year. 

To contrast with private sector, the oil and support industries have laid off more than 2,000 workers and are neither hiring nor investing in Alaska. 
Can the State of Alaska afford these raises in light of our fiscal situation? Here's what the Alaska State Chamber of Commerce offered:

Reduce the State’s operating budget to a sustainable level by:

  1. Create an endowment model or similar framework to use Permanent Fund earnings to support essential services; and
  2. Only then explore introductions of new, broad-based taxes, if needed.

"It is inappropriate for the State to burden a receding private sector with the yoke of spiraling public spending. Union contracts should be subject to the full review and scrutiny of the public process," said Chamber President Curtis Thayer. "I urge you to review these contracts carefully and support a freeze on all public employee wages as we face a $4 billion shortfall."

Short version: When we're talking about taxes, why aren't we talking about wage freezes?

SENATOR WILKEN REACTS: A personal income tax would feed government growth, says our friend from Fairbanks.

From the April 18 edition of Must Read Alaska newsletter.

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