Friday, May 3, 2013

Which Public Workers Are Most Overpaid In California Compared to National Norms? Water Utilities or Public Safety

There has been a lot of talk in California water about the inability of the State Water Project (SWP) to compete with the salaries paid by local water utilities.  The problem for SWP is real, and I agree that with the Delta Stewardship Council that it is a threat to water supply reliability.  But some comparative wage data gives a little different perspective to the problem, and has implications for other statewide water reliability issues as ratepayers will soon be asked for large rate increases to pay for the Delta tunnels and other grandiose projects pushed by local water agencies.

Are State Water Project wages too low, or are local water utility wages too high?

The data below comes from the Census of Employment and Wages, a full nationwide census of wages by industry compiled from tax filings by the Bureau of Labor and Statistics.  It doesn't include employer paid benefits, like pensions.

In the private sector, the average job in California pays 13.6% more than the average job in the U.S.  That is mostly driven by the huge salaries in the state's tech and entertainment industries, wages are pretty equal to the U.S. for most ordinary jobs.

State government jobs in California pay an average of 26.5% more than the U.S. state government average.  Within local government, there are really interesting differences across sectors.

Local government education (K-14 schools) average wages are 10.7% higher in California than the U.S. average.  Teachers are about the only public workers in California whose salaries are in line with national norms and the local private sector.  Except California has some of the highest student-teacher ratios in the country.  School funding in CA is pathetic, and a serious long-run economic problem.  The average public utility salary in California is almost double the average public school salary.  You don't see that level of disparity in the rest of the U.S., and it is these kind of cost differences and spending priorities that are hurting the state's long-run competitiveness.

Other than teachers, California local government workers make enormous salaries compared to their national counterparts.  While the high salaries of police and firefighters are well-known, the premiums earned in the public water sector in California are even higher.

Local government safety and utility workers in California both earn wages that are 37% higher than the U.S. average.  If you drill down to water utilities (NAICS code 22131), the wage premium paid to public California water agency employees baloons to 44% more than the U.S. average.  California skews the U.S. average higher too, so if you  take California out of the U.S. data and compare us to the other 49 states, the gap rises to around 60%.

That's right, local water agencies in California are paying higher wages relative to national norms than the state's notoriously well-compensated police and firefighters.   By many accounts, the Metropolitan Water District pays the highest wages and is driving the statewide wage inflation.

Some think the solution to the State Water Project employee retention problem is for it to break away from DWR/state, and become more like Metropolitan.  Looking at the wage data, one wonders whether we should be looking equally at solutions that focus on controlling local water utility costs/wages rather than increasing the costs/wages of the state water project.  Rather than making the SWP more like Metropolitan and independent from the state, maybe we need to bring Metropolitan under the control of the state legislature. The Legislative Analysts Office (LAO) and others have been arguing for years to bring DWR more under the purview of the legislature, not less.

Even if there is no action, there could be some ratepayer revolts brewing for the local water agencies that put downward pressure on the salary gap and indirectly help DWR's retention problem.

Postscript 1:  Some links   if you want to look up the wage data for yourself.

Postscript 2:  New story in the LA Times about salaries at one of the largest local water utilities becoming a major political issue.  Salaries rising sharply as their customers incomes fall, and the union is financially backing one of the mayoral candidates and asking for more raises.,0,1472728.story

Postscript 3: I see Jon Ortiz wrote about this issue in today's Sac Bee.  Despite what I wrote above, I agree that their is some logic in transferring the State Water Project to the contractors, it might help with this employee retention issue and eliminate some of the conflicting incentives and mission for DWR.  Nevertheless, I think this discussion would be improved with some discussion of trends in local water agency salaries and costs and whether this is a temporary or long-term phenomena.  The economics of these local water agencies is changing, and they are going to have increasing conflicts with ratepayers as they try to push through hefty rate increases in the coming years, and it is a safe bet that these salaries will become an increasing issue with ratepayers and harder to justify to their boards.  Some of the current salary gap reflects an unsustainable trend in California local water agency salaries that in many cases kept rising through the recession while other public and private workers saw their salaries decline.  Police and fire compensation is under pressure due to a local government financial crisis that has yet to hit water agencies in the same way... yet.  Nothing like the bond debt for a $15 billion Delta tunnel project that doesn't yield any new water supply to bring on a future financial crisis for some of these local water agencies.

1 comment:

  1. Gov. Hiram Johnson said in 1910, "We have to control the utilities or else the utilities will control us."
    Nothing's changed!
    Burt Wilson