Guest Columns

HOLDEN: OUT OF CONTROL

Public sector attrition a “simple solution” to Colorado’s continuing budget woes

GUEST COLUMNIST

The University of Colorado increased tuition 9 percent earlier this year. University officials seem to say their numerous revenue sources — student tuition, state funding, foundations, corporate and federal grants, alumni contributions and more — are not enough. Colorado higher education is an easy target for budget cutting, but increased tuition will result in fewer students able to afford college.

It’s a small part of a larger problem.

Colorado’s latest comprehensive annual financial report (CAFR) provides credible, powerful financial information to indicate sources of Colorado budget woes. Probably the most significant yet controllable government expense is growth in personnel, their salaries, benefits, retirement and working perquisites.

Overall, the CAFR’s reported Colorado job numbers are quite revealing in terms both of the recent gubernatorial term, 2007-2010, and that combined with the preceding term.

While wealth-creating, tax revenue-generating private sector jobs increased only 1.7 percent from 2002 to 2010, net-wealth-consuming Colorado state government jobs increased 9.1 percent. Less money in, more money out. Total jobs increased 2.9 percent, while Colorado unemployment doubled from 3.8 percent to 7.7 percent. The ratio of private-to-government jobs dropped from 5.15 to 4.80.

To meet the rate of government job growth, 165,000 more private sector jobs would have been necessary. “Created government jobs,” however, increased 7,299 — 707 “classified” and, 6,644 “non-unclassified.”

For comparison, a more recent analysis from 2005 to 2010 showed total jobs grew by 1 percent — government up 6.9 percent, private down 0.2 percent, with 132,000 non-government jobs required to match government job growth.

In short, public sector growth is out of control.

The growth is divided between two categories of state employees. The CAFR defines classified employees as “those holding positions within the State Personnel System.” The other, non-classified employees “are excluded from the State Personnel System and are not subject to the rule-making authority of the State Personnel Director.”

“Non-classified positions are found primarily in the judicial branch, the legislative ranch, the Gogvernor’s cabinet and office staff, the Department of Law, the Department of Education, and as administrators and faculty in the Department of Higher Education.”

One can hold the Governor directly accountable for only about half the state employees, the lesser-growing “classified employee” category.

For the recent five-year period the number of classified employees grew 5.9 percent to 32,799, while their average monthly salaries rose 10.4 percent to $4,367. Classified combined state expense increased 16.9 percent. Non-classified employees grew more than three times greater, 20.1 percent, to 32,526, along with an average monthly salary increase of 16.4 percent, to $5,735. Their combined state expense rose 24.5 percent.

For perspective, during the eight years from 2002 to 2010, total classified employees grew 2.2 percent (average monthly salaries up 18 percent), their combined state expense up 20.6 percent. Non-classified jobs grew 11 times more, 25.7 percent (average monthly salaries up also 25.7 percent), their combined eight-year state expense up 57.9 percent.

Making appropriate calculations including salaries, plus benefits, retirement and perquisites of 40 percent, the State’s 65,325 total full-time equivalent employees cost Colorado taxpayers more than $5.5 billion in 2010.

Had Colorado (not “frozen” but) hired only half the employees during the eight-year period — 353 classified, 3,322 non-classified — the annual savings of the same numbers not hired, in 2010 alone would have totaled $346 million.

Obviously, excessive hiring has put a major squeeze on the budget and Colorado taxpayers. Had more executive leadership, organizational growth analysis, management discipline and control been exercised, these continuing budget problems could be controlled.

Lawmakers should investigate particularly how non-classified hirings are justified and install tight and multi-management-monitored hiring policies with highly visible and stringent overview. Similarly tighten up on classified hiring, and then institute the “simple solution” to get the budget back under control.

The “simple solution,” that hurts no one but helps everyone, is attrition. Do not replace a state employee who retires, is terminated, or accepts other employment. Begin now to utilize attrition and freeze net hiring until private sector job growth sizably exceeds that of the public sector.

Fred Holden is a senior fellow at the Independence Institute in Golden, and author of TOTAL Power of ONE in America.