Why California is Bankrupt

Over the past year several attempts have been made here to evaluate just how much public sector employees make in total compensation. The most comprehensive of these was “Public Employee Compensation,” published on Oct. 24th, 2010. In that post, which as of this writing has attracted 44 comments from very informed readers, it appears fairly well-settled that the average total compensation for a state or local worker in California is about $100K per year, and the average total compensation for a private sector worker in California is slightly under $60K per year.

This data comes with a lot of caveats, two of which are worth highlighting, (1) total compensation is based on putting a value on current funding requirements for future retirement benefits, including pensions and health insurance, using a conservative inflation-adjusted 3.0% return to retirement benefit funds; currently, for example, CalPERS uses an after-inflation return projection of 4.75%, and (2) a true apples-to-apples comparison of public sector compensation to private sector compensation should normalize for the average skill sets that characterize the workforce in each sector. Advocates for retaining the higher rates of average compensation to the public sector argue, for example, that on average, public sector workers have higher average educational attainments. There is clearly a degree of truth to this argument. Another argument frequently heard is that public safety employment entails personal risk that doesn’t accrue to jobs in the private sector, and this too has validity. The real question is how much […] Read More