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Report finds the cost of providing government services should be reformed

The way public employees are compensated is increasing the cost of providing government services and should be reformed, according to a researcher from the Minnesota Taxpayers Association.

Aaron Twait presented the findings of a study that compared the compensation of public and private sector employees during a Willmar Lakes Area Chamber of Commerce policy committee meeting Friday in Willmar.

"This is not a public employee bashing exercise," said Twait, as a preface to his summary of the study, which was funded by the Minnesota Chamber of Commerce and NAIOP, the Minnesota Commercial Real Estate Development Association. But Twait said fringe benefits, like public pensions and health benefits that have "exploded" the past decade, need to be reformed.

He said public employee pay should be based on performance rather than years of service that involves steps and lanes.

Twait said the Taxpayers Association, a group that advocates for the "rational and efficient use of tax dollars" is also recommending elimination of comparable worth provisions, reforming the prevailing wage law and requiring additional transparency in how city and county governments report expenditures that would make it easier for citizens to see and understand where their tax money is going.

The reforms are needed, said Twait, if the state is to be a business player with global competitors like China and India.

Increasing government transparency will also ease the frustration of citizens and potentially avoid constitutional amendments, the California's Proposition 13, that limits property tax rates, which he said would be disastrous for Minnesota.

Kandiyohi County Commissioner Harlan Madsen said local elected officials are careful watchdogs of the budget and there are no hidden costs. He objected to another mandate that would require more staff time and money to document every nickel-and-dime purchase the county makes.

In his summary of the study, which did not include teachers, Twait said there's a "double imbalance" in private and public employees.

When it comes to maintenance workers, cooks or engineering technicians, Minnesota's public employees earn wages that are 23 to 39 percent higher than private sector employees.

But other state employees, like attorneys, accountants and management analysts make 14 to 50 percent less than private sector employees.

That means that the state's highly educated and trained employees are quick to leave to seek higher-paying jobs in the private sectors.

"Is this the system we want to have in Minnesota," Twait asked.

On the other side, Twait said the state doesn't want to participate in the "race to the bottom" to decrease public compensation, but increased efficiencies need to be implemented.

Twait concluded that the "disparities" between public and private sector pay are "symptomatic of more fundamental problems in the design of public sector compensation systems" and is just one set of needed reforms.

The role of unions, which Twait said are "effective advocates for public employees" that may not always be in the public interest, may not be sustainable in the future.

He said unions can be involved with making changes that will be good for employees and taxpayers, or they can wait until somebody tells them how it's going to be done - like Wisconsin.

The study also showed that Minnesota's state and local government workforce is "modest" compared to other states, ranking 31st in the number of employees based on the percentage of employees and overall population.

According to the study, Twait said public employees in Minnesota are paid better than most other states, ranking fifth for state employees and ninth for local employees, based on 2009 average wages and adjusted for the state's cost of living basis.

The "real basis" wage growth since 2001 in Minnesota increased 10.5 percent for state employees and 7 percent for local government workers, giving the state a 21st ranking and local government a rank of 30 compared to other states.

Fringe benefits increase about 46 percent from 2001-09 for both state and local governments, said Twait.