The Oregon Legislature is planning a pay cut for public employees, as a big part of a package to restructure the deficits caused by the failure to fully fund the Public Employee Retirement System. Public positions already pay much less for the qualifications required than is true in the private sector. Compensation in the public sector only looks good if you don’t account for the fact that a high proportion of public-sector jobs require college and graduate degrees.
But public employees and PERS are the favored scapegoats of Oregon’s business lobbyists, who try to blame public workers and their unions for the long decline in the quality of our schools and public services. The corporate lobby wants to distract us from the dramatic plunge in their contributions to the state budget. Oregon’s business groups hide behind small businesses and cry poverty, though corporate profits are high – particularly after the 2016 federal tax cuts targeted at the top.
Public employees as a group already work for less than they could get elsewhere, in order to do work they value. That sacrifice for our community is ignored by Oregon’s business associations, and by much of our media. To divert attention from corporate welfare, the business “community” obscures our history of low public-sector pay and the failure to fully fund PERS. Never mentioning corporate responsibility for Oregon’s budget woes, they point to the obscene salaries and retirement benefits of football coaches and university presidents – as if public workers didn’t hate that squandering of public funds!
Corporate tax contributions hit bottom, hurt the state budget
The Oregon Center for Public Policy reported in January that “corporations in Oregon are on track to pay a smaller share of Oregon income taxes this budget period than at nearly any point in the past four decades.” Businesses pay less in state and local taxes in Oregon than in any other U.S. states except Oklahoma, according to the pro-business Anderson Economic Group.
Relative to the size of the state’s economy, businesses now pay less than half what they did in the mid-1970s. Worst of all, corporate income taxes provide less support to our schools and services than the Oregon lottery, which is widely understood as a tax on the poor. The affluent can gamble on the stock market, which pays off much better than the lottery.
FURTHER READING: Teachers demand stability for children; GOP senators balk at the investment (Director’s Desk)
Inadequate school budgets, low teacher pay lead to shortages and strikes
With class prep and grading, teachers work long hours though their compensation is far less than for people with comparable levels of education and experience who work in other fields, even after accounting for retirement and health benefits, as well as time off in the summer. The “penalty” being paid by public school teachers nationally hit 21 percent last year, according to a new report from the Economic Policy Institute. In Oregon, the gap is even wider, at 23 percent. For every $77 earned by Oregon’s teachers in a workweek, similarly qualified people in other occupations are paid $100. Over a lifetime, that adds up to hundreds of thousands of dollars.
Teaching has been devalued as “women’s work.” For a long time, teaching was one of the only occupations open to college-educated women; without other options women had no choice but to work for much less than men were paid. Teacher pay has remained low, even as women’s opportunities have expanded, resulting in growing alarm over teacher shortages.
Teachers are striking all over the country, demanding better support and lower class sizes for their students and schools, as well as salaries high enough to recruit and retain good teachers. In Oregon, we need to raise another $2 billion a year just to fund our Quality Education Model, and rebuild our schools. With the legislature poised to raise less than half that, Portland area teachers walked off the job May 8.
Underfunding the state retirement system left us in a hole
All over the country, legislatures have failed to budget enough to make good on contractual pension guarantees – going instead for the shorter-term goals that get them re-elected. Oregon’s claim that public pension investments could reliably earn 8% annually was a politically convenient dodge to invest much less than was needed. Financial advisers’ rule of thumb is to take an income of no more than 4% of your savings – even if cleverly invested – or risk eating into your assets and harming future earnings.
And if you’re trying to regularly come up with a higher than usual return, like 8%, you’ll be pushed toward riskier investments. Risky investments may seem fine during a boom, but will leave you in a deep hole during the recessions that are an absolute certainty in a market economy. In late 2007, PERS appeared to be more than 110% funded, but that was before the financial crash of 2008.
The state ‘pickup’ of employees’ retirement contributions – cheaper than raises
State employers started to “pick up” the 6% of pay that public employees used to contribute to the pension system in 1979, under Gov. Vic Atiyeh. It was a cheap way to try to keep salaries up with the high inflation of the era, shifting employee dollars from retirement contributions to take-home pay. Paying for retirement benefits cost the state less than paying higher salaries, which would also have increased payroll taxes like Social Security.
Bring back corporate responsibility for an educated labor force and infrastructure
Big business shouldn’t get away with avoiding responsibility to help pay for the schools, infrastructure and public safety that underpin their profits – particularly now that their federal taxes are so low. And scapegoating our hardworking, community-minded teachers as the source of our state’s inability to provide our kids the education they deserve is ugly and insulting. The big corporate players have never been wealthier; it’s time they stepped up.
Street Smart Economics is a periodic series written for Street Roots by professors emeriti in economics. Mary C. King is a professor emerita of economics, Portland State University.