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A vital Anchorage service with some significant employee costs/AFD Facebook

The high cost of doing government business in Alaska was outlined Wednesday in a report from the Alaska Policy Forum that showed nearly three-quarters of Anchorage Municipal employees are compensated to the tune of $100,000 or more.

The figure is not what employees see in pay, according to forum executive directory Bethany Marcum, but what they cost the municipality.

On average, she said, about 30 percent of an employee’s cost is tied up in benefits with health insurance costs now eating a big share of that.

The average, 2017 salary and benefits package for a  municipal employee came to  $128,162, but the average is weighted by the 412 of nearly 3,000 full-time employees who make more money than Mayor Ethan Berkowitz at $185,570 per year.

The muni’s highest cost full-time employee was a firefighter who collected some back pay to push his wage and benefit compensation to $701,476 on the year, according to the study; the second highest paid employee, a senior patrol officer with the Anchorage Police Department, cost $450,304.

The average $128,162 compensation package would yield a wage of about $89,600 per year. The median wage for working men in Alaska is $55,752, but that drops to $43,455 for women, according to the national Bureau of Labor Statistics. 

But there are wide regional variations in pay and even bigger differences between job categories for both men and women. The Alaska Department of Labor also notes a high premium paid Alaska workers with college educations.

The median wage for men with bachelor’s degrees is $85,602, according to the state agency.

Too much; too little?

The Policy Forum report comes at a time when Alaska is struggling through a recession and the question of “right sizing” government is a hot topic. An economy long lifted by oil wealth began hurdling back to earth when global oil prices started falling early in this decade.

The economy continues to slide, but the Alaska Department of Labor hints of improvement. It forecasts a 2018 job loss of only a half percent, way better than the 1.9 percent drop in 2016 and the 1.1 percent drop last year.

Meanwhile, a  February report from the Institute of Social and Economic Research at the University of Alaska says the state, which thousands have fled, has managed to successfully do some downsizing, although budgets remain large.

“Alaska’s 2015 state and local government spending per person – for all types of spending – was more than twice the U.S. average, and significantly more than spending in two other oil-producing states” – Wyoming and North Dakota, that report notes.

But it adds that Alaska spending in 2015 was inflated by the cash payments government made to residents in the form of Permanent Fund Dividends (PFDs) and to oil companies in the form of oil-tax credits to encourage them to keep drilling for new oil.

Remove those expenses from the equation, the report says, and Alaska is closer to Wyoming and North Dakota in terms of per capita state spending, and if the higher cost of living is added to the equation, “Alaska’s 2015 state and local spending per person was about 50 percent above the U.S. average, and below Wyoming’s.”

In the latter scenario, Alaska spending on state and local government at a cost of $12,733 per person slots in almost exactly halfway between Wyoming at $14,564 per person and North Dakota at $10,845.

Good or bad?

Whether this is where Alaskans want to be, or should be is, at the heart of budget debates going on at both state and local levels. Anchorage, like other Alaska communities, has long benefited from the state’s oil wealth, but it is being forced to do more to support itself as oil revenues decline.

Once the municipality enjoyed almost $15 million per year in revenue sharing. That’s down to less than $8 million for fiscal year 2018 and projected to continue declining. As state funding drops, the burden of paying for local government falls more and more on municipal property owners who shoulder the burden in the form of property taxes.

Since fiscal year 2013, the ISER report says, the state has cut the capital budget by nearly $2 billion. The capital budget pays for construction of roads, airports, state buildings and other types of infrastructure.

“State agencies have also seen cuts of several hundred million dollars, and the state has cut UGF (unrestricted general fund) spending for tax credits to oil companies and special contributions to employee retirement funds,” according to the ISER report.

A 2016 ISER study found that state and public sector employees earned about 8 percent less than similar private sector employees, but when benefits were factored into the equation compensation was near equal. 

“There is no consistent evidence that state and local government employees are overcompensated,” the study concluded.

That has not helped Alaska avoid a budget crisis. Despite cuts at the state level, the state budget has come up about $3 billion per year short, and the state has been forced to cover the shortfall with savings which are just about drained. The situation has improved somewhat with global oil prices on the rise since July, but the state is still expected to be more than $2 billion short this year based on a March forecast of an average price of oil at $61 per barrel.

Future prices are  uncertain. Crude climbed above $70 earlier in the week only to fall back. Tensions in the Mideast are putting upward pressure on prices; rising U.S. crude oil production is putting on downward pressure.

“The recent rally in oil prices might have taken some by surprise as the underlying fundamental picture does not justify Brent being close to $70/bbl. This view is based on the simple fact that non-OPEC oil supply growth will trump the increase in global oil demand this year,” PVM Oil Associates analyst Tamas Varga told the Reuters, the news service. 

Problem for Alaskans

Oil prices are vital to Alaska because, as the ISER report notes, the unrestricted general fund is the part of the budget “that pays for general government services, and it’s been funded almost entirely by oil revenues since the 1980s—so that’s where the budget deficit is.”

Legislators in Juneau are still fighting over what to do about the budget. Some want to tax Alaskans, some don’t. Some want to use part of the Permanent Fund to cover the gap, which would reduce the PFD; some don’t.

The House of Representatives, which wants to increase the size of the state budget despite the deficit, voted Monday to give Alaskans a full $2,700 dividend this year. 

Gov. Bill Walker proposed raising revenues with a payroll tax and Permanent Fund earnings. Payroll and income taxes proposals have run into strong opposition. So, too, a statewide sales taxes proposed last year.

“In 2016, Alaskans paid less state tax per person than anyone—$514, compared with a U.S. average of $2,600,” the ISER report says. “In other oil states,Wyoming residents paid nearly $1,700 and North Dakota residents $2,700.”

The report did not include local or borough property taxes, or sales taxes, or property and sales taxes paid by most Alaskans. Economists generally agree any sort of new taxes, cuts to the PFD, or reductions in state spending will hurt the economy. But the state is quickly running out of savings to cover spending shortfalls.

Anchorage has also faced funding shortfalls. The Anchorage School Board is now struggling with how to cut about $13 million because of lack of revenue. 

How well compensated state and local government employees is all part of the equation. Marcum argues Alaskans have a responsibility to get involved in the discussion.

“Alaska has historically spent more per person than other states, and the persistent question—especially when the budget is in the red—is how much the state should spend,” ISER argues. “We don’t presume to answer that question, but this paper provides some context for discussions about the budget.”

At a statewide level, it suggests, “providing services costs more in a huge state with a harsh climate, few roads, and many small, isolated towns. Operating remote schools is one example. And health-care-costs, which are the highest in the U.S, also drive up spending for governments here.”

But a fundamental question, at some point, comes down to what Alaskans think public employees are worth.

Correction: Bethany Marcum’s last name was misspelled in an early version of this story.



31 replies »

  1. Here is my take on how those numbers reflect on, costs to taxpayers, for those particular public employees.
    The values given are actual costs, of course, but they don’t really tell us anything about the salaries (with benefits) that are presently paid to a new hire. Further, due to a few unusual cases that involve back pay, they also don’t tell us anything about average salaries either. Also, and I’m assuming here, since State of Alaska has revised its retirement program at least four times, since those Oil Pipeline days, its likely that municipality of Anchorage has done something similar. Thus, any particular job position could be staffed with one of (say) four different benefit packages associated with it with the later packages being lower than than the first (especially). Of note here, as those earlier employees retire, they would be replaced with those with later packages resulting in lower funding for that particular position. And, of course, that individual would continue to draw his/her retirement benefits until say death, still costing something to taxpayers but they wouldn’t be showing up on the above listings of employees.
    As for the reasoning for these changes (lowering) to those retirement packages, here is how it was explained, to me (for State retirements and most likely the same reasonings hold for Alaska municipalities): In the 70s when construction for TAPS, the enormous salaries that were paid, cause significant issues for other employers (State included). There was the need to keep good employees but there wasn’t money available, at the time, to be able to increase salaries so the State (and unions) negotiated a benefits package that didn’t result in an immediate need for the money that they didn’t, as yet, have. Those Tier 1 employees, for State, have most all retired as of now but there just could be a few still hanging around. And the remaining employees are spread out among the other Tiers resulting in several different layers of costs to municipalities and State of Alaska.
    Alaska needed to keep its employees and chose a method than has needed, changing over the years, but I have no reason to believe that present costs (to taxpayers) are skewed by ISER, especially.
    Certainly health-care costs have driven that health insurance cost higher, to the extent that many employers have dropped it, if possible, but those costs remain a significant one for all public employees (even the Feds.). I suspect that few municipal employees have opted for Obama Care and accept their insurance program but I do know of one State employee that had kept Obama Care, due to a large subsidy paid on it.

    • Never assume. Certainly what you describe has happened on the state level. In some cases, it has happened to the extent the state sometimes can’t keep some good people. I’m not sure the MOA has kept pace with the state rollbacks on tiers, however.
      And then there is the issue of people getting paid more than the mayor. There are arguably people who should be paid more than the mayor. The questions would seem to be how many, and should there be a cap on how much more? Or should there be a cap on both?

      • Some good advice, Craig.
        However, i’ve no reason to think otherwise. For all we know MOA has even more than kept pace with State benefits. Most likely they are relatively on par with each other, otherwise someone’s negotiators have dropped the ball IMO.
        More than a few years ago I knew a local who made more than the Governor, due to overtime, and it made quite a stink. I was impressed with the lineman (seasonal) that made I think it was $185k. Nice work if you can get it.
        It pays to have certain skills, it seems.

    • Bill,
      your point is very relevant (the IBEW) is also Union, just like the Fire and Police in Anc.
      These “lifers” in their chosen trades may “have the skills to pay the bills”, but what we are seeing on a nation level is these over compensated positions that less than 5 percent of the population enjoys are draining the budget.
      Their combined fat pensions are causing a national budget crisis throughout the states.
      And like other Muni employees, M.L.&P. Linemen are city employees.
      Why should 95 percent of the population pay for exorbitant salaries and benifits for a slect few?
      This imbalanced earnings only further drains other departments like “Social Service” or “Parks and Rec” or “Education”…budgets that could benifit a larger population of taxpayers, instead of a few loyal union career folks that pay into the system which lobbies for more and more money each contract renewal.

      • My question here Steve, is do you think it would make any difference if the electric co. were held privately? Juneau’s AEL&P is held privately by Avista that is in the process of being bought by a Canadian co. but I suspect that their “linemen” are compensated similarly to MOA linemen.
        They (AEL&P) are a pretty typical regulated utility IMO and while you may feel that their employees are “over compensated,” what is your reasoning (other than you don’t like unions)?

      • Bill,
        It is not so much my dislike for Unions, but more the goal of a balanced budget (especially in Juneau) which drives my concern.
        Yes, as we see utilities privatize throughout the state, this will help as younger workers reach retirement age.

      • It escapes me how a municipal run utility going private could possibly result in a balanced budget (whatever that means) in Juneau.
        You evidently expect said privatized utility to result in lower utility rates? lower salaries to their professional employees (engineers and linemen)? I know a bit about Doyon’s taking over a few Federal utilities some years ago and they contracted much of that professional work that may/may not have ended up in any cost savings to the feds. And I know AEL&P houses its own professionals, rather than contract that work out.
        You evidently expect some jobs available from privatizing but I suspect you are not talking about electrical engineers, linemen or even electricians. Janitors??

  2. Awesome info ! Thanks for getting info out there ! How can a cop get almost .5 mill? Seems out of whack . Did he get injured? Seems wages are unreasonably variable in this state . My brother is a medic in Anchorage. Some how he works under a subcontractor for some emergency medical company. His hours are terrible 24 hour shift aprx . his hourly wages are low so he only makes about 200 per day . Seems poor compensation for the effort. How on earth did those specific cops and firefighters in your article earn so much per year ?

    • Ramey,
      Interesting point.
      In PA my job as a city paramedic fell under “health and social services ” budget.
      The only union that I could even “buy” into was the street sweeper union.
      The fire guys would not even speak to us on calls….they just relayed through “dispatch”.
      The cops treated us well.
      There is a weird dichotomy in place today which is self serving to the unions and bankers who have created it.

    • The firefighter and at least the top to police officers on the payroll list did not make that money in one year. The totals included legal settlements, so in no way represent what they are actually paid or typically cost on a year, it was just what they happened to cost that particular year due to when their case was settled.

  3. Craig,
    Like many of your reports,
    It causes me to “dig deeper” into the issue…
    Like why when Anchorage is faced with problems like homicides, rapes and opiate epidemics is their budget so disproportionate towards fire and PD?
    100 million a year to APD.
    100 million a year to AFD.
    And Only…
    11 million a year for Health and Social Services for the entire population of the city.
    It seems the Unions have negotiated more money than they are worth in my opinion.
    And I was a non union city medic for nearly a decade back East.
    Without increasing the budget for Health and Social Services, much of the diagnosed mental health illnesses will go untreated in the majority of citizens.
    This is why Anchorage has an epidemic of Heroin, Fentanyl, Theft, Robbery and Violence.
    Luckily for residents, the police and fire will still show up after the crimes are committed and clean up the mess.

  4. “Public employees in Aaska are not over-compensated”. So says the ISER, a group of public employees the state does not need and should not be funding. Oh the irony.

    • It’s hard to believe their studies on public employee compensation, not just for the simple fact that the authors of the study have a vested interest in the outcome of the study, but because their results are always at odds with every other study about public sector pay. Why are we paying public sector employees to study public sector pay anyways, isn’t that just further proof that the government hasn’t cut enough spending? Put another way, if we are paying somebody to give us a clearly skewed study we are spending too much money.

      • We agree that the objectivity of the ISER study may be skewed to begin with.

      • Not to nitpick here, but can any of you give some examples of this “skewed” study??

        I realize that you don’t like their conclusions-what did they skew?

      • Bill,

        Some of us have jobs and can’t comment all day on Craig’s writing, so I apologize greatly and with much humility for not getting back to you in the time-frame you deem sufficient.

        Did you read the article? Take a look at the 5th paragraph under “Good or bad?” it’s a link to the ISER study. Also in the very first sentence of this piece you can click on the words “report from the Alaska Policy Forum” and it will hyperlink you to that study/report. It doesn’t take a well paid public employee to figure out that the scales of the ISER study are skewed to favor the well paid public employee conducting the study on how well paid public employees are, in any other form it would be referred to as a conflict of interest.

      • Thank you Steve-O and I did read both studies. I don’t have a problem with you or anyone else suggesting there could be a conflict of interest. What I did ask was what is the skew? You haven’t answered it, either IMO.
        Do you think that Anchorage employees are overpaid, relative to other public employees? And show your work. Like I said, talk is cheap!

    • Their wage and benefits while working may be roughly the same, but due to the retirement and healthcare benefits that extend after employment, their lifetime cost to taxpayers is far higher, and, as a multitude of states are finding out, unsustainably so.

      I don’t care that a guy makes over a hundred grand if the job is more or less worth that. I care that he is still going to be getting paid a portion of that _out of my pocket_ after he stops working.

      That’s the fundamental problem with how we compensate public employees, it should be the same as the private sector, you earn your money while you are working and you invest for your own retirement after.

      • This study and article are having to do with Anchorage Municipal employees and not public employees (in general).
        Some public employees do get significant benefits upon retiring but do you know that is the case for all/some Municipal employees??
        It seems to me that you are attempting to compare apples to elephants, here.

      • Sounds like you (Steve) are wanting to change the subject, along with Mr. Craberry. The subject here is Anchorage Municipal employees and I don’t know the situation on their retirements/pensions, do you???
        What I do know is that State of Alaska public employees have been changing their retirements programs, over the years, from one of I think was called a defined retirement program to what is now a 401K type program. And I think their changes have gone from their lucrative package Tier 1 to what is now labeled Tier 4.
        I suspect that the Municipality of Los Anchorage has also done something similar to State of Alaska, but surely somebody out there does know.

  5. Craig, Please change the above reference to “Alaska Public Policy Forum” to “Alaska Policy Forum”. Thank you for the article. And Lance Roberts is correct in his comment–it is Bethany Marcum, not Bethany McKay. Thanks.

    • thanks, Lance. i know. late night screw up. i fixed it in the morning when i read the story live. the joys of working without editors. wish i’d been up at 4:34 a.m. hit me with an email next time. i check those first in the a.m.

    • David: see the note to Lance. i fixed both when i got up and read the story live. it was a late night. you’re obviously another early riser. if you see a type on in ANY story hit me with an email ASAP. working without a copy-editing net is tough. i appreciate all the help the cloud can provide.

  6. The High cost of Healthcare and Pharma is really hurting this country. We need much steeper regulations and price caps. The Lie that it will stifle research is BS.

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