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THE TAKE

For 3 Midwest governors, public employee compensation takes center stage

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By Dan Balz
Washington Post Staff Writer
Thursday, November 18, 2010; 6:40 PM

SAN DIEGO

Rick Snyder, the former Gateway executive who was just elected governor of Michigan, calls it the next big national issue, on a scale with health care in its importance to the economic vitality of the country. But unlike health care, this battle will be fought in the states, not in Washington.

Snyder is talking about public employee compensation. Like almost every governor in the country, Republican or Democrat, he has identified the issue as a priority in his strategy to deal with looming budgetary shortfalls and structural deficits that plague state governments. The changes governors will seek could produce pain for many state workers and their families and will generate strong resistance from powerful public employee unions.

Snyder is one of a trio of newly elected Republican governors in the industrial Midwest. (The others are Ohio's John Kasich and Wisconsin's Scott Walker.) Each will inherit a state government hemorrhaging dollars and a state economy that has suffered from long-term job loss, particularly in the manufacturing sector.

They will come into office in January after campaigns in which they promised to slash their budgets, to avoid raising taxes (and cut them where they can), and to revitalize economies that have proven stubbornly resistant to past economic development schemes. But even before they can implement their longer-term plans to boost their economies, they will have to address their budgets.

Asked where he will have to try to cut, Snyder quickly pointed to public employee compensation. "I view that as one of the toughest things I need to do as the next governor," he said Thursday morning over coffee at the Republican Governors Association meeting.

"You're talking about people and their livelihoods and their families. So it's a very serious topic. I want to do it working with them. But you have to ask two questions from a fiduciary point of view. What's comparable with the private sector, and what's financially affordable? And my view is I don't believe you can check either one of those boxes today. And if you can't check either of those boxes, we need to sit down and have a dialogue."

Wisconsin's Walker already has dealt with the issue as Milwaukee County executive, having inherited a pension and compensation scandal when he took over eight years ago. "I've taken on wage and benefit reforms," he said here on Wednesday. "We're going to have to do that [in Madison]."

The possible changes will affect everything from health-care coverage for state employees to pension contributions. Most Wisconsin state employees, Walker said, contribute nothing to their retirement plans. "We have to tackle legacy costs," he said. "Otherwise we end up like GM."

For some Republicans, the model is New Jersey Gov. Chris Christie (R), the blunt-talking leader who has taken a confrontational approach to budgetary issues in his state, to the delight of GOP activists across the country. Outgoing California Gov. Arnold Schwarzenegger (R) has negotiated some compensation changes with some unions in his state. Some Democratic governors, retiring Pennsylvania Gov. Edward G. Rendell among them, have begun to move on the issue.

In Snyder's estimation, however, what has taken place so far has only scratched the surface. "A lot of it is still to come," he said. "I'm not sure a lot of states have fully addressed this issue. Some are looking at teachers first."

The three Midwestern governors will tackle the issue with different styles. Snyder, a moderate Republican, has already named the outgoing Democratic speaker of the Michigan legislature as his state treasurer. He is a consensus-builder by personality.


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