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This Sunday, page 5B of the Review Journal was a full-page ad, paid for by a consortium of local government unions apparently stung by the growing public awareness of how they pillage taxpayers. Bear in mind – no actual government workers were involved in the ad, just the government unions.

The five highest-paid Chamber employees are compared with two high-paid (not highest) government employees and three average pay figures.

The ad pitches more money and benefits for government union members by suggesting members compare poorly with “the private sector.” The Las Vegas Chamber of Commerce, of course, is not a private sector organization. It is a 501(c) non-profit organization which, in addition to having membership revenue from private businesses, has a bunch of membership revenue from local government entities. The Chamber is partly government-funded.

Still, the Las Vegas Chamber of Commerce is subject to most of the same payroll taxes as a private entity. Combined with retirement benefit differences, these factors drive up government compensation well beyond the Chamber.

Let’s take the Jill Flores – Greg Gammon comparison as an illustrative example.

First, reduce Jill Flores’ pay by $6,572. That’s how much the Chamber takes out of Jill’s paycheck to send to Washington for social security. Greg’s paycheck is not reduced.

Next, reduce Jill Flores’ pay by another $2,500, because that’s how much Jill gets paid for the approximately four holidays every year that she has to work because her organization is open, while Greg gets them off (or, more likely, gets double pay for working them. Government gets more days off.

(By the way, this same phenomenon causes the teacher-private sector comparison to be way off – never mind the silly comparison between a teacher and a successful salesperson. The $49,000 per year in the union ad immediately goes to $62,400 per year because teachers have three months off each summer, in addition to many of the other adjustments outlined in this article).

As a career fireman, Greg has long enjoyed a work schedule that involves being on duty for 24-hours followed by two days off duty. It’s like a weekend every other day. And, like most firemen, Greg has probably spent his two weekends off per week starting and growing a thriving small business. Jill, on the other hand, has worked at least four ten-hour days per week as a Chamber executive. Sometimes five, and sometimes she works on her weekends, for no additional compensation. You can find such dedication in government, but it’s much rarer. And it doesn’t easily allow starting and growing a side business.

But those qualitative comparisons are tough to assign dollar value to. So let’s get back to the union’s compensation comparison. After the two adjustments to Jill’s compensation, she’s at $153,844, 2.6% higher than Greg’s $149,940.

Now let’s suppose that they’re both 50 years old, have 20 years each on the job, and they both retire next week.

Here’s where the big difference happens. Because Jill is 50, she won’t collect any social security for another 15 years – assuming Congress doesn’t raise the age in an attempt to cover its’ bankruptcy of the system. And she will have to find her own health insurance. Meanwhile, Greg will immediately start collecting a retirement income of $75,000 per year from his government retirement plan. He will be allowed to continue in the government health insurance program, and may be eligible for a premium subsidy as well.

When Jill reaches the age where she can get social security income, it’ll likely be around $25,000 per year, a third of Greg’s.

This disparity is because, during their working years, Jill’s employer paid much less money for her retirement than Greg’s employer. In their final year, Jill’s employer paid around $6,500 into social security on her behalf, while Greg’s employer paid around $30,000 into PERS on his behalf. If we factor those dollars into each of their respective compensations, now Jill is close to $160,000 and Greg is close to $180,000.

There’s more.

Let’s say in the year 2019, both Jill and Greg’s retirements are interrupted by an attack of angina, and each must have an artery stent installed to live a more comfortable life. Regardless of what insurance either of them have, Nevada state law says that any police or fire retiree has lifelong 100% coverage for all ailments of the heart or lung, so taxpayers will pay for Greg’s operation.

This difference in benefit is funded by taxpayers putting additional dollars into a long-term savings account – something the Chamber does not do for Jill. For purposes of our comparison, this increases Greg’s compensation even further.

The union’s ad in today’s paper is as deceptive as the union coalition has ever been – and that includes all the ads they funded saying state Senator Joe Heck wanted people to get cancer and state Senator Bob Beers wanted teachers to shoot children.

Me, well, I’m now a volunteer. But a game volunteer.

Just to catch everyone up, Parker wrote a column for the Las Vegas Sun here, which I believe was deceptive by quoting some parts, but leaving out the most important parts, of studies by such esteemed sources as the US Census Bureau and the Tax Foundation, about Nevada’s taxing and spending. When all parts of the Census and Tax Foundation studies are considered, Nevada is revealed, contrary to Parker’s pained portrait, as a state with midline state and local government funding, though we spend those dollars ineffectively. Parker contends that Nevada’s state and local government is “the smallest.”

I posted a rebuttal to Dr. Parker’s opinion the same day Parker’s article was published in the Sun. Ten days later, I wrote about the interesting reaction to Dr. Parker’s and my debate here.

This weekend, Parker posted his counter-rebuttal on his own website: linked, and reproduced here, with my endnotes added:

A Reply to Former Senator Bob Beers About State Spending

I want to thank former Senator Beers for his reply to my column in the Las Vegas Sun, which was printed in the Las Vegas Review Journal recently. It is an important issue, and I appreciate him keeping it before the public so we can clear up apparent areas of confusion, even if he mistakenly thinks I was wrong or reporting selectively. I insist, emphatically, that I was telling it like it is.[A]

Senator Beers says I did not give details on my sources, but newspapers appreciate brevity. Had he asked me, I would have gladly shared my sources and calculations, and like any professor I appreciate people checking my facts. I am easy to find online for anyone with access to a search engine, especially if you spell my name correctly, and I have made the data available on my website.[B]

Senator Beers reports that state revenue was higher than the number I reported for expenditures.[C] We were near the peak of the housing bubble at the time, and revenues were unusually high. Rather than saving the surplus for a rainy day, Governor Guinn and the Legislature chose to give most Nevadans a pretty significant tax rebate. I said I was reporting expenditures, which were more representative of the actual state budget than revenues.[D]

Senator Beers also reports that the data he found did not exactly match what I reported. In the month between when I downloaded the data and the column was published, it seems a new Statistical Abstract came out. I have checked these new data, and include them, with updated calculations, on my website. [B] Nothing significant changed. As in prior years, Nevada still ranked 50th in the nation in the relative number of state employees, total state and local government employees, and employees in higher education, as well as 49th in the nation in K-12 employees.

While Senator Beers admitted that I might be right about the relative number of employees in state and its higher education system, he argues instead that we are overpaid. He reports that government employees make significantly more in Nevada than the national average, but the data he cites – Table 448, column M – only reports earnings for local government employees[E], which are three-quarters of the total. That is relevant for county commissions and city councils, not the state legislature[F]. For the quarter of employees working for the state, average earnings are equal to the national average even though Nevada’s cost of living is higher than average.[B]

Regarding how our state and university benefits compare to those of other states, I don’t yet have a consistent set of data on this, but I will look for one. If Senator Beers has one, I would appreciate him sharing it with me. I do know that we compete in a national marketplace, and our benefits are reasonably competitive but not any more than that[B]. You should not compare our benefits against those in casinos[G], but against other states and other universities.

On his web posting, Senator Beers said that I think we should “further expand government.” I don’t know how he reads that in what I wrote. I certainly doubt that my former economics students – there must be several thousand working in Nevada by now – would say that I advocate big government, and I am quite critical of excessive government. Instead, I wrote that we should not make the smallest state government[H] in the country even smaller, for it would damage the future of the universities and the state. These are not equivalent statements[I].

Finally, I apologize if I offended any Nevadans who earned their degrees online or at small private colleges when I said Nevada only had two universities.[J] I certainly support the desire of anyone to improve themselves through education, but I also assume anyone who has graduated from UNR, UNLV, or any other similar university knows that the institutions are not comparable. The fact that Senator Beers suggests that they are causes me some concern. Is that his objective for our state universities?

My notes to Dr. Parker’s post…

[A] Keynes was just as emphatic that it’s cool to foist irresponsible levels of government debt off on future generations. He was wrong, too. Your enthusiasm does not make you right – in fact, your undeniable self-interest makes you suspect.

[B] Then reference your work. I can understand not doing it in the Las Vegas Sun – it’s chronic on their opinion pages. But here, on your own webpage, it’s just too easy to link to your work. For you to not do so is telling.

[C] Actually, I don’t recall making that argument. Are you creating a paper tiger? I did lay out a series of calculations using Census Data, which you are apparently not disagreeing with in any detailed manner, that Nevada’s per-capita state-and-local government spending at about the middle of the 50 states.

[D] This seems like introducing a bushel of bananas into an argument sorting out apples and oranges. Worse, it sounds like you’re admitting to having included the 2005 tax rebate (where state government apologetically gave taxpayers back some of what they’d been overcharged) as an expenditure? The proper accounting treatment would be to not include those funds in either revenues or expenditures, but certainly never as an expenditure.

[E] Professor Parker is correct. My initial post was incorrect. Column M shows local government employee wages, where we rank sixth. Column J (here’s the data table) shows state government employees separately, where we rank sixteenth. Both rankings are above the national average. My original argument, that Nevada’s government employee benefits are much richer than average, which would lift our rankings compared to other states, remains subject to further study.

Remember, though, that Professor Parker’s original essay argued that Nevada’s low number of government employees per thousand citizens proved that Nevada’s citizens were chintzy in funding goverment. I argued that it was deceptive to “prove his case” with that tiny part of the Statistical Abstract of the United States, especially when the rest of it showed Nevada’s above-average government wages.

[F] Incorrect. This is absolutely the Legislature’s concern. NRS 288 (like all state laws, this exists soley by legislative authorization) allows government unions in Clark and Washoe Counties to prohibit city councils and county commissions from exercising common sense. State government wages are set directly by the Legislature. Both are clearly the Legislature’s doing, and their rehabilitation are clearly the Legislature’s responsibility.

[G] I wasn’t comparing them to those in casinos. I was comparing them to those throughout the private sector. Employment benefits in casinos are actually above average (though not up to government levels).

[H] This is how we got engaged in this debate in the first place. All evidence points to Nevada having a per-capita mid-sized state-and-local (or just state) government, unless you deceptively quote tiny parts of studies, as you did in your original Sun article. It’s not a very academic term, but around Nevada’s dinner tables, your case is what we call “bullshit”. I am floored that you are not ashamed to make it.

[I] Sorry, Dr. Parker. You cannot get away with saying that your opposition to making state-and-local government smaller (reflecting the economic shrinkage in our job market, incomes and Nevada at large) does not equate to further expanding government. It does. You sound like a politician, running for office. Campaign season is over.

[J] More incorrect. Remember, you said there are no private universities in Nevada. My point was not to try to compare them to you, it was to point out your very large factual error. But while we’re on the topic, Touro University’s medical school is larger than the University of Nevada. Not counting their medical students on campuses in other states. Is that what you mean by “small private college?”

The first are step increases, which are the subject of union bargaining and thus can vary from the 4.5% that Lawrence describes.

The second are COLAs, an acronym for Cost of Living Adjustment.

These two pay hike types, as Lawrence notes, are awarded regardless of job performance, and typically will cause starting pay to triple over the first ten years of a government employee’s term of employment.

The third pay type takes place anytime an employee’s duties or responsibilities are increased. Public employment is structured with a matrix that assigns higher “base” pay to more responsible jobs. Thus, by maturing within the organization, employees can increase their pay prior to the application of step and COLA increases.

The Nevada Spending and Government Efficiency Commission said in a new report that the salaries paid to state workers are similar to equivalent positions in the private sector. Commission Chairman Bruce James said, however, that the insurance and retirement benefits offered to state employees “exceeded the Nevada private sector and most other states by a wide margin.”

Parker’s column essentially says Nevada’s people have been terribly chinzy when it comes to funding government, particularly as compared to other states. It would be a mistake, he implies, to not raise taxes and further expand government.

As an economist, government or not, Parker should be embarrassed by his intellectual dishonesty.

He writes:

According to the most recent version of the Statistical Abstract of the United States, only 5.5 percent of Nevadans work for the state or local governments, the lowest share in the 50 states by far.

This is probably a true statement, although the Statistical Abstract of the United States is very large, and Parker should offer a more detailed attribution. However, it presents only one half of what’s wrong with Nevada’s structure of government.

The very same authority (the Statistical Abstract of the United States) also says our government employees are paid the six highest of all states. Here is the Statistical Abstract of the United States. Table 448 – here is a direct link – column M details average earnings in 2006, the most recent year reported. [Subsequent correction: column M details local government only. Column J details state government, where Nevada ranks sixteenth, still above the national average.]

These wage numbers – in which Nevada ranks the sixth highest state – do not reflect Nevada’s exceptionally generous benefits package.

All of Nevada’s government employees participate in perhaps the only “defined benefit” retirement plan found in the entire state, public or private sector. And for local government and school employees in Clark and Washoe County  – well over half of all state and local government employees in Nevada – taxpayers foot the entire bill.

To put it in terms that most taxpayers can understand, where we lose 6.2% of our paycheck to fund social security, our government employees do not. So, for a given wage, they take home a bigger paycheck. (The rest of Nevada government employees, by the way, fund half of their own retirement plans out of their paychecks but it’s over 10% rather than 6.2% – on the other hand, they get alot more retirement income and retire much younger than the rest of us.)

If you factor in how government retirement works in Nevada compared to the five states that outrank us in average government pay, we’d likely rank higher than sixth.

Nevada’s “structural deficit” lies in giving government unions too much power, which has resulted in our having the fewest government employees per thousand residents (dutifully reported by Parker) who are paid at or near the top of America’s government pay scale (incredibly omitted by Parker).

Parker next rambles down the taxes-per-capita path without attributing his statistics. For example:

Adding in spending by local governments, Nevada ranks 48th in government spending as a share of income.

Since the Statistical Abstract of the United States does not explicitly calculate this, he owes us a peek at the bar napkin he scratched his out on.

Here’s mine:

Statistical Abstract of the United States, Table 424, column B has total revenue by state for 2005. Table 12, column AK, has 2005 population estimates, which appear to be overstated for Nevada. Nevertheless, you can put the two of those tables together to calculate tax revenue per person. Nevada ranks 29th, at $7,868 per person.

Since this clearly does not support the “chintzy Nevadans” refrain, and since Nevada’s historically modest government has not surprisingly produced a society with a robust economy, low poverty and high incomes, Parker had to track down average income levels. They’re here, in table 684, column M (unfortunately, this lists family median income by state for 2006, which is not quite average income for 2005, but it’s close).

And Nevada ranks 42nd, ahead of 8 states. Not 48th.

Parker finishes up with the now almost-legendary deception that:

The Tax Foundation reports that Nevada has the next-to-lowest tax burden in the nation, just slightly above Alaska. That ranking is roughly where we have been since the 1970s.

The Tax Foundation actually found that while we rank low on the taxes we assess on ourselves, we rank high on the taxes we assess from non-residents (tourists), and at the national median for total spending per capita. Once again, Parker selects a deceptively small subset of the available information to lead readers to an incorrect conclusion.

In case his subtle sins of omission are not enough, Parker finishes with a couple of whopping lies:

…there are also many things the private sector cannot efficiently provide. Like national defense, affordable and available public education is one of these.

and

Unlike most other states, Nevada has no private universities, so this is an important responsibility.

These are really the heart of the matter for Parker. As a government economist in Nevada, he’s been enjoying doubled cost-of-living raises for years (once for inflation and again from the NSHE “merit” program under which almost all professors get an extra COLA bump). And if we don’t raise taxes, he may not get either next year.

Of course the private sector can efficiently provide education. In Las Vegas, for example, Faith Lutheran‘s middle school tuition was $7,260 in 2006 including capital costs and debt service; that same year, Nevada public school funding was $7,345 not including capital costs and debt service.

And there are a growing number of private colleges in Nevada, including: Touro College, Sierra Nevada College, DeVry University, National University, ITT Technical Institute, University of Phoenix, Morrison University, University of Southern Nevada, with my apologies to the many more I don’t have time to list.

The “wicked profiteer” they work for finds revenue falling.

Why, their cruel taskmaster exploiter is even talking about avoiding layoffs by not giving them raises.

“We’ll sue,” their elected and well-paid leaders threaten.

Are there any dues-paying government union members who are not embarrassed by their union’s behavior? This isn’t turn-of-the-century labor action against selfish capitalists! This is modern, selfish labor action against struggling, taxpaying Nevada families, who are already not doing as well as government employees.

Clark County officials, led by Commission Chairman Rory Reid, met with leaders of the Service Employees International Union and the police and fire unions Thursday to deliver the grim news. Expenses are outpacing revenues, Reid said. Thus, current labor costs are simply unsustainable, he said.

The three unions represent 12,000 workers, and their leaders bristled.

“A meeting like we had has never been seen,” Reid said later. Prior to this week, reopening contracts has “never even been suggested as an option.”