One Out of Four:
Tackling state labor costs
July 14, 2010
The Problem
Illinois’s state budget is billions of dollars in the
hole, but that didn’t stop Illinois government
from handing out pay increases to 46,000 state
workers on July 1, 2010.1 Indeed, Governor Pat
Quinn has handed out 43 raises (averaging 11.4
percent to his staff) since he took the oath of
office.2 All areas of government spending—
Spotlight on Spending
including labor costs—must be carefully
reviewed for potential savings.
One out of every four dollars from
general funds is spent on public employee
compensation.
In fiscal year 2010, Illinois spent $26.3 billion
on regular appropriations from general
funds. Subtracting $400 million in unspent
appropriations and adding in $3.2 billion in
transfers out and $4 billion for the state’s
annual pension contribution (most of which
was borrowed), general fund spending comes in
around $33 billion.3 From this, $9.2 billion went
toward the salaries, benefits, and pensions of
state employees.
Without action, Illinois can expect labor costs
to increase. Employee headcount is up: Illinois’s
full time equivalent employee total rose from
53,227 in fiscal year 2009 to 55,497 in fiscal year
Graphic 1. Illinois State Employee
Compensation Costs from General
Funds, Fiscal Year 2010 ($ millions)
Personal Services & Fringe Benefits $5,209
Pension Contribution $4,052
Total $9,261
Source: 2011 State Budget Book
This is part 7 of the Illinois Policy Institute’s weekly Spotlight on Spending series, highlighting wasteful or inefficient
programs and spending with the goal of bringing more responsible spending and accountable government to Illinois. For
additional information on state spending, visit www.IllinoisOpenGov.org.
2010 (this number is expected to increase again
in 2011).4 Raises and cost of living adjustments
continue. Pension funding is growing rapidly:
Required pension contributions from the state
have grown 300 percent since fiscal year 2000.5
Health care costs are on the rise: The cost per
participant in the state’s group health insurance
program increased by 72 percent between fiscal
year 2003 and fiscal year 2011, going from
$3,735 to $6,449 per person (of which the state
covers most of the cost).6
Better controlling public employee
compensation costs will be key to ensuring
that other areas of government spending are
not disproportionately targeted for budget
balancing reductions, while also helping
taxpayers to avoid shouldering an even higher
tax burden.
Our Solution
Across the country, private businesses and
state and local governments—from Caterpillar7
to Sangamon County8 to the State of New
Jersey9—are taking steps to reduce payroll costs
in the face of acute and continuing economic
troubles. Illinois should follow their lead in
making sensible reductions.
Illinois policy makers have a variety of tools for
right-sizing the state’s labor costs, including:
• Reducing the number of full-time
equivalent jobs funded by the state;
• Addressing pay disparities between public
sector and private sector jobs;10
• Reforming pension benefits for current
employees’ future service;
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• Implementing pension funding reform
along the lines of the Pension Funding &
Fairness Act;11
• Pursuing consumer-driven health care
insurance options;
• Eliminating programs that benefit a
narrow group of workers at the expense
of taxpayers, such as the Upward Mobility
program;12
• Adopting the suggestions of a Sunshine
Reform Commission to eliminate
duplicative and ineffective programs;13
and
• Using a Council on Efficient Government
With one out to streamline state operations.14
of every four Why This Works
general fund The State of Illinois spends revenues on a
variety of areas, including direct programmatic
dollars going and grant outlays, transfers to other
government entities and funds, debt payback,
toward public and labor costs.
employee
With one out of every four general fund dollars
compensation, going toward public employee compensation,
solving the state’s budget crisis will necessarily
solving the involve tackling labor costs. Sealing off labor
state’s budget costs from deficit reduction measures would
place an unfair burden on other recipients of
crisis will government payments. The expectations of
necessarily state workers should be balanced with other
groups that rely on government spending,
involve including welfare beneficiaries, contractors,
service provides, and the state’s creditors, as
tackling labor well as the taxpayers who pay the bills.
costs. Right-sizing the state’s compensation costs
will help balance the budget, maintain funding
for core government services, and protect
overburdened taxpayers.
Endnotes
1 Kurt Erickson, “With cuts looming, state workers
to get raises,” Bloomington Pantagraph, June 29,
2010, http://www.pantagraph.com/news/state-and-
regional/illinois/article_1421027c-83c9-11df-ae8e-
001cc4c002e0.html.
2 Associated Press, “Gov. Quinn gives raises to
staff averaging 11.4 percent,” Chicago Sun Times,
July 6, 2010, http://www.suntimes.com/news/
politics/2469512,quinn-staff-raises-illinoi-070610.
article.
3 State of Illinois, FY 2011 Budget, http://www2.
illinois.gov/budget/Pages/default.aspx.
4 State of Illinois, FY 2011 Budget, http://www2.
illinois.gov/budget/Pages/default.aspx.
5 State of Illinois, FY 2011 Budget, http://www2.
illinois.gov/budget/Pages/default.aspx.
6 Commission on Government Forecasting and
Accountability, “FY 2011 Liabilities of the State
Employee’s Group Insurance Program,” March 16,
2010, http://www.ilga.gov/commission/cgfa2006/
Upload/fy2011stateemployees’groupinsurance.pdf.
7 Sue Kirchhoff and Del Jones, “Caterpillar to
cut white-collar pay up to 50%, offer buyouts,” USA
Today, December 23, 2008, http://www.usatoday.
com/money/industries/manufacturing/2008-12-22-
caterpillar-pay_N.htm.
8 Andy Van Meter, “County has met its budget
challenge in a responsible way,” State Journal-Register,
November 6, 2009, http://www.sj-r.com/opinions/
x1312016172/Andy-Van-Meter-County-has-met-its-
budget-challenge-in-responsible-way.
9 Claire Heininger, “Christie looks to privatize
motor vehicle inspections, other services,” State House
Bureau, July 9, 2010, http://www.northjersey.com/
news/politics/070910_Christie_looks_to_privatize_
motor_vehicle_inspections.html
10 See: Illinois Policy Institute, “The Disparity
Between Public Sector and Statewide Salaries,” June
2, 2010, http://www.illinoispolicy.org/news/article.
asp?ArticleSource=2634.
11 See: Illinois Policy Institute, “Mission Possible:
An Update to the Pension Funding & Fairness Act,”
June 9, 2010, http://www.illinoispolicy.org/news/
article.asp?ArticleSource=2678.
12 See: Illinois Policy Institute, “Upward Mobility
Program – Funding a Union Perk at Taxpayer
Expense,” June 16, 2010, http://www.illinoispolicy.
org/news/article.asp?ArticleSource=2742
13 See: Illinois Policy Institute, “Testimony on
Sunshine Commission Act,” Aprl 14, 2010,
http://www.illinoispolicy.org/news/article.
asp?ArticleSource=2519.
14 See: Illinois Policy Institute, “You Better
Shop Around!,” March 30, 2009, http://www.
illinoispolicy.org/news/article.asp?ArticleSource=879.