New mayor must fix ABQ’s ‘out-of-whack’ city pay

Generous pay, benefits creating millions in unfunded liabilities

With the goal of better informing Albuquerque’s voters about key issues that will face the new mayor, the Rio Grande Foundation recently undertook a deep dive into how the city compensates its employees.

What we found was profoundly disturbing.

In New Mexico, just 8.2 percent of all workers are unionized. But 81.2 percent of Albuquerque’s non-seasonal employees are covered by collective bargaining agreements. Under the city’s detailed deals with Big Labor, automatic raises are the norm. In the 2017 fiscal year, seven of the city’s eight bargaining units received raises of 2 percent, with management employees securing a 3.5 percent bump. Automatic raises are not common in the private sector, where pay is primarily based on performance.

In 2014, North Carolina’s governor noted that workers outside of government “have never heard of the term longevity pay,” but the perk is pervasive in the Duke City and “longevity” can be defined quite loosely. For example, the union contract governing blue-collar employees mandates a boost of $64 per pay period for just five years on the job.

In addition to the 10 standard holidays — Presidents’ Day, Memorial Day, Thanksgiving Day, etc. — many Albuquerque employees are given their birthdays off, and all receive almost comically generous vacation and sick leave. Many are permitted to convert unused time into either paid leave or a lump sum payment at retirement. In 2016, the Albuquerque Journal reported: “It isn’t unusual for longtime city employees to retire and walk away with tens of thousands of dollars in pay for unused leave. Some payouts have approached $100,000 altogether.”

Nationally, 24 percent of private sector workers do not receive paid holidays, 24 percent do not receive paid vacation time and 42 percent do not receive paid sick leave. And in nongovernment employment, use-it-or-lose-it is the norm for paid leave.

For medical care, the city offers a Presbyterian Healthcare Services plan permitting employees to “choose among three different benefit options to find (what) best fits their unique needs: the Active, Family, and Independent options.” A gym benefit may be added for employees and their “dependents over the age of 18 at no additional premium,” and vision and dental coverage is included. The city pays 80 percent of premiums.

In the private sector, 30 percent of employees do not receive health care benefits, 55 percent do not have the option of dental care and 75 percent are not offered vision care. For all civilian workers who are offered health insurance, their employers pay, on average, 68 percent of the cost of health premiums — meaning that, in the private sector, the share is likely lower.

Nearly every regular Albuquerque worker is a member of New Mexico’s Public Employees Retirement Association. Participants are required to contribute to the pension system, but the city voluntarily covers a sizable share of its employees’ obligations. In the 2016 fiscal year, Albuquerque was legally required to make a $33.3 million payment to PERA, but its actual payment was $60.2 million. In addition to a pension, the city offers health and life insurance to retired employees.

Workers in the private sector receive nowhere near the level of retirement benefits provided by the city of Albuquerque. Defined-benefit pensions such as the one offered by PERA have slipped to a small minority of pension retirement income, and the dominant pension type is a defined-contribution plan that does not secure a guaranteed — and taxpayerbacked — monthly check.

Health care coverage post-employment is increasingly rare for private sector retirees. The portion of firms with 200 or more workers offering the benefit dropped from 66 percent to 28 percent between 1988 and 2013. For smaller enterprises, the share is doubtless much smaller. Just 55 percent of all private sector employers offer a life insurance benefit.

Out-of-whack compensation levels have severe consequences for Albuquerque’s fiscal health. Forty-nine percent of the city’s expenditures are dedicated to pay and benefits. Unfunded liabilities for future pension, health care and life-insurance costs run into the hundreds of millions of dollars.

In just a few months, Albuquerque will elect a new mayor. Voters should ask the men and women seeking the job what their plans are to fix a city compensation structure that is unfair and unsustainable.

Reach D. Dowd Muska at dmuska@riograndefoundation.org. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on the principles of limited government, economic freedom and individual responsibility.