The benefits of buyouts

Our view: Gov. O'Malley's plan to entice workers to leave state government will do some modest good — but it is only a small step in achieving a 'new normal'

December 12, 2010

A lump sum of $15,000 plus $200 for every year of employment may not sound like much of an enticement for someone to leave a secure job, particularly in this economy, but Gov. Martin O'Malley's buyout offer for state workers may well be enough to persuade some civil servants to retire sooner rather than later, or to pursue another career, or go back to school. And even if it accomplishes nothing more than getting the administration to the reduction of 500 positions mandated by the legislature this year, the savings in the long term could prove substantial — so long as the state holds itself to a requirement to permanently abolish the positions of those who take the deal.

In that way, the buyouts differ from many of the administration's previous budget-balancing measures, such as its program of employee furloughs, in that they are a recognition that the state cannot get through its present fiscal crisis by temporary measures alone. Governor O'Malley's second term will likely require some real and permanent restructuring of state government, and the executive order he signed Tuesday authorizing the buyouts is a first step in that direction.

In announcing the buyout, the governor touted his previous moves to shrink the size of the state work force by nearly 1,300 positions. But in the scheme of the state's 79,000 employees, that's not much. In fact, the number of state workers has been relatively stable through the Glendening, Ehrlich and O'Malley administrations. That's in sharp contrast to Maryland's private sector. The O'Malley administration's reductions amounted to 1.6 percent of the state work force, but private sector employment in Maryland has declined by nearly four times as much — about 6.2 percent — since its peak in 2008.

Clearly, some reduction in the size and scope of Maryland's government is going to be required to put the state on a sustainable path. The latest budget estimates put Maryland's gap between projected spending and revenues at about $1.6 billion for the next fiscal year. The problem is not that state spending is growing faster than tax revenues would support. The cost-cutting the O'Malley administration has done already has taken care of that problem. The issue is that there is a structural gap between taxes and expenditures that has been masked so far during the recession by one-time transfers of money and the federal stimulus program. Those tactics have run their course, and we're left now with a need to realign our expectations for state government.

Reducing the size of the state work force will be an important component of that effort, but taxpayers should realize that it's going to take more than getting rid of bureaucrats. Wages and benefits for state employees make up about a quarter of the state budget — a substantial share, to be sure, but much less than what is sent to the counties for education aid and to various contractors for health care and other services. It's also worth bearing in mind that outside of the university system, where many of the jobs are funded by research grants, the biggest chunk of state workers, by far, is in public safety and health. Many of those jobs are exempted from this buyout offer, and for good reason. Unless we want fewer prison guards and state police or to reduce staffing at the remaining state hospitals and in the already troubled juvenile justice system, the options for savings are limited.

The O'Malley administration, to its credit, is looking at this as one of dozens of steps that will be required to achieve a "new normal" for state government, one that will require significant reorganization and consolidation of state departments and measures to reduce the state's liability for employee pensions. Governor O'Malley campaigned for re-election on the strength of his having made hard decisions in tough times, but, unfortunately, that job has only just begun.

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