The Right Way to Do a Pay Raise

December 4, 2005

Andrea Neal column for Aug. 31 and thereafter
740 words

INDIANAPOLIS — In Indiana, the average teacher earns $44,966 a year. A low-level accountant gets $38,122. The average state employee receives $32,461. A part-time legislator, counting salary and expense stipends, makes $45,221.

Such salary statistics may explain the typical Hoosier reaction to legislative pay raise proposals. "Say you’re kidding" is how the Lafayette Journal and Courier summed up its reaction to the latest one.

When a pay raise commission recommends a 159 percent salary increase for lawmakers, as the Indiana Public Officers Compensation Advisory Commission did on Aug. 26, count on Hoosiers to respond in unison: Say you’re kidding.

As many times as Indiana has been through this — virtually every legislative session considers some sort of pay raise bill — you’d think people in power could figure out the right way to go about it.

Here’s the wrong way: Let years pass without any pay raise occurring, create an independent commission to create political cover, then attempt to make up for years of stagnant salaries in one fell swoop during a time when the state faces an $800 million budget deficit.

In defense of the compensation commission, it did what it was charged to do. A law passed during the 2004 session required the commission to recommend salary adjustments for various public officials in Indiana by Sept. 1.

The commission heard testimony, requested reams of data from the Legislative Services Agency and watched a Power Point or two. Members set aside politics and base their decisions on data and comparative charts. In the end, they concluded that many Indiana officials were underpaid. They recommended pay raise hikes to bring them up to par, ranging from the lowest — an 11 percent increase for the governor — to a whopping 159 percent raise for lawmakers. And they beat the Sept. 1 deadline.

Yet instead of getting thank you notes from Hoosiers, they hear a collective: "Say you’re kidding."

The majority of editorial pages that have responded so far have opposed the legislative pay hike. The Indianapolis Star supported an increase in judicial salaries, but not legislative salaries "at a time when other state employees" salary increases aren"t keeping up with inflation." The Lafayette Journal and Courier found the majority of recommendations were reasonable, but the legislative recommendation out of hand. The Fort Wayne Journal Gazette endorsed pay raises, but offered two sound amendments to the plan for legislators: 1. Phase in the increase over several years and 2. In exchange for the increase, eliminate or reduce the health care and pension benefits lawmakers now receive.

On the face of it, legislative salaries are low at a base rate of $11,600 a year. Lawmakers last raised their pay in 1985 when it was $8,000. But over the years, lawmakers have padded the sum with per diem (which rises according to a federal reimbursement schedule), generous health insurance and a pension program in which taxpayers match $4 to every $1 invested by lawmakers. All things combined, the pay of a part-time legislator would average $63,000 under the commission proposal. Do they deserve it?

The same must be asked of the other elected officials and judges included in the compensation commission plan. Appeals court judges now get $110,000, a figure lawyers say is too low to keep the most qualified ones on the bench. The commission wants to raise their pay to $139,951. The governor now receives $95,000. The commission would raise his salary to $105,404.

In its April-May issue, the Journal of the European Economic Association reported on a fascinating studying that attempted to find a link between politician pay and performance. The researchers used a complicated model for judging performance of U.S. governors relative to their salaries and concluded, "The empirical results are weakly encouraging to the view that pay rates of politicians affect behavior," and the candidate pool, in a beneficial way for the citizenry.

Yes, there are legitimate reasons to raise the pay of our elected officials and judges. But when taxpayers are footing the bill, pay hikes must be gradual and affordable.

An 11 percent raise for the governor? Probably a good idea. A 25 percent raise for judges? Difficult but doable. A 159 percent pay hike for lawmakers? Say you’re kidding.

All kidding aside, a 10 percent increase over each of the next 10 years would be fairer, feasible and acceptable to taxpayers.

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Andrea Neal, former editorial page editor of the Indianapolis Star, is adjunct scholar and columnist with the Indiana Policy Review Foundation. Contact her at aneal@inpolicy.org



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