Government needs to share the burden
Although Enron and WorldCom's distress makes headline news, their woes are only a symptom of our troubled economy.
Ford Motor Co. restructured, Kmart faltered, Boeing Co. laid off workers, and even Eddie Bauer may not survive. Internet companies merged with more traditional 'brick and mortar' companies or disappeared. The list of corporations with financial trouble is large and growing. Motorola Inc. announced that it was top-heavy, and in the interest of saving the company it eliminated everyone with the title vice president.
In the interest of saving our economy and achieving a balanced bottom line, municipalities need to follow suit. Our tax-dollar pool is no longer growing; it is shrinking.
In the early '90s, we endured a minor blip in our economy. At that time, business began to ask employees to share in the rapidly increasing cost of health care and other benefits. It was a simple and relatively painless way, particularly for small and medium-sized companies, to save money and stay in business.
At the government level, that suggestion was met with horror and outrage. Labor unions tied enough knots in the municipal systems that for the most part the issue was dropped.
Boom years followed the short economic downturn of the early '90s. Salaries and benefits skyrocketed in all sectors.
But now, as the bottom line shrinks drastically, corporations and small businesses alike are taking measures to ensure that they remain in the marketplace. Cutting salaries, eliminating positions at the top Ñ not at the bottom where services are provided Ñ and sharing the cost of benefits or transferring responsibility to employees are a few of these measures.
Government has yet to change. Municipal managers scramble to save their budgets. As municipalities realize that pension plans cannot be sustained at the current rate, employees are retiring en masse in some locales before changes are made, while lawyers declare that changes may be illegal.
Continued 'restructuring' (a never-ending process in the public sector), means new salaries are calculated based on large overall budgets and compared to corporations with similar-sized budgets. Each time the salary comparison exercise is conducted it is with a new slate of businesses rich with investor funds, bank loans and venture capital.
Enron Corp. is the best example of how uncontrolled spending and precarious revenue streams lead to failure. Company management and its watchdogs buried their heads until it was too late to save the business. Meanwhile, managers retired or left with full pockets at the expense of workers and pension holders at the bottom.
In our current economy, the fastest-growing sector (and possibly the only growth industry) is government at all levels. However, federal, state and municipal budgets are in crisis across the nation. Eventually, as the number of government jobs outnumbers nongovernment jobs, the entire system will topple.
We may have already passed that point. Increasing revenue and cutting services does not represent a healthy long-term strategy. Raising taxes puts more strain on small business, and eliminating service providers leaves government even more administratively top-heavy.
A solution exists that may save more jobs and possibly our economy. That solution involves across-the-board salary and benefit reductions.
Salaries at the managerial level of government need to be based on the average salaries for the state in which the governing body operates. Salaries should be averaged among large as well as small businesses, which struggle to survive in the best of times and which make up the bulk of the corporate world in our state.
As with Enron, it may be too late, but it is time our government leaders adopt bold measures that build confidence in business. It is time to view resources as permanently declining, and time to quit using scare tactics (threats of reducing police and fire services) to goad us into higher taxes. It is time to develop a truly long-range solution that fits Oregon's economy and shares the burden of bad times as well as the boon of good times.
If government takes a greater share of this permanent loss of revenue through across-the-board cost cuts and lower taxes, businesses may be more likely to survive this economic crisis, and fewer workers in all sectors will lose their jobs.
Judy West is a writer from Portland. She is a fourth-generation Oregonian and lives with her husband in Hillsdale. She has a business degree from Portland State University and leads wine tours for a local bus company.