Padded Payroll: An Examination of Municipal Employment Practices in Baltimore City

About the Author
Kantayhanee Whitt is currently an assistant program manager with a Baltimore-based non-profit enterprise that provides training and technical assistance to organizations and institutions involved in community development.

She received her master of arts degree in policy studies at the Johns Hopkins University in 1997. In 1995, she received her bachelor of science degree in city and regional planning from Cornell University. Born in 1973, Whitt is a native of Baltimore City.

Executive Summary
Recently, I was invited to a meeting of the Baltimore Homeowners’ Coalition for Fair Property Taxes. One of the attendees was Kantayhanee Whitt, who had just completed some research for the coalition on municipal employment in Baltimore City (funded by the Abell Foundation). The coalition apparently did not intend to publish the material. So I asked if the Calvert Institute might “adopt” the project. The coalition agreed. This study is the result.

Whitt has written an outstanding report. The core finding is straightforward: Baltimore is an over staffed town. It is true that there has been a reduction in the actual number of people employed by city government over the past couple of decades. In 1981, the city employed 33,489 people, or 514 for every 10,000 residents. By 1992, this had decreased by 12.3 percent, to 29,379 (or 372 per 10,000). But the problem is that Baltimore’s population is also spiraling downward. The consequence is that the city, which currently employs 25,855 workers, now has 381 employees per 10,000 residents. Proportional to population, this is Baltimore’s second-highest bureaucratic burden since the early 1980s.

The inevitable, if tired, line of defense against such statistics is that a declining city needs extra service provision to ameliorate the impact of poverty. To counter this, Whitt compares Baltimore’s municipal employment levels with data from six other cities. Scrupulously fair, Whitt has ensured a valid comparison. She has not selected booming new metropolises in the Southwest. Rather, Whitt has chosen six other smokestack cities in the Northeast and Midwest. These are Cleveland, Indianapolis, Milwaukee, Philadelphia, Richmond and St. Louis. With the possible exception of Indianapolis, none of these is much known for lean and trim municipal government.

To guarantee the matching of apples with apples, Whitt has compared municipal functions, not municipal agencies. This ensures that agencies with a wide range of responsibilities are not unfairly compared with similarly titled agencies with a narrower range of duties. Whitt has selected six functions common in all cities: fire; health; parks and recreation (P&R); planning, housing and community development (PHCD); police; and public works. For comparisons of city employees’ pay, Whitt accounts for differences in purchasing power among the seven cities. Using an American Chamber of Commerce formula, Whitt converts all salaries into “Baltimore dollars.” Given safeguards such as these, we are confident that all comparisons within this study are as fair as possible.

Whitt examines three issues: (a) the number of employees per 10,000 population for the six selected functions in all seven cities; (b) the amount typical employees get paid and the amount top management gets paid; and (c) the generosity of benefits packages offered to employees.

It is in terms of the number employees that Baltimore really stands out. With the exception of parks and recreation, Baltimore’s functions and their corresponding agencies are all staffed to an extent well above average. Most notably, in Baltimore the number of public-works function employees per 10,000 population is almost four times the mean of the other six cities (80 per 10,000 residents, as opposed to 22 per 10,000 in the other six). As a percentage of the six other cities’ average, Baltimore’s functional employment per 10,000 residents is as follows:
Fire function, 147.2 percent of the other cities’ average.
Health function, 152.8 percent of the other cities’ average.
P&R function, 98.9 percent of the other cities’ average.
PHCD function, 140.8 percent of the other cities’ average.
Police function, 120.1 percent of the other cities’ average.
Public-works function, 370.4 percent of the other cities’ average.

Baltimore’s combined budgeted positions for the fire, health, P&R, PHCD, police and public-works functions come to 186 per 10,000 residents. The combined average for the other six cities is 104.3. If Baltimore reduced its city work force to be in line with the comparison cities’ work forces, it would have about 7,000 employees in these six functions instead of 12,600 or so. This should be perfectly possible. It is hardly as though Whitt’s six comparison cities themselves have earned a reputation for anorexic government. If Baltimore slimmed down to these other cities’ average level of municipal employment, and assuming an average salary and benefits package of about $40,000 per employee, this would translate into annual savings to taxpayers of $224 million. That is approximately 10 percent of Baltimore’s annual operating budget.

Baltimore’s ability to generate outside sources of revenue, particularly from the state and federal governments, may enable it to get away with its padded payroll for a while. However, outside funding should not be counted upon forever. If a Republican governor is elected in Maryland’s 1998 election, and if a Republican president is elected in the national election in 2000, the city’s role as an important Democratic voting bloc will count for nothing. Valueless to Republicans in terms of votes, and manifestly imprudent in the spending of public moneys, the city will find it has precisely no leverage for obtaining non-local funds. City Hall should heed this well.

- Douglas P. Munro, Editor

I. Introduction
This study assesses whether Baltimore City’s employment policies exhibit signs of inefficiency. This may seem a dry topic, but an examination of Baltimore’s municipal employment patterns is a vital component of any assessment of fiscal efficiency. This is also a timely topic. In an election year, Governor Parris N. Glendening (D), in the words of a recent Baltimore Sun headline, is on a spending campaign to “woo the city.”1 It is as well, therefore, that state and local taxpayers understand what their public funds are buying in Baltimore. In a word, it is bureaucracy.

Baltimore’s fiscal condition as it prepares to enter fiscal year (FY) 1999 appears relatively rosy. Though Edward J. Gallagher, chief of city’s Bureau of Budget and Management Research, is pleased that unexpectedly flush circumstances will mean no staff reductions for the foreseeable future,2 there is little room for complacency. As this paper will demonstrate, there is ample room for reductions in personnel. While City Hall may be crowing about the current budget situation, the long-term outlook still appears bleak. Moody’s Investors Services, Inc. has recently described Baltimore as having a “negative outlook” fiscally, a possible prelude to downgrading the city bond rating.3 In early April, the city announced that it could not longer afford the luxury of keeping up the buildings that comprise the failed City Life Museums. The city said it intended to sell or lease the buildings,4 only to backpeddle a couple of days later in the face of local opposition.5

Excessive personnel levels and unsuitable compensation policies create unnecessary burdens on city taxpayers – particularly homeowners, who pay the bulk of property taxes. Employee salaries and benefits invariably make up a large proportion of municipal general-fund expenditures. In a city such as Baltimore, with droves of middle-class residents daily heading for the suburbs, such an analysis is crucial. It is vital that action be taken to stem the outflow.

Three employment policy areas are examined herein: (a) employee position levels, (b) employee salaries for selected positions and (c) employee benefits packages. The Baltimore data detailing these three areas are compared with like data from six other U.S. cities facing demographic, economic and social challenges similar to those faced by Baltimore. These cities are: Cleveland, Ohio; Indianapolis, Indiana; Milwaukee, Wisconsin; Philadelphia, Pennsylvania; Richmond, Virginia; and St. Louis, Missouri.

This report has three principal foci:
A statistical analysis comparing the number of positions for selected Baltimore functions with those of the six comparison cities;
A statistical analysis comparing salaries for selected Baltimore employment classifications with those of the comparison cities for the last fiscal year (FY 1997); and
A statistical analysis comparing non-salary benefits for selected Baltimore employment classifications with those of the comparison cities for FY 1997.

The six functions we have selected are: fire; health; parks and recreation (P&R); planning, housing and community development (PHCD); police; and public works. A year ago, the Baltimore Department of Recreation and Parks was under considerable fire politically, resulting in budget and program cuts. By that time, the bulk of our research had already been conducted, so readers are asked to bear in mind that the agency now is not identical to the one described within.

As explained further on, our concern is functional staffing levels, not departmental staffing. In terms of PHCD, planning, housing and community-development functions are considered to be one unit because in several study cities one department is responsible for all functions while in other cities (such as Baltimore), two or three separate departments are responsible for them. For the purposes of this essay, we consider the director of the dominant agency of the cluster to be the primary administrator, with the others considered to be subordinates, ranked by pay.

Readers will notice that, throughout this paper, our principal concern is those positions financed by Baltimore’s property-tax revenues. These are termed “general-fund” positions. Baltimore City’s rate of property taxation is $5.85 per $100 of assessed value, which is the highest level in the state. In most cities, property taxes go into the all-purpose municipal fund. This fund is usually called the general fund. It pays for major municipal government functions. Baltimore is no exception in this regard. In fact, Baltimore is more dependent on property taxes than most cities. Property-tax revenue makes up over 58 percent of the city’s general fund, a far higher percentage than in many places. Thus, most property-tax-funded positions are drawn from the general fund, though it is not necessarily true that all general-fund positions are funded by property taxes. In addition to general-fund positions are other city positions, funded from other sources. We refer to the total as “operating-budget” positions. By way of example, the public-works function’s figures of 17 general-fund positions and 80 operating-budget positions mean that the city employs 17 persons per 10,000 residents paid for by means of property taxes and other general-fund revenues; and it employs a total of 80 persons per 10,000 residents paid for with all funds from all sources (including the 17 general-fund positions). In short, general-fund positions are a subset of operating-budget positions.

Because employees paid for out of the general fund most directly affect city residents via their property taxes, excessive numbers of general-fund-financed employees are likely to have a particularly negative impact on city population levels. Baltimore residents’ local tax burden is high. Baltimore City’s effective local tax burden per $100 of assessed property value is $5.71. In Maryland, the average local government’s effective rate is just $2.90 per $100 assessed.6 A padded payroll financed out of the general fund can only serve to keep property-tax rates high, reducing residents’ incentive to remain in the city. Lavish numbers of employees funded from other sources, while hardly acceptable, are at least less likely to result in middle-class flight because the moneys to pay them may be drawn from other sources such as state and federal grants or specially levied fees.

Staffing Levels
At first glance, Baltimore emerges from our analysis looking reasonably lean. Baltimore’s fire function is the only one of its functional areas where the number of general-fund-supported employees per 10,000 population is well above the seven-city mean (the average of Baltimore and the other six cities). Though Baltimore is the only city where the difference is statistically significant, Richmond’s and Milwaukee’s fire functions are also above average in terms of general-fund employees proportional to city population. This said, expanding the analysis beyond positions supported by the general fund to those supported by the entire operating budget reveals that Baltimore’s police and public-works functions’ total operating-budget positions are well above their respective averages, especially in the case of public works. Last year’s partial takeover of Recreation and Parks Department functions by the Public Works Department on the grounds of efficiency was thus ironic seeing as how it (Rec and Parks) was the only one of Baltimore’s functions that did not have above average staffing levels relative to the other cities, neither for general-fund positions nor operating-budget positions. By contrast, Baltimore’s public-works agency is by far the worst of its functional offenders in terms of comparative over staffing per 10,000 population.

We examined a number of job classifications common to all cities, such as computer programmers, attorneys, secretaries and so forth. In the selected position classifications for these “typical employees,” Baltimore maintains salaries generally near or below the comparison cities. The city’s minimum salary level for a personnel manager is the only salary figure that is above average to a statistically significant degree.

However, at the upper levels of agency administration, a different story is told. Again, the Fire Department stands out. Three of Baltimore’s top five fire administrator salaries are notably above average. Additionally, in PHCD and public works, the top administrator – that is, the head of the dominant department – is paid well above the average for the other cities.

In terms of paid leave, Baltimore annually grants a slightly greater number of leave days than Indianapolis and Philadelphia, the two comparison cities used for this section of the study. Where Baltimore differs significantly is in the extent to which it allows accumulation and cash conversion of sick days. There is no limit on accumulation and the cash-out policy is far more generous than in the other two cities. A Baltimore City employee with 30 years’ service might be able to accumulate as many as 270 days of sick leave, and then be able to cash them all out at retirement. This would equal approximately a whole year’s salary. This sort of generosity is not found in Indianapolis or Philadelphia.

Baltimore’s retirement plan is the only one that does not require an employee contribution. In terms of annual payments to retirees, it is more generous than Indianapolis’ plan but less so than Philadelphia’s.

As for health-care benefits, Baltimore’s package is, overall, the most generous. For the most popular plan on each city’s menu of plans offered to employees, Baltimore’s package costs the city $513 a month for family coverage. The most popular plan in Indianapolis costs the city $347 a month. Philadelphia caps its monthly contribution for employees’ family health coverage for the most popular plan at $304.

The above average salary figures for the highest-paid administrators in the fire, PHCD and public-works functions indicate excessive compensation policies in the corresponding departments in Baltimore City, as we shall demonstrate in the body of this report. While Baltimore must offer competitive salaries to attract capable head administrators, this occurrence should nevertheless be investigated. The operating-budget staffing levels for the city suggest that policies determining labor needs for the police, PHCD and public-works functions lack sound direction. While union influences may impair the city’s ability strongly to control personnel policy, further investigation should be undertaken to determine the full nature of the problem.

In particular, both the number of positions and the salaries paid suggest that the city fire function’s personnel policies are inefficient. The salary compensation findings for the Fire Department are not surprising, given its protracted fiscal and personnel management problems; it is widely recognized that the department has experienced policy dilemmas in recent years.7 Nonetheless, while position levels may be justified, at minimum an inquiry into the appropriateness of Fire Department compensation packages is needed. The 50 percent increase in the number of fire calls over the last six years or so may explain the significantly above average position levels in the fire function. Additionally, the Fire Department’s policy of sending fire trucks out to accompany ambulances to situations where only paramedic care is needed greatly escalates costs. This habit recently became so egregious – fire engines were sent to about a third of paramedic calls – that the department agreed to curtail the practice to a degree.8 The fire fighters’ union was frank in admitting that a reduction in the number of fire- engine dispatches would follow. It was concerned, however, that this would be used to reduce the number of employees on the force.9 This may have been disarmingly candid, but one is left to wonder why so many fire employees were required initially. In early 1997, the city considered privatizing the paramedical services provided by the Fire Department as one means of saving funds.10 The effort foundered due to questions about its potential for cost-effectiveness, according to Fire Department public information officer Hector Torres.11 Intense union opposition can hardly be discounted either.

In fact, as an example of the lengths to which the fire-function unions will go to avoid competition, during the 1998 legislative session in Annapolis, Delegate James E. Malone, Jr. (D-Baltimore County) tried to introduce a statewide bill that would have made it virtually impossible for local governments to privatize fire and paramedical services by requiring a local referendum on such measures. Delegate Malone is a professional fire fighter by trade. The bill was killed in committee in late March.12

II. Background
The increasing demand for educational and other cultural services and for more social welfare activities has begun seriously to handicap the financing of primary and other essential functions of the [Baltimore] Municipal Government

Posted in: Efficiency in Government, Issue Brief