News Story

Number of State Employees Down, Amount of State Payroll Up

24 percent fewer people on state payroll costs taxpayers $286 million more than in 2000

While the number of full-time employees working for the state of Michigan increased slightly in 2017, the rise was a blip on a long-term trend of fewer people working directly for the state. But while the number of state workers has fallen over time, they are costing taxpayers more because pay and benefits have risen much faster, even after adjusting for inflation.

The state of Michigan had 46,824 full-time employees, or FTEs, on its payroll in 2017, up from 46,692 in 2016. On average, the total compensation for a state worker, including salary and benefits, was $118,860 in 2017, up from $116,398 in 2016.

The one-year change in the number of employees is not large, but both the downward trend in the number of state employees and the upward trend in the cost of employing them has been significant over the past decade or so.

There were 46,824 individuals directly employed by the state in 2017, which is 14,669 or 24 percent less than was the case in 2000.

Yet, while the number of state employees was decreasing, they were collecting $286 million more in pay and benefits, even after adjusting for inflation. The real cost of an average state employee increased 38 percent during that time, from $85,857 in 2000 to $118,860 in 2017.

During this 17-year time period, the average base pay of state employees rose 13 percent, from $2.7 billion to $3.1 billion. The cost of their benefits increased much faster, from $986 million to $2.5 billion, an overall increase of 154 percent.

James Hohman, fiscal policy analyst at the Mackinac Center for Public Policy, believes that part of the reason employee compensation costs are going up so much is that state-run pension systems have been persistently underfunded for many years.

From 2000 to 2017, the average retirement cost per employee increased from $7,960 to $32,897 when adjusted for inflation.

“The state’s been operating with fewer employees, but taxpayers are not getting the savings as the costs for compensation continue to increase,” Hohman said. “The costs of underfunded pensions for older employees, in particular, drove up costs.”

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.