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April 2014 Policy Study, Number 14-2


Iowa's Privileged Class: State Government Employees


The Pay Gap's History



Iowa’s state-government employees have, on average, been paid between 45 and 54 percent more than Iowa’s private-sector workers from 2003 to 2012.  That means that for every $1.00 an average private-sector worker earns in Iowa, an average state-government employee in Iowa has earned between $1.45 and $1.54 over the last decade.


However, Iowa has held the dubious distinction of having the largest Pay Gap between government-sector workers and private-sector workers in the nation for far longer than just the past decade.  Iowa had the largest Pay Gap in the United States when Public Interest Institute published our first article on the state’s Pay Gap in May 1996.  But its reign as number one goes back even further than that.  Iowa has had the largest Pay Gap in the nation since 1987.  For 26 years the gap between the average wage of Iowa’s state-government employees and the average wage of Iowa’s private-sector workers has been larger than in any other state in the nation.  Table 2 shows Iowa’s Pay Gap and its rank among the states for the last 30 years.



1975 is the year Iowa’s collective bargaining law took effect.  The Public Employment Relations Act, signed into law the previous year by then-Governor Robert Ray, “grants employees of the State and its political subdivisions, including cities, counties, and school districts, the right to join and participate in employee organizations, and the right to bargain collectively through such employee organizations.”[1]  The collective bargaining laws, found in Chapter 20 of the Iowa Code, establish detailed procedures for negotiating contracts between the state government and union-represented employees.


Under Chapter 20, contract negotiations involve the state government (represented by the Governor), the union, and a Public Employment Relations Board (PERB) which is appointed by the Governor.  Contract negotiations involving the state employees are supposed to be completed by March 15th of the year the contract is supposed to take effect.  However, if the state government and the union reach an impasse, then PERB can appoint a mediator to help resolve the dispute.  If the mediator is unsuccessful after ten days, then PERB can appoint a fact-finder to examine the dispute and make a recommendation within fifteen days.  If the fact-finder cannot resolve the dispute, the state government and the union can keep negotiating, or they can agree to binding arbitration.  Under arbitration a panel of arbitrators, agreed to by both the state government and the union, will make a final decision that both sides have to abide by.[2]


If negotiations reach the state of arbitration, the Iowa Code states that “the panel of arbitrators shall consider…the power of the public employer to levy taxes and appropriate funds for the conduct of its operations.”[3]  Thus, arbitrators can take into consideration the state’s ability to raise taxes in order to pay for an increase in pay for state-government employees.


In 1991, negotiations between union-represented state-government employees and then-Governor Terry Branstad’s representatives went to binding arbitration.  Despite a budget crunch at that time, the arbitrators awarded a 9 percent raise for state employees.[4]  Governor Branstad vetoed the appropriations legislation providing the funds for the pay raise, citing “difficult fiscal circumstances.”[5]  The unions filed a lawsuit, which was appealed to the Iowa Supreme Court, which affirmed the ruling that the state must fund the pay raise.  In June 1992, the Iowa Legislature met in a special session to appropriate the funding for the pay raise.[6] 


In fiscal year 2010 (which runs from July 2009 to June 2010), the unions that represent Iowa’s state-government employees agreed to a “zero percent across-the-board salary increase.”[7]  This may seem reasonable, given that many private-sector workers did not receive a raise that year and many others were out of work.  However, this is not the end of the story for Iowa’s state-government workers.  “Merit raises and other perks will pump up Iowa’s state employee salaries by an average of 4.3 percent [for Fiscal Year 2010],” reported The Des Moines Register.[8]  “The increases are due to ‘step’ increases – bumps in salaries given to state employees who are not at the top of their field’s pay grades.  Around 50 percent of state employees qualify for such increases.  Most are eligible for 4.5 percent raises.”[9]


With many state-government employees who agree to “no” raise, but still receive a 4.5 percent raise, it is no wonder that Iowa has the largest Pay Gap in the nation and has had the largest gap in the nation since 1987.


In 2009, under then-Governor Chet Culver, the Pay Gap in Iowa reached a level higher than 50 percent for the first time.  In that year, for every $1.00 an average private-sector worker earned in Iowa, an average state-government employee in Iowa was paid $1.54.


Following his defeat in the November 2010 election, former Governor Chet Culver agreed to the proposal by the unions representing many state-government employees for salary increases for the next two fiscal years.  Public Interest Institute Research Analyst Deborah D. Thornton writes about this “gift” from Culver to the unions in the POLICY STUDY, Iowa’s Privileged Class: Time for a Change![10]


As widely reported in November 2010, outgoing Governor Chet Culver (Democrat) acted to limit incoming Governor Terry Branstad’s (Republican) personnel funding options by signing a two-year contract with the American Federation of State, County, and Municipal Employees (AFSCME) union immediately following his re-election defeat. 


That contract required a 2 percent salary increase [in July 2011], and another 1 percent this January (2012).

In addition, according to the contract signed by Governor Culver, the FY2012 salary increases are followed by another 2 percent across-the-board increase in July 2012 – at the beginning of FY2013 – and another 1 percent increase in January 2013.[11]

The total amount of the increases is expected to be over $200 million in permanent additions to the state budget, plus the corresponding increases in pension and health-care contributions.

These raises were higher than those enacted in all other states for fiscal 2012, except Hawaii, which allowed a 5 percent across-the-board pay increase.[12]  Nationally, according to the Bureau of Labor Statistics, the average increase for state government workers was 1 percent.

So in November 2010 Governor Culver gave a Christmas present to state-government workers that was three times bigger than that received by workers in other states.  The speculation was that this lame duck action was a ‘thank you’ gift to union workers for their support of Governor Culver in the election.  Unfortunately, Iowa taxpayers will have to keep on funding this gift for a very long time.


If both Governor Culver and the unions were bargaining on the side of state-government employees, who was speaking for the taxpayers in this equation?  No one.


In March 2013, the Iowa Department of Management announced that the state had negotiated a contract with the American Federation of State, County, and Municipal Employees (AFSCME) union for Fiscal Years 2014 and 2015.  The new contract provides a “0% across-the-board (ATB) raise for FY 14 and 0% ATB for FY 15.” However, the contract does include annual STEP increases for those two fiscal years.[13]  Governor Terry Branstad made the following statement when the contract provisions were announced:


Unlike two years ago, this administration made sure taxpayers were actually represented in these negotiations. When Gov. Culver simply took the unions’ first demand, taxpayers were socked with a $202 million bill. As a result of our efforts, the cost of this contract is $94 million less than it would have been under the previous contract. This is real savings for Iowa taxpayers.[14]


Because of the lag in data collection by the federal government, the impact of Governor Branstad’s recent negotiations with AFSCME won’t yet be seen in the most recent data reported by the Bureau of Labor Statistics, but Public Interest Institute will continue to provide updates on the status of the Pay Gap into the future.




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