One of our young researchers at Baker went through the City of Houston budget and divided each department's total personnel cost by the number of employees to see what the average cost to taxpayers runs. Frankly, we were a bit surprised by the size of the number. So, we decided to look at the other large cities in Texas to see how they compared. What we found was that the average cost for municipal employees in Texas is over $100,000 annually and, in many cases, well over that threshold. You can read the full report here.
Before going over these numbers, I want to make sure that you understand these are not salary figures. These numbers represent the total cost to the cities to employ an individual. This includes costs such as health insurance, pension costs, and payroll taxes. Because most of these employees are still covered by high-cost defined-benefit pension plans, the contributions to those plans make up a substantial portion of the cost.
The average cost of a municipal employee ranged from a high in Austin of $142,000 to a low of$112,000 in Dallas. Houston was roughly in the middle of the pack at $ 132,000.
Public safety employees (police and fire) cost quite a bit more. Police department employees cost between a high of $198,000 in Houston and a low of $140,000 in San Antonio. Fire departments ranged from a high in San Antonio of $180,000 to a low in Austin of $144,000. Some of the variation is due to different pension plans and the timing of contract negotiations.
Two things struck me about these numbers.
First, there has been a general belief that municipal employees are underpaid compared to the private sector. I think these numbers call that narrative into question. According to BLS statistics, the average weekly wages for the counties in which these cities are located are about $1,700. With standard benefits, that would equate to a personnel cost of about $115,000. That may not be an entirely fair comparison because the average worker in a city might have lower skills, education, and experience than the average municipal employee. Nonetheless, it is hard to imagine that municipal employees are significantly underpaid compared to their neighbors.
The data also raises the question of how these averages are spread across the departments’ hierarchy. We know, for example, that a starting police officer at HPD earns $81,000. Even with a generous benefit add-on, the cost does not come anywhere near the $198,000 average.
I suspect this means that the mean cost is skewed significantly higher than the median. If most rank-and-file workers cost far less than $198,000, a relatively small group of highly compensated senior staff, along with heavy overtime and tenure-based pay steps, is dragging the average up. That strongly points to a top-heavy structure — an observation consistent with the Ernst & Young efficiency study conducted by the City of Houston.
This is a metric we will continue to follow and expand to other governmental entities. It will be particularly important to track how these averages change over time.
Stay tuned.
