It is important to remember that the savings from these types of reforms will not accumulate all at once. For instance, even though the Publicly Funded Health Insurance Contribution Act began capping what can be spent on health insurance benefits, this law does not apply to government employers operating under a current collective bargaining agreement with their employees. Since these agreements cover multiple years (typically about three years), it will take several years for local government officials to begin realizing savings from this law. Similarly, savings from reforms to state-run pension systems would only accrue slowly over time.
Legislators can implement these policies to accrue savings to the state budget, local governments or to taxpayers. A substantial amount of state tax revenue is redirected to local governments in the form of state aid payment to schools, appropriations to colleges and universities, and revenue-sharing payments to local governments, so adjusting payments in conjunction with implementation can change the direct beneficiaries of implementing this policy.
One approach would be to allow these savings to accrue directly to the state and subsidiary governments, enabling them to use these savings to improve or expand the services they provide taxpayers. Theoretically then, taxpayers could be provided with $5.8 billion worth of more state and local government services.
The state could make use of these savings in other ways, too. By adjusting the level of payments made to subsidiary governments, legislators could obtain some of these savings at the state level. This would allow state government to improve and expand some of its services, such as its transportation infrastructure.
The Legislature could also allow some of this $5.8 billion in savings to accrue to taxpayers. If policymakers were to reduce overall spending, at both the local and state levels, in response to balancing public sector employment benefits to private sector averages, taxes on private individuals could be reduced proportionately — without loss in quality or quantity of government services.
Finally, these options are not mutually exclusive — the state could actually produce all three. In other words, Legislators could use the $5.8 billion in savings to expand local government services, improve state government services and simultaneously put money back into taxpayers’ pockets.