Local govts need bigger ax to slash personnel costs
Slashing personnel costs is a crucial task for local governments and from the viewpoint of rebuilding the central government's finances. It is essential that local governments redouble their efforts to cut expenditures.
With preparations for compiling a state budget for fiscal 2013 under way, the Finance Ministry announced provisional calculations regarding salary levels of local government employees.
The Laspeyres index--an indicator that compares local government employees' salaries against a base of 100 for salaries of central government workers--stood at 106.9 for fiscal 2012, marking a reversal for the first time in nine years, according to the estimates.
Salaries in more than 80 percent of about 1,800 local entities across Japan exceeded the pay pocketed by central government employees.
This seems partly due to the fact that the central government decided to cut its employees' salaries for two years from fiscal 2012 to raise funds for budgetary appropriations for reconstruction from the Great East Japan Earthquake.
Salaries of local government employees are stipulated by ordinances, mainly after consultations between municipalities and trade unions of their workers. The central government has no say in pay scale decisions by local governments.
Averse to pay cuts
However, local government employees' salaries are paid from local tax grants allocated by the central government, in addition to local tax revenues.
These tax grants, which are designed to help local governments make up for budget deficits, have reached more than 17 trillion yen a year. The central government funds these grants by incurring debts. Providing cash for local tax grants has been a major cause of the central government's fiscal crunch, along with fast-ballooning social security costs.
Personnel costs account for about one-fourth of the more than 80 trillion yen in total expenses of local governments throughout Japan. Curtailing employees' salaries is essential for turning around the finances of chronically debt-ridden local governments.
Kyoto Gov. Keiji Yamada, who chairs the Association of Prefectural Governors, has bristled at the Finance Ministry's suggestion that local government workers' salaries must be cut. He said the central government "should recognize the efforts being made by local governments" to reel in budget deficits.
Internal Affairs and Communications Minister Shinji Tarutoko also joined the chorus of criticism, saying the Finance Ministry was "making figures arbitrarily, apparently with the aim of misleading public opinion. This is extremely inappropriate."
The way salaries of local government employees are determined is baffling for several reasons.
Salary levels for a local government are decided, in principle, after checking salaries of other local entities and the central government, as well as salary trends in the private sector.
Fringe benefits too generous
According to the Finance Ministry, workers at local governments in every prefecture earned larger pay packets than the average monthly pay of private business employees. Local government monthly salaries were more than 100,000 yen higher than company employees' salaries in Aomori, Akita and Ehime prefectures, the ministry noted.
Aside from regular administrative positions, local government employees handling cleaning and bus-driving duties are paid 1.5 times the amount their private-sector counterparts receive. The figures are 1.9 times higher for security guards and and 1.8 times for telephone operators.
Some local entities pay employees housing allowances--a perk already abolished for central government employees. Others give special allowances to teachers for accompanying school excursions and supervising high school exams.
Both the ruling and opposition camps appear reluctant to take up the issue of local government salaries. They seem afraid of antagonizing local entities when a House of Representatives election is likely to be held soon.
Community residents and assemblies should press harder for administrative reform of local governments.
When the consumption tax rate is raised to 10 percent from October 2015, revenue from 1.54 percentage points of the five-point hike will go to local governments' coffers, which they can use at their discretion.
Given this, local governments should remain aware of their responsibility to further cut expenditures to ensure fiscal matters are handled effectively and properly.
(From The Yomiuri Shimbun, Nov. 11, 2012)