The Pay Squeeze at the Top

Highly paid public-sector executives are in the headlines. But governments may need to pay top dollar to get the excellence they need.
by | August 9, 2011 AT 11:30 AM

Nearly three years of state and local fiscal crises have put public-employee pay and benefits under the microscope, and the debate has become particularly polarized in the aftermath of Wisconsin Gov. Scott Walker's successful effort to narrow the scope of collective bargaining for state employees. But at the other end of the public-sector pay scale, efforts to rein in executive compensation are highlighting the tension between fiscal prudence and the need to attract and retain excellence.

One high-visibility example is Massachusetts Gov. Deval Patrick's efforts to rein in pay at the Bay State's quasi-public authorities. To his credit, Patrick has worked to eliminate some indefensible perks, like the public authority CEO who collected $450,000 for unused vacation and sick time upon retirement. But a recent article highlights how Massachusetts Bay Transportation Authority General Manager Richard Davey, who is responsible for nearly 6,000 employees and a $1.6 billion budget, earns $145,000 annually — $110,000 less than his predecessor and $132,000 less than the average for leaders of 13 similarly sized American transit systems. Jay Walder, chairman of New York City's Metropolitan Transit Authority, was making $350,000 when he recently resigned.

Massachusetts Convention Center Authority Executive Director James Rooney's maximum annual pay was slashed by about one quarter. I've already weighed in on the dangers of unwarranted convention center expansion, but Rooney's managerial skill has saved taxpayers far more than he is paid.

When he took over construction of the Boston Convention and Exhibition Center, it was on a path toward being a year late and $100 million over budget. Three years later, it was completed on time and on budget. When flaws forced the MCCA to sue the design team, the authority hoped to recover $10 million. Thanks largely to careful documentation while Rooney oversaw construction, MCCA netted a $24 million. Earlier this year, both Boston convention centers joined just one other U.S. facility by earning the International Association of Congress Centres' "gold standard" recognition.

Richard Davey was just promoted to state secretary of transportation and James Rooney has chosen to stay on at the MCCA — at least for now. But what happens after they leave? What about when the economy finally turns around and proven leaders like these have even more tempting opportunities?

Controlling public-employee personnel costs is undoubtedly important. But so is attracting and retaining excellence at the top. Transforming public employment into a meritocracy by rewarding excellence and instituting consequences for failure serves both goals.