As a result of years of escalating wages and overtime costs, California state employees enjoy the highest average pay out of the nation's most populous states, according to a report by Bloomberg News.

Employees earned an average of $60,317 in 2011, according to Bloomberg's analysis. Rounding out the top five after California are New York ($55,650), New Jersey ($54,064), Illinois ($51,387) and Michigan ($49,022). Bloomberg compiled payroll data on 1.4 million public employees in the 12 most populous states.

Officials defend such high earnings for some public workers because they say that they must compete with the private sector and attract high-quality workers. In several states -- such as California where a state psychiatrist was paid $822,000 last year -- public-sector psychiatrists were paid the most, according to Bloomberg.

“California spends most of its money on salaries, retirement payments, health care benefits for government workers, and other compensation,” former California Gov. Arnold Schwarzenegger told Bloomberg. “State revenues are up more than 50 percent over the past 10 years, but still we’ve had to cut spending on services because so much of that revenue increase went to increases in compensation and benefits.”

Bloomberg notes Californians now are still paying for changes made by former Gov. Gray Davis during his tenure. From 1999 until October 2003 when Davis was recalled, unions negotiated more generous pensions and the state's $12 billion budget surplus shifted to a $35 billion budget deficit.

Since taking office for his second term, current California Gov. Jerry Brown has taken steps to reduce pension costs. A bill he signed into law in September raises the retirement age for new employees, caps benefits for the highest-paid public workers, and requires employees to pay half of their retirement.