How bad can Mass. crisis get?

By David Beard, Globe Staff

States like Massachusetts are having trouble raising credit to maintain their cash flow in times of declining revenues. We're facing the greatest economic crisis since The Great Depression. Here are five questions for Jack Donahue, a former US assistant secretary of labor, current professor at Harvard's Kennedy School of Government, and author of the just-published "The Warping of Government Work'' (Harvard University Press).

Q. Things seem to be so bad for Massachusetts that officials on Tuesday warned that the state's aid to its communities may be at stake. What impact would a significant cut in that aid have on our towns and cities?

A. Not good. The state's share of combined state and local spending is higher in Massachusetts than the national average, and Prop 2.5 means local governments aren't allowed to pick up the slack even if they can afford to. So cutbacks on Beacon Hill translate pretty directly into fiscal trouble at the local level.

Q. Is it surreal that on a day in which the Dow lost more than 500 points and the forecast for the state's economy was so gloomy, that one modest effort at budget-cutting -- using civilians as flagmen on road crews instead of police details -- again was derailed and delayed by off-duty police who blocked a roadway in Woburn and prevented the necessary work from being done? Isn't this the worst-ever timing for public safety officers to threaten public safety to preserve their perquisites?

A. Surreal's not a bad term for it. Inadvertent, too, I'd guess -- I doubt the Woburn cops checked their Bloomberg screens before staging their protest. Nobody can justify forcing taxpayers to pay premium rates for flag details in order to top off police salaries that are already beyond what the average taxpayer earns. Personally, though, this is pretty far down on my list of things to get outraged about. The real scandal isn't that cops are making a decent middle-class income, it's that so many other people aren't.

Q. Do you think it's a given that state workers will see, like private sector workers, an increase in their co-pays and premiums for health insurance? Is there a provision in state and municipal contracts where the community can renegotiate if the receipts and revenue fall drastically? Or will layoffs, based on seniority, be the order of the day?

A. I'd certainly rather see the pain be spread out, rather than concentrated on those with the bad luck to be recently hired. I'm not privy to the details of the contracts. But if things get as tough as it looks like they might, the smart thing for the leaders of the state workers' unions -- not to mention the decent thing -- would be to strike new deals that preserve jobs while taking a hit on benefits, particularly since state benefits can shrink quite a bit before they fall to prevailing private-sector levels.

Q. On Thursday night, Barack Obama said we need to keep people working during this economic slowdown, building roads and bridges, restoring America's worn-down infrastructure. How do you see that getting done, with so many demands on our limited finances -- debt service, ballooning Medicare and Medicaid costs, an unprecedented Pentagon budget, and now, the repair of the broken fundamentals of our economic system?

A. Well, we already have a lot of explaining to do to our grand-kids over the gargantuan debt they'll inherit. We won't be doing them any favors if we also bequeath them a network of infrastructure that would make Ghana blush. Better to borrow a little more from the Chinese and put people to work than to borrow a little less to pay for unemployment benefits.

Q. Your book talks about perquisites for blue-collar, unionized government workers that are unheard of in private American business these days -- a gulf that is ever-widening. Yet white-collar workers in government toil at salaries far below private-sector colleagues. Will the real-time economic stress on government change it, no matter who wins in November? How?

A. The operant term in your first sentence is "these days." A generation ago blue-collar workers in the private sector could pay the mortgage, send the kids to college, maybe save a little for retirement -- often on one income. It's not that rank-and-file workers in government have surged ahead. It's that their counterparts in business have fallen behind. What's happened is that the bottom has fallen out and the ceiling has blown off of the pay distribution in the private sector, while government has stuck with more or less middle-class pay for the Cabinet secretary, and for the Cabinet secretary's secretary. Treasury Secretary Paulson took a 99.5 percent pay cut to join the Cabinet. We can use some top talent in crucial government jobs, and it's harder and harder to get it. That worries me more, frankly, than some Woburn cop getting some gravy on a flag detail. Will we narrow the gaps between public and private work going forward -- both the gap at the bottom favoring public workers, and the gap at the top favoring private workers? We'd better.

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