Corporate Fat Cats Become the Nation’s Richest “Government Employees” by Leaching Off Taxpayers

by Gregory N. Heires

overpadworkersBudget hawks squawk about bloated bureaucracies and excessively paid public employees to justify their calls for slashing government services.

In recent years, their drumbeat about government waste has contributed to a political climate that has allowed for layoffs of hundreds of thousands of public employees and the imposition of salary freezes and paltry pay raises, as well as reductions of pension, health-care and other benefits.

But public employees like sewage treatment workers, teachers and social workers are far from being fat cats. Arguably, the most compensated “government” employees are actually the corporate bosses and administrators who line their pockets with taxpayer dollars for shoddy contracted-out work.

Exposed: America’s Highest Paid Government Workers,” a report by the Center for Media and Democracy (CMD), shows how just six of those corporate chieftains have earned $100 million in recent years. But their track record for delivering services is often abysmal.

While the Center for Media and Democracy’s report focuses on only a few contractors, its message is more far-reaching, suggesting that government would generally be better off keeping work in house.

Indeed, two years ago, POGO, the Project on Government Oversight, took a look at federal contracting, which mushroomed from over $200 billion in fiscal year 2000 to more than $530 billion in fiscal year 2011.

POGO’s report, “Bad Business: Billions of Taxpayer Dollars Wasted on Hiring Contractors,” found that contractors cost 83 percent more than federal employees. The study showed that federal government employees were less expensive than contractors in 33 of the 35 occupational classifications reviewed by POGO.

In one of the greatest municipal government scandals in U.S. history, former New York City Mayor Michael R. Bloomberg’s contracted-out CityTime project, which automated the city’s payroll system, resulted in the theft and waste of hundreds of millions of dollars and the indictment more than 10 consultants. Besides helping to expose CityTime, a project on contracting out and revenue by District Council 37, which represents municipal employees, has documented how New York City’s annual $10 billion in procurement spending is marred by waste, corruption and union busting.

Poor Services and Excessive Costs

“Given these astronomical salaries, and evidence of higher prices, poor service, and at times outright malfeasance, taxpayers have every right to be concerned about how their outsourced dollars are spent,” said Lisa Graves, executive director of the Center for Media and Democracy, when the watchdog group released its report in February.

The top executives—described as the most highly compensated government employees in their fields—are:

  • George Zoley, the country’s highest paid “corrections officer.” Zoley is the CEO of the private prison firm GEO Group. Between 2008 and 2012, his compensation was $22 million.

The Center for Media and Democracy estimates that GEO Group makes 86 percent of its revenue from taxpayers. Its contracts include clauses that require governments to keep prisons full or pay for empty beds. GEO Group has faced hundreds of lawsuits over prisoner deaths, assaults, and excessive force.

  • David Steiner, the country’s highest paid “sanitation worker,” is president and CEO of Waste Management. He earned $45 million in compensation from 2006 to 2012. Government contracts account for 50 percent of Waste Management’s revenue, according to Goldman Sachs.
  • Ron Packard, head of K12 Inc., is the country’s highest paid “teacher.” Between 2009 and 2013, he earned $19 million. He enjoyed that compensation even though only 12 percent of K12 Inc. cyber schools met state standards in 2010-2011, compared to 52 percent of public schools. CMD estimates that 86 percent of K12 Inc.’s revenue comes from taxpayer dollars.
  • Jeffry Sterba, the country’s highest paid “water worker,” is president and CEO of American Water Works Co. During his three years as the company’s top executive, he has earned $8.3 million. American Water is the largest for-profit provider of water and wastewater treatment services in the country. CMD estimates that 89 percent of its revenue comes from taxpayers.
  • Richard Montoni, the country’s highest paid “caseworker,” is CEO of Maximus, which provides Medicaid and government-funded welfare services for the poor. Between 2008 and 2012, Montoni enjoyed a compensation of $16 million. Wisconsin charged Maximus with improper billing in 2013. In 2007, Maximus paid the U.S. Justice Dept. $30 million after a government investigation uncovered widespread overbilling.
  • Nicholas Moore, managing director and CEO of the Australian infrastructure firm Macquarie, is the country’s highest paid “road worker.” He made $8.8 million in compensation in fiscal year 2013. He has promoted the privatization of public services as a member of the American Legislative Exchange Council, which helps conservative politicians to craft legislation to privatize and reduce government services and undermine the power of public- employee unions. Macquarie has long-term contracts to run Chicago’s Skyway, Indiana’s Toll Road and the Dulles Greenway in Virginia.

Public Investment, Private Profit

These instances of privatization and contracting outstanding are disturbing for a number of reasons beyond the fact that corporate executives are profiting handsomely from taxpayer dollars.

Privatization allows companies to profit from government investments in infrastructure—roads, information technology and sewage treatment plants—without bearing the risk of making their own capital investment. Consultants often have far higher salaries than civil servants.

The takeover of government services by private companies is a form of union busting that typically replaces workers who have decent benefits with lower-paid and non-union front-line workers. And contracting out often leads to a lack of accountability, creating conditions that allow for theft and inefficiencies.

Research by Paul C. Light, a professor at New York University, shows that the total cost of federal contract employees is twice that of civil servants. The cost of military contractors is three times higher.

If only the politicians who determine how taxpayer dollars are spent would listen to credible analysts like Light instead of budget hawks whose agenda is to whack away at government services.

Gregory N. Heires is senior associate editor at Public Employee Press, the official publication of District Council 37, which represents 120,000 municipal workers and 50,000 retirees in New York City.  He blogs at The New Crossroads.

Read other Talking Union posts by Gregory Heires.


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