s 2009 winds to a close, public employers are still scrambling to balance their budgets, and many see worsening fiscal conditions in the new year. Revenues continue to soften in many states, and costs continue to escalate for health insurance and retirement benefits. Even with wage freezes and furloughs, many public budget officers are scrambling for ways to further cut costs. Finance directors, bond rating agencies and muni bond investors are looking beyond 2010 and asking what these employers will do to structurally reduce their payroll costs in the long term.

Meanwhile, at least a third of California's municipal employers and a large number of other public employers across the country continue to pay their employees' share of pension costs, and require no contributions whatsoever for retiree medical benefits. Their pension funding behaviors are the exact opposite of private-sector employers, who have cut back on employer 401(k) contributions during this recession. I predict this will become one of the key battleground issues in governmental labor relations in the coming year. More here.