Osun’s modulated salary structure: Facts behind the figures

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Some days to the beginning of a general strike by workers, Osun State explains that it is not owing the workers as it has been operating a modulated salary payment in the last three years. Here is what the government means by modulated salary structure;

The modulated salary structure adopted by the State of Osun became a child of necessity in July 2015. It is a survival strategy for a State that had been long neglected in infrastructure development but recently took a deliberate decision to rapidly develop the State.

The survival strategy became necessary when revenue projections of the State got distorted as a result of the economic terrorism inflicted on the nation by the administration of Goodluck Jonathan which led to consequences, some of which the country is still grappling with today and may have to grapple with for a long time. The dire consequences of this on many States of the Federation was made worse by some of the earlier decisions the country took including the 2011 minimum wage increase, which from all indications is unsustainable for most states of the federation considering the huge size of the public service of many of them, low productivity and high level of waste. Yes, the workers deserve a living wage, welfare and the best post retirement lifestyle.

But do the States need the size of the public service workforce we currently carry? Can the States survive with the low level of productivity of the public service? _*Could their have been a balance between living wage for the workers and the right size and efficiency of the public service?*_

Well, soon the reality of the bad economic situation and some not well thought through policies crept in on everyone in the second half of 2015. Prior to this period however, the administration of Ogbeni Rauf Aregbesola had introduced and paid the 13th month bonus to workers for the first time in the history of the State as a gesture to motivate the public service workers and make them partners in the development of the State. Workers were paid their leave bonus promptly on the dates freely chosen by the workers, either on their birthdays or the anniversary of joining the service. The Governor recognised the critical role of workers in governance and development, he wants the best for workers. The various infrastructure development in the state are to further enhance the welfare of government workers in particular: quality and affordable schools for their children, affordable medicare, good neighbourhoods to live in, good roads to drive on without the frequent wear and tear on their vehicles. So, for a Governor who showed so much faith with workers and gave priority to their welfare when the economy was good and there was surplus cash flow to now adopt modulated salary structure must have left him with a very painful choice. Indeed, it was a most painful choice.

*The Figures*

Let us examine the facts behind the figures in the State of Osun. Let us attempt to see if there are justifiable reasons not to pay full salaries to all workers.

1. *GL 1-7* constitute *72%* of the workforce.

2. These *72%* are paid *100%* of their salaries and have been paid up till November 2017. _*Not a dime is owed this group which are the most vulnerable in any society.*_

3. *GL 8-12* constitute *20%* of the workforce.

4. These *20%* are paid *75%* of their salaries and have been paid up till November 2017. _*These are the middle level management who will be in charge in no distant time.*_

5. *GL 13* and above constitute *8%* of the workforce.

6. These *8%* are paid *50%* of their salaries and have been paid up till November 2017. _*These are the leaders in the State.*_ _*Please note that in this category are ALL political appointees.*_

It is important to highlight that *28% of the workforce account for more than 50% of the wage bill.* This is however understandable when you plot that against the Pareto principle.

Modulated salary structure became a painful child of necessity in *July 2015.* Up until then full salaries were paid to all categories of workers, leave bonuses were paid promptly and pensions were never delayed. Now, lets look at these figures which were captured in nearest absolute decimal numbers:

7. *July to Dec 2017* Gross FAAC Allocation: *N15.5billion*

8. *July to Dec 2015* Total Deductions: *N11.9billion*

9. *Net Revenue* from FAAC July to Dec 2015: *N4.5billion*

10. *Jan to Dec 2016* Gross FAAC Allocation: *N31.2billion*

11. *2016* Total Deductions: *N26.1billion*

12. *Net Revenue* 2016: *N5.09billion*

13. *Jan to Nov 2017* Gross FAAC Allocation: *N31.3billion*

14. *2017* Total Deductions: *N21.3billion*

15. *Net Revenue* 2017: *N12.5billion*

16. *Gross Total* of FAAC Allocation July 2015 to Nov 2017: *N82.08billion*

17. *Gross Total* *Deductions* July 2015 to Nov 2017: *N59.8billion*

18. *Gross Total Net Revenue* July 2015 to Nov 2017: *N22.2billion*

The above are figures of the State’s commonwealth from the Federal Government. Of course the State has it’s own *Internally Generated Revenue.* Prior to November 2010 when Ogbeni Rauf became Governor, the *average IGR was less than N400m.* The reason is not far fetched. Osun was a sleepy town, commercial activities ended at 7pm or earlier if darkness came earlier than 7pm. The infrastructure was at a pedestal level, rents were very low because demand was low, GDP was low. It was obvious that for the IGR to get a lift, there must be a near crazy ambition to develop infrastructure. Development and infrastructure have become siamese twins. Unfortunately, both are joined in the head. Difficult to separate one from another. For IGR to increase there must be visible change in the State, workers must be committed to its collection.

 

The public service has no influence on what comes to the State as FAAC, neither does the government. The people do and they do so with their numbers. It is therefore a disaster, travesty of justice and equity that many states use their entire FAAC allocation and even the Paris Club Refund to pay salaries

 

_*Let’s look at the IGR figures:*_

19. *July to Dec 2015 Total IGR: N5.3billion* . This is an average of N883million monthly.

20. *2016 Total IGR: N8.9billion.* Average of N742million monthly.

21. *Jan to Nov 2017 Total IGR: N7.1billion.* Average of N645million monthly.

22. *Total IGR Jan 2015 to Nov 2017: N21.3billion.* This is an average of N734million monthly.

By some providence of fate, like manna from heaven came in the *Paris Club Refund.* This was clearly an extraordinary revenue, not planned for and not projected for. It came in at a critical period when most states were almost belly up. It’s best imagined what would have become of many States in Nigeria without it.

*Let’s look at the impact of the Paris Club Refund on Osun figures.*

23. *Total Paris Club Refund: N18.05billion.* That’s a decent number in the life of a State like Osun as in most States. *That’s almost 85% of the State’s total IGR for 29 months.* It shows clearly that without it things would have been extremely difficult for *ALL* stakeholders in the State including the workers. It also shows that the *IGR receipt could be qualified as abysmally low* especially when you look at the month on month average and you look at how significant the extraordinary revenue is when compared with IGR.

*IGR collection is an indicator of the level of productivity of any government. Some countries live on this solely.*

Under normal circumstances, the IGR should cover the entire wage bill of a State and still leave room for other uses. If consistently the IGR averages at N800million it can be argued that the State does not need a workforce whose wage bill will exceed N800million. Revenues from FAAC and other extraordinary revenue should go into development of infrastructure because that is a State’s share of a common patrimony and infrastructure development is the basis of competition. The public service has no influence on what comes to the State as FAAC, neither does the government. The people do and they do so with their numbers. It is therefore a disaster, travesty of justice and equity that many states use their entire FAAC allocation and even the Paris Club Refund to pay salaries. The only way a State has to repay the people therefore is through higher productivity of the public service and development.

What therefore is the relationship between all these revenue heads: *FAAC, IGR and Paris Club Refund?*

24. *Gross Total Revenue July 2015 to Nov 2017 (18+22+23): N61.7billion*

Here’s the interesting part of the story. Recall the statement in the first paragraph on past decisions that was predicted to come to haunt us, minimum living wage without optimal size of the public service. Let’s look at some of the symptoms of this ailment which has become epidemic among most states of the federation using Osun as a case study.

25. *Total Wage Bill (Modulated) July 2015 to Nov 2017: N63.9billion*

Even if one cannot understand the implication of all other factual figures one would notice that *ALL* the *revenues in 29 months* are not sufficient to pay even the entire modulated salary. Yes, you got it. It couldn’t pay the modulated salary. There’s a *N2.2billion hole* the State has to fill even after factoring all sources of revenue. Who constitutes the State, the public officers, elected office holders and political appointees. This means there must be a deliberate decision among these stakeholders to either *cut the body to size or work harder to raise IGR.*

Let’s take this a step further and come up with some assumptions. Let’s assume that the State did not face the burden of deductions of revenue from source and the child of necessity called Modulated Salary was not given birth to painfully.

26. *Gross Total Revenue Without Deductions July 2015 to Nov 2017: N121.6billion*

27. *Total Wage Bill Without Modulated Structure: N104.4billion*

The implication of this is that wage bill alone in the period under review constitutes *85.85% of Gross Total Revenue.*

28. Osun has a *population* of about *4million people* which includes infants, children and adult. It therefore means that what belongs to almost 4 million people including children, infants and generations yet unborn will be used to service less *70,000 100% adults who constitute the public service.* That’s an *ethical* choice that we all have to make and one which will define the quality of leadership.

As at 2010 when Ogbeni assumed office, it was obvious that the State of Osun required extra ordinary push. The world was leaving it’s source behind. There was just no incentive for any investor to come to Osun, no incentive for Osun people in diaspora to come home. The choices of what should be done were limited. One of it was to rightsize the workforce and make it optimal to save money. But there was an assumption that as *Omoluabis* Osun people are cultured to bend backwards for each other, we lose something in order for us all to gain something or survive. We are cultured to make sacrifice for a collective interest. Therefore, the painful child of necessity called *Modulated Salary Structure* did not come as a surprise. The interesting and comforting part of this is that the deductions are not lost. They remain IOUs in the books of government. They will be paid when the cash flow improves, assures Mr Governor. It has therefore become in our collective interest that the cash flow improves. The aspect of the various revenue heads that the State has control over is IGR. With *taxable adults estimated at 1million and the massive infrastructure development which has translated to capital gains for many individuals and businesses there is nothing stopping the State from averaging N3billion monthly IGR.*

The massive investment in infrastructure is a strategy towards jump starting the economy of the state. There is no doubt that the workers of the State have made huge sacrifice towards the huge transformation going on across the State. History will be kind to them. It’s been tough for the administration of Ogbeni Rauf. He’s been able to make omelette without breaking an egg with the support of workers. It is important that this support is sustained in the interest of the State. We are almost there. The darkest part of the night is just before dawn. This is not the time for labour unrest in the State on something that is a compromise the Government had to make against the more rational option of cutting its coat according to the size of its cloth.

The big questions to the critics are:

1. What else could the government of Ogbeni Rauf have done in the circumstances the State finds itself?

2. What solution do the labour leaders have that will be fair and beneficial to the 4 million people of Osun?

This is the time to borrow each other some common sense. Osun does not deserve any labour unrest at this time.

Osun a dara si o!

*Issued by the Osun State Government