In defense of state employees, as you can see they are working without a safety net.
Staff's have been cut, generally one person is doing the job of 3 (I know, same at megacorp), but there are also no added resources or incentives. With the above cited pay, what is the incentive to work 60-80 hours? There are no stocks, no bonus, maximum of 2.5% raise, etc. If you give up a few years as a work-a-holic you miss your family and lifestyle balance but you can't even justify it for furthering your plans (save or spend depending on your mindset), as you can in megacorp.
I know of few instances of graft or other illegal activities, probably the same per capita as the private sector. Most are trying hard to do the best job they can with the resources they have been given.
Issuing state contracts to get the job done under the current wave of outsourcing can take 6 - 10 months since all must be publically announced with all criteria specified, and let's hope it doesn't get held up on appeal (often with larger contracts), And with contracts, because they need to be rebid every so often, there is a discontinuity of vendors. In the mean time, some things are better served with contracts than others. Cutting the grass on roadways is one thing, but there is a reason that the private sector doesn't automatically do many of the protection and support services that goverment offers. So, many contracts are not necessarily cheaper and better service. I have seen low bids awarded, with the vendor only coming back and use political pull to get increases in subsequenct years, that if the state agency had been given the same $$ resources -- would do just as well or better.