Turnover, competency, and having more than say, 0-2 choices when hiring. Think I'm kidding? I work for the state - there's been times where we had to re-open our positions due to lack of qualified applicants. Often we only have one or two qualified applicants. And that's at our current compensation package. We've lost lots of really great workers because companies like Boeing and Intel will snap them up and start them at $100k +. I'm not exaggerating. 

Personally, what I make right now is not excessive, nor underpaid. It's fair, considering the benefits and hours we put in. But reductions will hurt in the quality and retention of experienced workers. It's not a threat, just reality based on my 11 years of experience.