November 10, 2007

The Party's Over Folks

Unless you have been living in a cave over the last month you know we are headed for both inflation AND a recession. This was likely triggered by the sub prime mortgage melt down. Of course it does not help that the dollar is tanking, oil is rising to counteract the falling dollar and China realizes they are holding half of the debt of the entire US. But this is no worry for Government employees. Full speed ahead on the Titanic. Poblem is that when the Titanic goes down only Govt. employees will get lifeboats. Taxpayers will have to go down with the ship. Like the article says below, the slow people, those that only Oprah or entertainment TV (the lowest denominator voter) is starting to at least as questions about the pension issue.

Sutter debates public pensions Its controversial move to boost its benefits echoes statewide fight

By John Hill, Sacramento Bee, September 3, 2007

Sutter County may be a little off the beaten track, but it finds itself at the center of a statewide debate over whether local governments have granted extravagant pensions to public employees.

Three years ago, the Sutter County Board of Supervisors sweetened pensions for county workers, arguing that generous retirements would help the county recruit and retain workers.

The move was controversial from the start, with one prominent local official, Auditor-Controller Robert Stark, objecting that he and the public were given no chance to comment on the dramatic change.

Three years later — this June — the county grand jury called the decision "flawed" and laid out the fiscal consequences. The county’s pension plan had gone from being $38 million in the black in 2000 to $36 million in the red five years later.

"This has gone on all over," said Keith Richman, a former assemblyman behind a proposed initiative to scale back government pension costs by offering a less generous retirement to new state and local employees.

Organizers have not yet started gathering signatures for the initiative, which they hope to put on the November 2008 ballot.

"The fundamental problem is that more and more of government budgets are going to pay for retirement costs, whether you’re talking about the state or local governments," Richman said. "The money is not going to pay for other services like education or health care or public safety."

Public-employee unions counter that the state retirement system is sound, and that if the state and local governments roll back pensions, they will have to compensate by increasing salaries.

Sutter County officials defend their 2004 decision as a sensible way to maintain a qualified work force. They deny that it plunged county finances into a crisis.

"Our pensions are in great shape," said Larry Munger, a lifelong Sutter County resident who ran a market for 22 years and became a county supervisor in 1995.

Munger said he is not worried about the $36 million "unfunded liability" mentioned in the grand jury report.

"You buy a house, you’ve got an unfunded liability," he said.

The controversy, he said, has been kept alive by malcontents who have other bones to pick with the county. Munger said his constituents aren’t worried about pensions but are "sick and tired" of the critics.

Government pensions became a hot topic across California four years ago as state and local governments struggled to meet pension obligations in the midst of a fiscal crisis. The state and many local governments boosted pension benefits during the dot-com boom, when investment returns soared for the California Public Employees’ Retirement System.

Then the stock market tanked, even as the richer benefits kicked in.

In 2005, public-employee unions fought off Richman’s earlier attempt to cut costs by replacing the traditional pension system, which guarantees a set retirement income, with 401(k)- style accounts for new workers. Gov. Arnold Schwarzenegger scrapped the initiative after the unions waged a campaign saying it would cut off death and disability benefits for fallen peace officers.

Late last year, Schwarzenegger formed a 12-member commission to come up with a new proposal for dealing with pension costs. The commission is scheduled to issue its report by the end of the year.

In the meantime, local governments across the state have continued to struggle with pension costs. County grand juries and others have criticized the generosity of the benefits and how decisions were made.

Sutter County, Sacramento’s neighbor to the north and home to some 91,000 residents, increased pension benefits in 2004, after the pinch had already been felt in other jurisdictions.

Government pensions are based on a percentage of a worker’s highest annual salary multiplied by the number of years served.

In January 2004, the Board of Supervisors agreed to give rank-and-file county workers 2.7 percent of highest annual salary for each year on the job at the age of 55. That was a substantial increase from 2 percent. That August, safety employees got 3 percent at age 50.

The grand jury report faulted the Board of Supervisors for failing to consult with Stark, the auditor-controller, as required by its own rules.

Citizens got to comment only after the pension hike was a "done deal," the report concluded.

Some of the biggest beneficiaries were in upper management, the same officials who negotiated the deal, the grand jury found.

"The grand jury is not implying that these changes were engineered to primarily benefit those responsible for making them," the report states. "However, if that was their intent, they could not have designed a better process for leaving that impression."

Even though the pension hikes were meant to recruit and retain a county work force, critics say, just the opposite has happened, as workers with richer retirement prospects have headed for the door.

"I defy you to find any pension expert who says that allowing people to retire younger with more money encourages them to stay," Stark said.

The pension payments, meanwhile, take away from other pressing needs, critics say. Busy roads have not been resurfaced for years, said Wade Arnold, who describes himself as a "concerned citizen." The museum and the arts council have seen their budgets cut, he said.

The county’s backlog on maintaining roads is about $50 million, said Robert Mackensen, president of the Sutter County Taxpayers Association.

But Supervisor Jim Whiteaker said the critics are crying wolf.

"We’re very frugal and very conservative in allocating money, and we thought it was justified for our employees," he said.

Since the change, Whiteaker said, the county has filled 19 deputy sheriff positions that had been vacant.

Supervisor Munger dismissed the complaint that the public didn’t have a say. The pension concessions were made in contract negotiations with public employee unions, he said, and those meetings are never open to the public.

But critics say that the public is angry. Mackensen, of the taxpayers association, said he gets stopped on the street or the grocery store and told to keep up the good work.

The pensions can’t be rolled back without approval from public-employee unions. But they can be changed for newly hired workers.

"I think there’s hope because I think the public is waking up," Stark said. "This issue has been in the public’s eye for three years now up here, and that’s practically unheard of for something that for many people is an esoteric thing."

Lakewood Accountability Action Group™ LAAG | | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

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