Time to break some promises..just like politicians do with taxpayers

Controller: State faces up to $47 billion bill on health benefits

Monday, May 7, 2007

California may have to come up with an extra $47.9 billion over the next 30 years to cover health and dental benefits for its retirees and current state employees, Controller John Chiang said Monday.

But Chiang said the state could cut that bill to about $31.3 billion if it dropped its pay-as-you-go approach, invested about $1 billion a year to help cover future retiree health costs and used the earnings to ease the impact on the state budget.

"Our actuarial report shows that, annually, if we continue on the pay-as-you-go basis, we will accrue a liability of $3.59 billion a year," Chiang said in remarks prepared for a speech to the Sacramento Press Club. "But if we fully pre-fund and put that money into a trust fund, we'll only need $2.59 billion a year (from the budget) to cover this liability."

The state has been paying less than $1.4 billion a year for health benefits, raising the specter of a large unfunded liability in the future, Chiang said.

An order issued by the federal government in 2004 requires states to spell out how much they'll have to pay in non-pension retirement benefits.

Chiang said he was releasing his findings nearly two years before the federal deadline to give the state time to come up with a "responsible plan to honor our promises to state employees and protect future budgets."

"We cannot continue to defer these costs to the next generation of Californians," he added.

The pre-funding approach he recommends is the same one used by the state to pay pensions. He also said the state should look for ways to control its health-care costs.

State Finance Director Mike Genest said Gov. Arnold Schwarzenegger appointed a 12-member commission last year to propose ways to deal with state public pensions and retiree health benefits.

"As the governor has said, we have to find the best way to meet these obligations without harming other government programs and taxpayers or handing the problem off to future generations," Genest said.

'Servants' become the masters

What an apt title. The drum keeps beating but the politicians are not hearing, just like with everything else in America. The politicians only serve themselves, public employees, lobbyists (and the interest groups that hire them) and the taxpayers. In that order, with taxpayers outnumbering the former but way down the list in terms of influence. Why? Because taxpayers are lame (less than half vote) and never vote anyone out of office (usually as there is no one else any better to vote in)

http://www.ocregister.com/ocregister/opinion/columns/article_1691947.php

May 13, 2007
'Servants' become the masters
STEVEN GREENHUT
Sr. editorial writer and columnist
The Orange County Register
sgreenhut@ocregister.com

As the presidential race gets under way, we're once again hearing the Democratic candidates ratchet up their rhetoric about the nation's great divisions between rich and poor, between those with health insurance and those without it, and between those with jobs and those on the unemployment line. I thought most people got tired of John Edwards' "two Americas" shtick during his campaign in 2004, but he is again championing this theme as he seeks the 2008 nomination.

I'll give the millionaire former senator this much: There are indeed two Americas, although the divide isn't the one that he repeatedly details.

Since the mid-1990s, American policy makers have been involved in a massive wealth transfer from the private sector to the public sector. To win the support of the powerful public-sector unions, officials at the federal, state and local levels have granted to government workers lavish retirement benefits that dwarf those of non-government workers. Here's the real divide: Between "public servants," who will be retired in their early 50s and living it up by the golf course, and private-sector workers who will be laboring until they drop over – not only to pay the bills, but to pay the higher taxes that surely will be needed to sustain the underfunded pensions promised to their government counterparts.

"As the first wave of 79 million baby boomers heads to retirement, the nation is dividing into two classes of workers: those who have government benefits and those who don't," USA Today reported Feb. 21. "The gap is accelerating in every way – pensions, medical benefits, retirement ages. Retired government workers are twice as likely to get a pension as their counterparts in the private sector, and the typical benefit is far more generous."

The newspaper quotes the Congressional Research Service, which finds that the typical government retirement is well over twice that of the typical private-sector retirement.

Government workers often also make more in salary. There are dueling statistics on public-sector vs. private-sector salaries, but the Bureau of Labor Statistics gives public employees (over the entire range of job categories) a 25-percent premium. Looking solely at federal workers, the Cato Institute explains that those in the government sector earn 56 percentmore in salary alone than those in the private sector. Public sector employees also have more days off, shorter work days, better health care benefits and so forth.

The benefit boom started when the stock market bubble inflated in the late 1990s, with unions claiming that the new level of investment returns meant higher pensions would be covered by pension fund investment gains and involve no risk to taxpayers. But what goes up must someday come down. After 9/11 happened, government unions – especially for police and fire – exploited that tragedy to increase their retirement dollars. No one could say no to potential "heroes." Meanwhile, union-dominated retirement boards continue to push for the most aggressive investments to earn the highest-possible returns. Why not? If they pan out, union members get even more benefits. If they don't, the taxpayers are stuck paying the difference.

The day of reckoning keeps getting closer.

State Controller John Chiang announced last week that California needs to start setting aside at least $2.2 billion a year to address the liability for its retiring workers; the total deficit ranges in estimates from about $48 billion to $70 billion. The state's pension deficit is at least $50 billion.

In Orange County, the public employee pension tab tops $2 billion – something made far worse after the Board of Supervisors in 2004 passed a retroactive pension spike that allows county workers to retire with a guaranteed pension equaling 81 percent of their pay after 30 years of service. Public safety workers in Orange County can retire with 100 percent of their final pay at age 53.

At these rates, pension liabilities are mounting. Some states' pension plans are on the skids and will soon require a bailout. Private pensions are in similar trouble, which is why corporate America is slashing benefits. But no such reductions have a chance in the public sector, where it's "only" taxpayer money that's at stake, and officials would rather pawn off problems to the future than face the wrath of the unions. Unlike companies, bureaucracies never go out of business, and voters rarely pay attention to these boring issues.

So it's two Americas, with the haves being those who worked in the government, and the have-nots being everybody else.

But don't worry.

A taxpayer-funded think tank at a taxpayer-funded university has released new research sponsored by a taxpayer-funded retirement system "proving" that these outsized pensions are not a problem for the state, but a benefit. As the Sacramento Business Journal reported, "The Applied Research Center at California State University, Sacramento, analyzed the impact of benefit payments to 674,000 retirees and their beneficiaries. Dr. Robert Fountain, research center director, and Dr. Robert Waste determined that the $13.8 billion in retirement benefits paid in 2006 created a $7.3 billion 'ripple effect,' for a total $21.1 billion impact." The CEO of the state retirement system reiterated the point of the study: "Retiree pension payments may seem like they are liabilities on the books of government, but, in fact, they represent billions and billions of dollars that contribute to the strength of state and local governments."

I don't know what's scarier, that professors (including one with the appropriate last name, "Waste") would engage in such pointless research or that the person in charge of the state's retirement system, with billions of dollars at its disposal, has such little economic understanding.

The argument that such liabilities are really benefits is known to economists as the "broken window fallacy." Author Henry Hazlitt told the famous fictional story, whereby a hoodlum throws a brick through a shop window. The store owner is upset, but a crowd gathers around the smashed window and starts to talk about the good things that will come from the vandalism. The money spent to fix the window will benefit a glazier, and the money the glazier gets will benefit his grocer and on and on. "The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor," Hazlitt explained.

But ... the crowd forgets that the shopkeeper is out the money, and he would have spent it at, say, the tailor's, and the tailor would have spent it somewhere else. The broken window did not create wealth but unfairly shifted it.

Likewise, elected officials, at the behest of the unions, have been diverting billions of dollars from taxpayers and giving those dollars to union members. Certainly, one can study the effect of the money spent by those retirees. I'm sure real estate agents at Lake Coeur D'Alene, Idaho, car dealerships and the people who sell those 4-by-4 sand toys will enjoy the benefits of dollars lavished on retired government workers.

Yes, if a mugger takes the money in my wallet, there will be a boon to the liquor store where he spends it. But then I'll be out the cash, which I won't be able to spend at the local restaurant.

There simply is not enough money to pay for all the promises made to government unions and their members. As the liabilities mount, officials will be forced either to slash benefits, borrow money or raise taxes. The unions will never allow the first course of action to happen, so we're stuck with the latter two options – both of which will mean more wealth transfers from one America to the other, regardless of how some government economists try to spin it.

Contact the writer: 714-796-7823 or sgreenhut@ocregister.com

California public employees gain generous benefits while public sleeps

LAAG could not have said this any better than Mr. Boren. Kudos. Maybe the politicos are starting to listen to the natives beating the drums?

California public employees gain generous benefits while public sleeps
http://www.scrippsnews.com/node/13986

By JIM BOREN
The special interests usually have their way when the public doesn't pay attention to policy decisions on issues that seem arcane to most taxpayers. Quite simply, the ones paying the bills get ripped off because government bores them.

Then they wake up one day to find they've been funding political giveaways for years, and that's threatening their favorite programs. Elementary school music is being cut; a fire station is being closed; a program for seniors is being eliminated. Now they're mad, but often it's too late.

Generous public employee pensions in California and excessive health benefits for the retirees are examples of the public not giving a thought to costly programs that could fundamentally change the mission of public agencies. But who cares about actuarial tables and unfunded liabilities? Besides, we have a short attention span and the problems won't be felt for a generation.

It's interesting to see what upsets the public. Californians started an election rebellion over paying an excessive car tax, but they didn't say a word about lucrative pension programs that may give public employees more money in retirement than they were paid for working.

The high car tax in California helped to get Gov. Gray Davis recalled in 2003, but a more serious Davis misstep _ heaping benefits on public employees that the state couldn't afford _ didn't make the voters' radar.

But decisions on employee benefits at all levels of government threaten the ability of agencies to provide the services they were created to perform. In school districts, for example, money is being sucked out of the classroom to pay for health benefits. The biggest problem is the increasing burden of retiree benefits.

School trustees in the Fresno Unified School District began controlling these costs last year and the retirees responded by suing them. Even though they were being asked to contribute a tiny amount toward their health care, they've rebelled.

Unfortunately, they think the money to pay for health benefits somehow magically appears. One retiree said the other day that it doesn't matter what the actuarial tables say, the state will bail out the school districts.

But this could be a house of cards, and one day retirees may have nothing at all as the government agencies supporting them go bankrupt. Who will they sue then?

A new report underscores the problem in California. Local governments and school districts in California face rising retiree health care costs and that could divert money from community services, according to the California HealthCare Foundation.

New federal accounting rules are beginning to reveal the huge liability that has been mounting in most public agencies in recent years. The rules, which will be phased in beginning next year, will require public agencies to report the cost of retiree benefits.

That should draw "increased attention to retiree health care spending," according to the CHCF. "This report is intended to stimulate a frank conversation about this important issue," said Mark D. Smith, the CHCF's CEO.

But a frank discussion will only occur if the public pressures elected officials to deal with the problem. In the current environment, public employees control the political agenda.

The Center for Government Analysis estimates that retiree health care costs for public employees in California will be $31 billion per year by 2020.

Pensions for public employees are another big problem. San Diego was the poster child for the problem. The city's pension fund was nearly $2 billion upside down last year, and it threatened every city program, including public safety.

In Fresno County, a grand jury investigation said the county faces "insurmountable debt" if retirement costs aren't contained. The report said the county couldn't afford to pay retirement benefits owed to its 4,000 retirees and 7,000 current employees without going to the taxpayers for more money.

The problem was magnified in Fresno because the county allowed retirees to manipulate the method for calculating their pay. The "Fresno method" resulted in some retirees getting more money in retirement than they earned while working. A judge ruled in 2004 that the Fresno method was improper and the pensions of about 600 employees had to be recalculated.

Employee unions continually push for increases in benefits, even when it's not financially wise. But unions take no responsibility if government agencies give benefits when they shouldn't.

Consider this union response in an Associated Press story last week: "If they haven't been looking at the numbers, shame on them," said John Abraham of the American Federation of Teachers.

That's another reason taxpayers should be paying attention to public employee benefits. Unfortunately, they're more interested in the latest antic of Paris Hilton.

Jim Boren is The Fresno Bee's editorial page editor. E-mail him at jboren(at)fresnobee.com or write him at 1626 E St., Fresno 93786.

Wonder why there isn't enough money to fix city streets?

You just cant say it enough ways or enough times in enough places. The "driveby media" is slowing picking up the story and starting to see the "Emperors clothes". Most politicians are to blame and very few feel any responsibility to "fix" the problem. Public safety employees are really not worth the cost, especially for benefits. Most crimes (especially murders ans serious crimes) have no relationship to the numbers of cops on the streets in most areas. The same with structure fires. When was the last time you saw one in person. Aside from the occasional house fire most large buildings are sprinklered or have advanced fire protection. Its just fear mongering by greedy unions pounding the drums making us think that if we are short one fireman or cop, our house will burn down or we will be attacked on the street.

You schleps in the private sector making under $100,000 a year with no benefits, ironclad job security or lifetime pensions at 100% of your highest years salary, better wake up before you get one hell of a tax bill soon.

Breaking the bank
Wonder why there isn't enough money to fix city streets? It's because fat pay and benefits packages are sucking up the dough

http://www.newsreview.com/chico/Content?oid=302991
By Richard Ek
PHOTO BY MEREDITH J. COOPER

About the author:
Dr. Richard Ek is a retired Chico State University journalism professor and department chairman who contributes frequently to the Chico News & Review.
www.chico.ca.us

The city of Chico is in financial trouble because it spends more than it takes in, and Greg Jones wants everybody in town to know about it.

"It's important to admit you have a problem before you can form a plan of action to solve it," the city manager said.

This negative state of affairs has been going on for about four years. If allowed to continue unchecked for a couple more years, the operating reserve would be gone, and another five or six years without corrective action would erase the emergency reserve, Jones explained. Then the sky could fall.Root cause of the problem: The city pampers its 450 employees with costly pay and benefits goodies, which in turn limits the amount of money available for street repairs, parks maintenance--Bidwell Park especially--and development of creekside greenways, to name a few infrastructure needs.

In what amounted to a cry for help, Jones last fall put out a mass mailing to Chico residents at a cost of $7,000 to pinpoint the problem. In the glossy, four-page "citizen newsletter," Jones said in part:

"The cost of doing business for the City has outpaced revenue for a number of years, requiring the use of reserves. ... These cost increases are comprised of ... retirement system cost increases, health benefit costs ... pay increases, and other personnel related costs.

"These costs, if no changes are implemented, will continue to accelerate faster than revenues, causing continuing ongoing budget deficits and allowing no room for increasing levels of service which the community needs."

Jennifer Hennessy, the city finance director and the source for most of the numbers in this article, supplied specifics by revealing that 80 percent of the city's $46.9 million budget for 2006-07 went for people costs. That's almost $37 million, and of that amount $26.5 million went to public safety, meaning police and fire. Overall, public safety accounts for 71 percent of the general-fund budget, with police taking 45 percent of the total.

Retirement benefits for city employees as a group have gone up 379 percent since 2000, and pay rates have largely kept pace.

Just how sweet the benefits package has become can be seen through health and life insurance policies enjoyed by all employees. Health coverage ranges from an HMO policy that's free to the employee but costs the city $323 per month, to a "Cadillac" policy that covers 90 percent of anything needed for a family and costs the city $902 per month, compared with $170 for the employee. All city workers also enjoy a city-paid life-insurance policy--cost: 34 cents per $1,000--worth a dollar of coverage for every dollar earned. Thus an employee who earns, say, $75,000 carries a free $75,000 life-insurance policy.

On average, permanent city employees earn $68,022 annually.

"Government employees are extremely well paid ... compared to private-sector workers in Chico and the county," Hennessy said. Indeed, Chico has long been known as a minimum-wage town, and Butte County, whose median household income in 2003 was just $33,443, has long been a poor county.

Jones emphasized that people everywhere consider public safety and streets to be the most important factors defining how well their cities or towns are managed. Public safety measures up well in Chico, but the streets do not.

Indeed, the police and fire unions--plus other city unions and employees--dip so deeply into the money pot that there's little left for road repair and maintenance.

The most outspoken critic of the pending budget shortfalls is City Councilman Larry Wahl. He more than anyone has warned that the council must face these realities and take action to reconcile spending and income imbalances before it is too late.

Dan Fulks, the city human resources director, holds the demanding job of negotiating contracts with the city's several unions. He's now hammering out a new multi-year contract with a three-person team representing the local chapter of the International Association of Firefighters. He said he couldn't "sunshine" (reveal) details other than to say the firefighters got a raise in each of the past three years and want another raise this year.

In contrast, the Chico Unified School District, for example, must early on sunshine the demands of the teachers' union, which nearly always creates a public furor. The city process instead reveals terms only after the fact, when the City Council has already OK'd the contract. Fulks acknowledged there might be more negative reaction if bargaining details were publicized.

City figures show that firefighters have enjoyed pay increases totaling 40.1 percent since 2000. As for retirement benefits, the big goody came down in 2001, when public-safety workers statewide won what has become known as the "3 percent at 50" plan. That means a firefighter or policeman can retire at age 50 with each year of service worth 3 percent of salary at the time of retirement.

If a public-safety worker started on the job at age 20, for example, he could retire at 50 with 90 percent of his highest salary, presumably the salary he made during the final work year. If that salary were $75,000 today, such a retirement would be worth $67,500. After age 50, each year is worth 3 percent of salary. In contrast, California public school teachers work until age 60 to get 2 percent.

The retirement benefits are carried with the California Public Employees Retirement System (CalPERS) in Sacramento, and the "3 percent at 50" plum proved to be the catalyst--along with a stock market swoon in spring 2000 that hurt investment returns and thus tax revenues--that prompted Gov. Arnold Schwarzenegger to declare a state of retirement system crisis and call for the Legislature to rein in pension costs. The governor knew that, once granted, a benefit, just like a bond, must be paid, even if it means a taxpayer bailout.

Although the Legislature balked and forced the governor to temporarily back off, he took a different tack last month by tossing this very hot potato to his newly created bipartisan Public Employee Post Employment Benefits Commission to study retirement reform and quickly make recommendations for action to the Legislature. The commission is also supposed to right away find a way to educate the public about the magnitude of the issue.

At the commission's first meeting early this month, Marcia Fritz, a CPA and pension expert from Citrus Heights, outlined the scope of the problem over the next decade, when hundreds of thousands of state and local government workers will retire and begin collecting benefits. She said the pension "fiscal time bomb" represents the biggest issue facing the state.

Just how well the 69 firefighters at six Chico stations are doing is reflected in the fact that they enjoy benefits worth 53 percent of payroll. That means if a firefighter makes, say, $75,000 dollars a year, his benefit package--defined-benefit pension, health insurance, life insurance, etc.--is worth $39,750.

New firefighters start at a hefty $57,551, and the average salary is $81,630. With benefits, total compensation is $124,894. Fourteen of the 69 firefighters earn salaries in excess of $100,000.

There has never been a time in the American private sector when any occupation group enjoyed benefits as rich as those enjoyed by city employees. Today even 5 percent looks good, and in the past 30 years the number of workers covered by defined-benefit pension plans has decreased by half.

Indeed, Hewlett-Packard is the latest corporate giant to announce it will no longer offer defined-benefit pensions. Others, like United Airlines, enter bankruptcy and dump their under-funded pension obligations on the federal Pension Benefit Guarantee Corp., which then kills all secondary benefits like health and life insurance and pays some 60 to 70 cents on the dollar for the remaining pension, depending on how seriously under-funded it was at dumping time. This federal rescue agency, which is many billions of dollars in the red, may well soon be a candidate for a taxpayers' bailout.
Click on the image for a larger version.

All city of Chico employees are required to contribute 9 percent of their salaries toward their pensions, but the firefighters pay only 2 percent because the city picks up the other 7 percent. The city then pays another 25 percent of the firefighter's salary into his or her pension fund, for a total of 34 percent of salary. The city pays at least 25 percent of salaries toward the pensions of all its 450 employees. This is on top of their free life-insurance policies.

Bill Hack, president of the local firefighters' union chapter, didn't see any problem with asking for more money because he said any pay increase is tied to an increase in the general fund and the city's being able to afford it. But the city manager's point is that the city is balancing the budget by using its reserve.

The city has added three new firefighters this year.

Fulks will sit down with the Chico Police Officers Association when he wraps up a contract with the firefighters, and he said he doesn't know what the 93 badge-carrying cops will want.

There are a couple of important things he knows for starters, however. First, the city picks up the entire 9 percent pension salary personal contribution for the police, and, second, the police benefits package is now worth 62 percent of payroll. That means if a policeman is earning $75,000, his benefits are worth another $46,500. The police have won a 37.4 percent increase in pay since 2000.

Starting salary for police officers is $49,795; the average pay is $70,777.

A different perspective on the matter of public-safety compensation can be seen in the fact that 64 of the 159 cops and firefighters earned more than $100,000, including overtime, in 2006. Hennessy said the city paid $2,435,479 for public-safety overtime last year, which was 5.5 percent of the city budget.

The police are unique in having a trust fund for health care that will carry on into retirement, not stop at retirement, as other city benefits do. Detective Terry Moore, the police union spokesman, said officers contribute $200 per month to the trust. The city matches that with another $200, and the total buys a health insurance policy that "partially offsets" costs for officers in retirement.

Just how many cops would it take to make Chico residents feel safe? It's hard to say. Police spokesman Capt. Mike Maloney revealed that work has been done on the national level to partially quantify the question. He said a formula carried in the annual FBI Uniform Crime Report shows Chico, with 1.83 officers per 1,000 population, is a little above average for the three states of California, Oregon, and Washington.

The city manager, however, doesn't feel comfortable with formula staffing and wants more officers so he can get into community policing with foot patrols.

Police Chief Bruce Hagerty said that last year his department fielded more than 26,000 emergency calls to 9-1-1, and in the great majority of cases a crime had already been committed or was in progress. In many cases there was already a victim.

"Our No. 1 goal is to prevent crime, and we can offer no statistics on how we are doing there because we obviously have no way to count crimes that didn't happen," the chief explained.

Hagerty added that police made 54,000 responses last year to calls, in addition to 9-1-1 calls, where the calling party wanted a police officer.
North Cedar Street
PHOTO BY MEREDITH J. COOPER

The department has just added two officers to the traffic division by redeploying two officers and is now starting the recruiting process for two replacement officers. All this is being paid for at present by state/federal grant money that will run out in a few years. At that time, Jones said, the city will pick up the positions on its regular payroll.

The 2006-07 budget calls for six new police positions, four of which have been filled. The other two will be filled when new grads emerge from the Butte College Police Academy in May, according to official sources.

The public often hears that police officers and firefighters need extra compensation because they "put their lives on the line every day." While providing public safety certainly can be dangerous, records show that only one police officer and one firefighter have died in the line of duty in the history of Chico--the policeman in a downtown restaurant incident in 1938, and the fireman in a post-fire downtown roof collapse in 1970.

Fulks also bargains with the service Employees International Union (technical, clerical, trades, and craft workers), and its 300 workers do very well, averaging an annual salary of $47,867. The top for an SEIU member is $37 per hour with benefits worth 52 percent of payroll and yearly total compensation worth $118,686.46. Union members' pay has gone up 37 percent since 2000.

The fourth and last union Fulks sits down with is the Chico Public Safety Association (dispatchers and community service officers). This small group has also done well in pay since 2000, with raises ranging from 30.8 percent to 40.8 percent, depending upon position. Average annual salary is now $47,607. The highest-paid member earns $29.03 per hour with benefits worth 56 percent of payroll and total compensation worth $94,196.54.

In addition to these recognized unions, the city also has three "unrepresented" employee groups: public-safety management (fire chief, police chief and captains), who have benefits worth 55 percent of payroll; confidential employees (certain clerical staff who have confidential-information access), who have benefits worth 47 percent of payroll; and management (city manager, department heads), who have benefits worth 39 percent of payroll and pay increases totaling 35.3 percent since 2000.

The police and fire chief each earns a salary of $165,939 and total compensation of $251,439.76.

Tracking of all groups shows their pay increased roughly 6 percent per year, except fire, which is closer to 7 percent. Union workers occupy lifetime positions.

The city manager personally negotiates terms with the unrepresented employees and makes compensation recommendations for them to the City Council. Since Jones makes recommendations on all groups--represented and unrepresented--and makes a pitch for his own pay, does he indirectly benefit from his own raise recommendations and thus have a conflict of interest?

City Councilman Larry Wahl didn't answer yes or no but asked, "How would you deal with that?" He went on to say, "We negotiate our contract with the city manager, and the city manager is free to pay those people under him what he thinks they are worth, and he's got to make more than his underlings."

Official records show Jones started work on Jan. 1, 2006, at a yearly salary of $190,259 (it has since gone up to $200,533). Tom Lando, the previous city manager, who served from July 1, 1992, until Dec. 31, 2005, started at $84,000 per year and retired at $233,516. Thus his pay improved by almost $150,000 over 13.5 years, increasing $11,075 per year on average. Based on his age at retirement (55), he is making about $145,000 annually in retirement.

The city also paid for Lando to earn a Ph.D. in public administration through the University of Southern California, an expensive private university (tuition today is almost $34,000 per year), which further qualified him for teaching at Chico State University.

It remains to be seen what princely package Jones will develop in the future.

Roads are the starving waif of the city. Although that is the last thing Chico motorists want, they don't have a powerful union to help change the situation. It's one of those "everyone knows" kinds of things. Everyone knows that traffic is increasing in Chico all the time, with popular SUVs and heavy pickup trucks much in evidence. Heavy garbage trucks with an extra pair of wheels in back for bearing additional load pound the pavement, as do buses.

Chico State student and letter-to-the-editor writer Kristen Thengvall expressed the public's general frustration when she wrote recently about the awful condition of North Cedar Street that she and other Chico State students must use as their main route to campus and downtown. "We pay the price as our vehicles need to be serviced more often due to the wear and tear of potholes and uneven road surfaces," Thengvall wrote, also criticizing the lack of sidewalks and lighting. She wants the city to give the street higher priority and do something about it other than talk.

The city manager lamented: "I need six to eight million dollars a year to put the streets in proper shape, and I don't have the money." He added that the city tries to keep potholes repaired, but "it's like chasing your tail to keep up. I want preventive maintenance. If I've got potholes, it means the preventative maintenance system is failing. My goal is no potholes."

He pointed out that Chico streets were not built for high-use urban traffic. Further, if the present winter had brought a lot of heavy rain, the streets now in bad condition would be in terrible shape.

The city manager said it would take "a number of years" to fix the streets. He didn't quantify a more specific timeline or specifically describe a program to do it.

Official records show that slightly over $4 million in general-fund money was allocated in 2006-07 to the General Services Department, which has responsibility for street maintenance, street cleaning and sweeping, parks operation and sewer-line maintenance.

Another $2 million in what's identified as "gasoline tax transfer" money is available, according to official records, but only $1.2 million was transferred into general services for road improvement and maintenance. Note that's improvement as well as maintenance. The other $0.8 million goes to pay working crew members. Gas tax money also hired a maintenance worker whose job is to abate the growing graffiti problem.

It's clear that, as Jones said, the money for road repair falls far short of the $6 million to $8 million per year needed.

It's a different story with big roads. Bond money from the Chico Consolidated Redevelopment Agency (RDA) paid for "the lion's share"--almost $8 million--of the cost to do all the major renovation work last fall on Mangrove Avenue, Cohasset Road, the Manzanita corridor, Vallombrosa Avenue and the Skyway, said Bob Greenlaw, a senior engineer for capital projects. Gas tax money paid for about $1.2 million, which is the yearly allocation.

All the work done last fall on these heavily traveled arterial roads--as opposed to neighborhood streets, minor traffic feeder streets, and major feeder streets--cost $9 million, Greenlaw said.

Overall street conditions further suffer because Chico gradually and incrementally annexes more and more of the many county "islands" that have long existed within the city, and no annexation fee exists to help pay for the transition or to improve the bad roads that usually come with the deal.

The county never took care of the island roads, Wahl said, and when annexed they represent an added maintenance expense burden for "a long time." Official records show the city has gained 18,151 residents through annexation from 1992 through 2006. Wahl explained that Chicoans are paying "for the sins of their fathers," who never drew a line around the city in, say, 1910 to define the difference between its limits and the county's.

Larry Wahl
PHOTO BY MEREDITH J. COOPER

Jones, who has been on the job only 15 months, takes an optimistic view of Chico's financial problems and does not think the sky will fall. City leaders will work out one or more solutions, he said.

His first forward step was to project the city budget 10 years out to bring revenue and expenditures into long-range view for perspective. He thinks seeing liabilities stretched out will hopefully lead to a better and more pragmatic financial approach, whatever that might be.

Jones also spoke hopefully about building a stronger stream of sales tax revenue, the biggest single source of general-fund money for the city. He pointed to the Costco expansion and its potential to bring the city an additional $300,000 per year, but did not go on to other specifics. He also drew attention to the fact that Chico is a regional shopping hub that had in the past delivered well on retail sales tax and should be able to build more such tax revenue. Jones thus hoped the city could at least partially grow out of its money problems.

Since city employees represent more than 80 percent of the city budget, Jones was asked, why not hold the line on raises for this financially pampered group until income and outgo come into balance? "This financial correction should not all be on the backs of city employees," Jones replied emphatically.

Why not, he was asked, since he had identified their pay and benefits as the root of the problem? He replied that the problem is "paternalism"--treating employees with the generosity a parent gives a child--and it's not unique to Chico. He said some local governments give their workers even more than they ask for.

Mayor Andy Holcombe said he "didn't buy into" the idea that lucrative total compensation packages are handed over by the Chico City Council or other local governments because it's just OPM (other people's money).

On the same question, Councilman Steve Bertagna replied that giving away OPM was not the case. He added that the council wants a certain high level of service and is willing to pay to get it.

Wahl, a small-businessman known for his outspoken views, said using OPM is part of the generosity problem with public employees. Another is that the city wants to ensure that its workers are paid as well as those in comparable towns elsewhere. He then stressed that employee compensation represents a huge problem the City Council must face.

"I have asked that the City Council have a discussion ... about how we can rein in the costs of paying employees. It's something we must do because we just have to get a handle on knowing, say, five, 10, 20 years down the road where we are going to be if we keep paying what we're paying ... when most of the people who are there now are retired, and we have a new crop [of employees] that is being compensated as well or maybe better than the folks now."

The councilman said he hadn't been able to win over a majority "because it will be a hard [discussion] to have, and it's going to hurt." He added, "The feeling is that it's always been that way. Yeah, but--you know? It doesn't mean it always has to be that way. You'd be out of business in the private sector in any kind of business ... with employee overhead costs like that, but we accept it in government. It starts at 1600 Pennsylvania Avenue. [the White House] and works its way down." He then suggested possible solutions to get costs down.

"One is letting people go, but I don't foresee that happening. Another is increasing revenues. That means some kind of tax, but I certainly don't support that notion. Another is to let the revenue grow without letting the salaries grow. We could also have a tiered approach where newer people don't get the same level of benefits the current group is getting.

"Now, you know that [having tiers] would create major angst among the unions, and they would fight it," Wahl said, but he insisted it be part of the discussion the council must have "before some point in time when it may be too late. I don't know any other ways you can do this." Wahl emphasized it would be better to plan for an outcome now rather than be forced to "an outcome we may not like."

Asked what it would take to give street repair a higher priority, Wahl replied, "It would have to be a council discussion, and I asked for it at the State of the City meeting [last January]. We need to sit down and decide which are the worst [roads] and then make a start by taking maybe a half a million or a million dollars a year so we take a little whack at it year by year to do something."

Wahl's current plan of action involves writing a letter to the mayor asking that road repair be put on the agenda for the upcoming spring budget discussions, but "I don't know that it will go anywhere."

As for Jones, he appeared reluctant to speak in specifics about the future and possible solutions to city financial problems. That may be his way of saying that it's up to the City Council to make such policy decisions.

CA cop earned $175,000 in a year...not including pension and healthcare costs

How a San Jose cop earned $175,000 in one year
`SPECIAL PAYS' PUTTING BIG BUCKS IN POCKETS OF SOME CITY WORKERS
By John Woolfolk
San Jose Mercury News
http://www.mercurynews.com/ci_5517589

Article Launched:3/25/07

The top annual salary for a San Jose police officer is $86,000. But one officer last year more than doubled that figure, earning a total of nearly $175,400.

How? Welcome to the world of "special pays," a combination of overtime, on-call work and other extras that put this officer among the 100 highest-paid of the city's 6,800 employees.

While the average Silicon Valley worker might marvel at such opportunities to boost one's salary, for a public employee it's all perfectly legal and above-board.

And the officer was hardly alone - one firefighter with an $84,000 salary was paid more than $163,000 last year, according to city records. While those are extreme examples, they show that for many city employees - in civilian as well as public safety jobs - their salary is just the beginning of their take-home pay.

San Jose's compensation structure includes 135 categories of extra pay, though no single employee can get them all.

The city's average employee salary and benefit costs have risen 45 percent since 2000 and recently come under heightened scrutiny. Mayor Chuck Reed, elected last year on a platform of fiscal responsibility, has noted that employee costs account for almost two-thirds of the city's nearly $1 billion operating budget.

And with a vow to eliminate recurring deficits, Reed has asked the city to look for ways to slow those growing costs as labor contracts come up for renewal.

Health care a factor

Employee Relations Director Alex Gurza said the various pay categories aren't primarily responsible for soaring employee costs, noting that most have been part of the compensation package for a decade or more. The biggest culprits, he says, are health care costs, steep pension payments and salary increases.

Still, the menu of salary extras illustrates the complexity facing city officials as they attempt to tackle runaway employee costs. Each uptick in the base salary rate can be magnified by special pays, which are often based on percentages of that base figure. City officials say those costs are tracked and taken into account when new labor contracts are negotiated.

Special pay beyond basic salary isn't unique to San Jose. Other cities offer similar provisions to their employees. Mountain View, for example, offers an extra $100 a month to bilingual officers and $50 a month for civilian employees who speak a second language. Mountain View canine officers get an additional 5 percent of salary to cover care for their police dogs.

But neighboring Santa Clara doesn't pay police extra for canine duty - their cops just get time off to spend on animal care and training. Santa Clara also doesn't offer extra pay for anti-terrorism training or higher levels of certification from the state Peace Officer Standards and Training organization, as San Jose does.

While extra cash for overtime, specialized training or foreign language skills might not raise many eyebrows, San Jose administrators have questioned the justification for at least some of the special pay.

City Manager Les White has asked that the city no longer pay a stipend to deputy managers for attending meetings of an advisory committee that oversees the San Jose/Santa Clara Water Pollution Control Plant. That stipend added $800 to one deputy city manager's $160,000 base salary and $100 to the $189,000 base salary of the other who qualified for the payment.

"That's ending," said Tom Manheim, a spokesman for the city administration. "It didn't seem to make sense that city employees are paid extra to do their job."

Many of the pay categories, however, have been negotiated in union contracts and can't be so easily eliminated. Still others are recent additions. After the Sept. 11, 2001, terrorist attacks, the city council approved a new 5 percent pay booster for all police to attend an annual in-house anti-terrorist training. San Francisco later adopted a similar program.

No names divulged

Apart from a handful of top administrators, it's unknown which employees are making what in salary and pay extras. The city, citing privacy concerns, has refused to release employee pay information by name unless the California Supreme Court, which is weighing lawsuits seeking disclosure by the Mercury News and other newspapers, orders otherwise.

By far the costliest special-pay category is overtime - usually one-and-a-half times the regular pay rate. It cost San Jose a total of $21.5 million in the last fiscal year and has been controversial for years. Particularly when it comes to the city's thinly staffed police and fire departments, where extra hours often are required.

City officials have argued it's cheaper to pay overtime than to pay the salaries and benefits of additional cops and firefighters. But union leaders say that strategy leads to costly injuries in a city with the state's highest proportion of big-city public safety disability retirements. They'd prefer a bigger staff to big overtime paychecks. The city has recently begun adding small numbers of police and firefighters to ease the staffing shortage.

But not all overtime is tied to overwork. Firefighters, who work multiple 24-hour shifts in a 56-hour week, are automatically paid overtime for three of their 56 hours. What's more, those who take on "administrative assignment" roles while working regular business hours are paid an additional $36 a day to make up for the loss of overtime pay.

Toward top of list

"Premium pays" for special skills and assignments are another big source of income, particularly in public safety jobs. The city's $175,000 officer, whose base pay is $83,400, wouldn't have cracked the top 100 highest-paid on $47,864 in overtime alone. It took special pay for extra training, on-call premiums and the extra compensation for having a police dog to help bring the officer near the top of the list.

While most of those categories are unique to public safety jobs, certain skills or circumstances also allow civilian city employees to boost their paychecks. City employees who decline the city's health and dental coverage get paid the money the city would have spent on it. For housing director Leslye Krutko - who is married to another city official and could get coverage under his health plan - that was worth an extra $5,350.

Some employees also can cash in their unused vacation. So for the city's busy redevelopment manager, the top overall earner of 2006, that contributed $8,648 toward his total pay of $254,000.

And in increasingly multicultural San Jose, bilingual ability is a big plus. There's extra pay for those who demonstrate fluency in another language - that's worth $754 a year - and $286 more for those who can read and write as well in another tongue.

Employee union leaders bristle at the suggestion that any of their members' pay is unreasonable, noting for example that public employees aren't eligible for Social Security retirement or perks like stock options that are available to their private-sector peers.

Police and firefighters say that even in the self-proclaimed Safest Big City in America, their jobs are dangerous. Five firefighters and an officer were hurt in December when a burning downtown house exploded, and a rookie officer was fatally shot making a routine traffic stop in 2001.

Erik Larsen, president of the city's largest employee union representing 2,900 librarians, janitors and other workers, said many struggle to pay the bills in high-priced Silicon Valley. Top base salary for a senior water meter reader is $59,000 in a region where $59,400 qualifies as low-income.

"Let's not demonize public employees that live in a region that has the highest cost of living in the country," Larsen said.

Contact John Woolfolk at jwoolfolk@mercurynews.com or (408) 975-9346.

UNfunded liabilities $205,000 per employee in one district!!

Again the you know what has not yet hit the fan... Wait until the all the government entities have to comply within the next four years with a new accounting standard of the Governmental Accounting Standards Board Statement, aka GASB 45...The taxpayers are going to get a serious prostate exam...

http://cbs5.com/localwire/localfsnews/bcn/2007/03/24/n/HeadlineNews/NEWS-ROUNDUP/resources_bcn_html
SATURDAY NEWS ROUNDUP
CBS 5 - San Francisco,CA,USA

A Marin County grand jury this week said the county has a long-term health care liability of $378 million because of health care payments to retired employees.

The county likely won't be able to make the payments without raising taxes or cutting services, the jury found.

The civil grand jury questioned whether the health care benefits for retirees are vested and can't be taken away, or whether they are subject to change or elimination.

The panel also asked whether managers and elected officials who are eligible for retiree health care benefits are in a conflict of interest position when making decisions about those benefits.

The $378 million liability "is only a little less than the county's entire 2007 annual budget of $400 million, the grand jurors said.

Towns, cities, special districts and school districts are expected to report their un-funded liabilities, including present and future costs of pensions and retiree health care benefits, within the next four years under a new accounting standard of the Governmental Accounting Standards Board Statement 45, GASB 45, the panel noted.

"They (the unfunded liabilities) will be substantial,'' the panel reported. "One of 36 special districts, for example, estimated its liability in 2005 at around $8.6 million, or $205,000 per employee.''

The panel recommended the county, towns, cities and special districts determine whether the benefits are vested and inform employees of their findings.

3 billion a year!!

Commission launches effort to improve pension system
By Harrison Sheppard Sacramento Bureau
dailynews.com
3/10/07

Warning that runaway pension benefits could steal money earmarked for schools, police and roads, a California commission on Friday launched the first statewide effort to overhaul the employee pension system.

California's retirement systems for state employees and teachers have a combined unfunded pension liability of about $49 billion for pensions and $70 billion for health benefits.

Combined, the liabilities already are costing taxpayers more than $3 billion a year - money that could instead be paying for programs like schools and public safety if the benefits were properly self-funded.

"I think the leaders have recognized that rising obligations of this type remain one of the biggest problems facing governments everywhere, particularly in California," said commission Chairman Gerald Parsky.

"As these costs rise and need to be met, it means that less money may be available for other programs that have very high priorities - such as education, public safety and environmental protection."

The panel, appointed by Gov. Arnold Schwarzenegger and state legislators, will spend the next nine months studying the scope of the pension and health benefit issue and proposing possible solutions to state policymakers.

Parsky, a Los Angeles-based investor and Republican fundraiser, said the group will protect benefits promised to state employees, but will need to find ways to reduce future costs so the government can continue to adequately fund other programs.

Local governments and school districts are facing similar multibillion-dollar deficits. Los Angeles Unified School District is facing a long-term liability of at least $10 billion for retiree health benefits alone.

Schwarzenegger's previous effort to reform the state pension system in 2005 fell flat when his proposal to shift to a 401(k)-style plan ran into heavy opposition from public employee unions.

Firefighters and police officers, in particular, were incensed that the proposal appeared to cut benefits for widows - an element that Schwarzenegger said was unintended, but which led him to drop the plan rather than risk placing it on a ballot.

Public unions are expected once again to be a major force in the debate, but this time Schwarzenegger has included them in the decision-making process.

The state commission has at least five representatives of public employee unions, including one appointed by Schwarzenegger and four appointed by the Legislature.

"Clearly two years ago we were at war and there was no input from public employees," said Lou Paulson, president of California Professional Firefighters. "Having this commission \ there's going to be folks out talking about it and there will be hearings and everybody will at least get some input.

"Last time it was, `This is the system and this is the way it's going to be."'

The commission is expected to consider a variety of proposals - including a controversial plan suggested Friday by a nonprofit foundation established by former San Fernando Valley Assemblyman Keith Richman.

Marcia Fritz, an accountant and vice president of Richman's California Foundation for Fiscal Responsibility, said the group believes raising the state employee retirement age could create substantial savings.

Currently, state employees are eligible to retire by age 55, and public safety employees can retire at 50. Richman's group is proposing to raise the ages to 65 for regular employees and 55 for public safety employees.

The move would save millions of dollars by delaying thousands of people from entering the pension system.

"We hope the commission clearly hears the tick of this fiscal time bomb and finds a responsible way to limit its damage to future budgets and programs," Fritz said.

Public employee unions are likely to oppose that plan, however. On Friday, union members in the audience laughed and jeered when Richman's name was mentioned during the hearing.

Richman also was one of the driving forces behind the failed effort to move to a 401(k) system two years ago.

Officially, however, union leaders were more diplomatic at this early stage, saying they would like to hear more details of the plan before critiquing it.

The commission plans to hold up to five public hearings statewide by May 31. It will then work on a report and analysis of the scope of the pension and health benefits problem and recommend solutions by Jan. 1.

harrison.sheppard@dailynews.com

(916) 446-6723

Govt Pensions: Legalized Fraud

Is anyone surprised by this article at all. No. Politicians are only beholden to public employee unions. And all "public safety" employees are "heroes" as soon as they walk in the door, so they cannot ever be told no. Even if Grandma has to go to the poor house due to her county tax bill the "darlings" of the pensions system cannot be denied. LAAG needs to hand out some bright green ribbon magnets (like those yellow ones for the troops and the pink ones for breast cancer; I dont think green is taken) that say "I DONT support pension scammers"

County pension artists
L.A. safety employees drawing new attention

BY TROY ANDERSON, Staff Writer
LA Daily News
Article Last Updated: 03/05/2007
http://www.dailynews.com/news/ci_5363901

Los Angeles County sheriff's deputies and firefighters retire on disability pensions at a nearly 50 percent higher rate than their counterparts in 19 other California counties, according to a report released Monday.

The 73-page report by Buck Consultants comes more than two years after the Board of Supervisors ordered an investigation into whether employees were fraudulently obtaining lucrative disability pensions.

The supervisors ordered the investigation after the Daily News revealed that an average of 79 percent of firefighters and 56 percent of sheriff's deputies received job-related disability retirements in the decade prior to 2005.

"There really is a culture of maximizing benefits," county Risk Manager Rocky Armfield said. "And the employees are very good at it."

As part of the investigation, the supervisors asked the firm to analyze 35 cases to determine whether any were fraudulent. The firm found no cases of outright fraud - defined as deliberate attempts to qualify for benefits that cannot be supported by doctors.

But investigators found four disability pensions whose justifications, they said, "contradicted" the original intent of a law granting disability pensions.

Buck Consultants said case law concerning disability pensions has gradually allowed more employees to qualify than was originally intended by a 1937 law that still governs pensions. The law was designed to allow incapacitated public employees to be replaced by capable employees.

In two of the cases reviewed by Buck, the connection between the injury and the job was minimal, analysts said.

Another case involved an employee who not only received a disability retirement at an advanced age, but whose main reason for the disability was the "aging process," investigators said. Very little of the disability was work-related.

In the fourth case, a firefighter who retired on a disability pension started a new job within days of leaving the department.

"It seems to us that the level of sophistication is higher in Los Angeles County regarding how to scam the system," said Jon Coupal, president of the Howard Jarvis Taxpayers Association. "I think it's probably not surprising when you have an entrenched bureaucracy like this with union leadership who encourage this kind of activity."

Employees savvy

Armfield said safety employees are well aware of the advantages of obtaining job-related disability pensions, half of which are tax-free. The job-related disability pays a minimum of 50 percent of an employee's compensation, while a non-job-related disability pays about 33 percent.

And when the employee dies, the spouse receives 100 percent of the final pay, instead of 65 percent.

"So you can easily see why it would be economically wise for safety members to at least apply," Armfield said. "There is no illegal activity in applying. They are simply seeing if they will be granted the disability, and if they are, there is a tremendous upside economically."

Also, Armfield said an "informal infrastructure" has developed over the years involving law firms, doctors and employee unions that assist safety employees late in their careers in applying for disability pensions.

The report found that as of June 2004, 61 percent of county safety employees retired on job-related disability pensions. In the 19 other counties, the percentage was 33 percent.

Standard liberal

The report also found that the Los Angeles County Employees Retirement Association applied a more liberal standard in deciding when to grant disability pensions, approving job-related disability pensions for 53 percent of applicants in 2003-04, compared with 18 percent in 15 other counties.

Among the 35 disability pension cases reviewed, the investigators found four filed after the applicant turned 60, and 11 filed within 90 days of retirement, suggesting that the employees were timing their applications to coincide with their normal retirement dates.

On the bright side, the report found a large number of employees who had filed workers' compensation claims were persuaded to come back to work on light duty. As a result, the costs associated with employees who file claims shortly before retirement have dropped from $49 million in 2003 to $37 million in 2005.

Still, investigators found a common practice among county employees approaching retirement of "spiking" their final pay with unused vacation, sick leave and other one-time payments.

Investigators said it is not difficult to get injury claims approved, citing examples of workers injured by tripping over a file cabinet, bending under a desk, lifting a ladder and falling off a bicycle while off-duty.

"The disability threshold is very, very low," Armfield said. "It's diminutive to the point if you apply with any good justifiable medical reason allowed under the act, there is a good chance you'll get it."

To help reduce soaring pension costs, Buck Consulting recommended legislative changes to reform the 1937 law back to its original intent and encouraged the sheriff and county Fire Department officials to return more injured employees to work in light-duty jobs.

But investigators wrote in the report that reducing the number of disability pensions will be challenging when many safety employees possess "extensive knowledge and understanding" and a "well-established external support network" to help them file for disability pensions.

It will be difficult to reform the 1937 law, wrote county Chief Administrative Officer David Janssen, noting that legislation passed last year will further increase the number of disability pension applications. That law enables safety employees to receive a 100 percent disability pension even though factors unrelated to work caused a significant portion of their permanent injuries, Janssen wrote.

troy.anderson@dailynews.com

(213) 974-8985

The truth about pensions

LAAG has a better idea than the ones below. Lets do to the govt employees pensions the same thing the private sector has done. Let the govermnet entities file bankruptcy and let the bankruptcy courts do what the political hacks cannot or will not do (due to vote pandering to/by the public employee unions)

The truth about pensions
A former politician speaks out about unsustainable benefits.
Article Launched: 02/27/2007 07:32:54 PM PST
http://www.presstelegram.com/opinions/ci_5318170
Long Beach Press Telegram

Keith Richman, a moderate Republican who was among a very few politicians in California willing to tell taxpayers the truth about the state's impending public pension disaster, no longer is in office. But fortunately, he's still telling the truth.

In speeches and in a recent article in the Orange County Register, Richman reminds us that the huge deficits have not gone away. The shortfall for public employees in Orange County alone is $1 billion for retirees' health care and $2.3 billion for lavish pensions.

For state employees, the shortfall is $140 billion for retiree health care, and $100 billion for pensions. Compare those numbers to the state's budget deficit of only a few billion dollars, which politicians struggle over and still can't quite seem to cover.

The State Employees Association belittles Richman's warnings as a crisis that doesn't exist. Oh, come on. The deficit numbers come straight from the California Legislative Analyst.

These plush benefits bear no resemblance to the real world of nongovernment jobs. That's bad enough from a taxpayer's view, but the more important point is that the benefits are unsustainable.

Politicians, who solicit money from government employee unions to finance their careers, show no interest whatever in negotiating more sensible contracts.

Richman offers a better solution: Continue the benefits for existing employees, but stop offering them to new nonsafety employees. Raise the retirement age to 65, which would cut pension costs by 50 percent and medical costs by a third. The retirement age for new public safety employees, who are subject to greater risk of physical disability, would be 55.

As Richman says, there is no defensible reason why government clerks, diesel mechanics, cooks, bureaucrats and the like should retire 10 years earlier than their private-sector counterparts.

We'd like to see Richman back in public office. But in office or out, we're grateful that he keeps speaking the truth.

Twelve to study public pension costs

Given that this panel is chocked full of govt. employees and govt. union reps. LAAG sees very little progress via this "committee" on the pension shortfalls other than "Damn the private sector taxpayers....Full speed ahead towards the pension iceberg"


Editorial: Pension puzzle
New commission has its work cut out for it


Published February 23, 2007
Story appeared in EDITORIALS section, Page B6
http://www.sacbee.com/110/story/127583.html

Faced with a politically intractable problem, elected officials invariably turn to blue ribbon commissions -- panels of distinguished citizens they hope will come up with palatable solutions.

Gov. Arnold Schwarzenegger appointed such a commission early in his first term to deal with the state's burgeoning prison crisis, to little or no avail. The panel made sound recommendations, which the governor ignored, and the prison crisis has deepened.

Now the governor, together with legislative leaders, has created a new commission, this one to deal with another intractable state problem: the soaring cost of retiree pension and health benefits. Like the Corrections Independent Review Panel, the individuals named to the Public Employee Post Employment Benefits Commission have impressive credentials. They include academics, public employee union officials, financial experts and former pension fund managers.

But will panel members be able to persuade elected officials to force the kind of sacrifice from politically powerful constituencies -- specifically, public employee unions -- that fixing the state's retiree health and pension problems will inevitably demand? There's reason to be dubious.

The Legislative Analyst's Office laid out the health care part of the panel's challenge in a special report last year. Under new federal accounting rules, state and local governments are required to disclose their health care obligations to current and future retirees. The LAO study pegged the state portion of those costs at between $40 billion and $70 billion.

Those obligations are paid out of the general fund now, a $1 billion annual expense and mounting. To place the obligation on an actuarially sound footing, the LAO recommended that the Legislature and the governor begin setting aside billions more into an investment fund for future obligations. The LAO also recommended cutting benefits for future hires.

On the pension front, courts have consistently ruled that the state cannot borrow to finance its unfunded liability. So general fund contributions to the state pension fund are likely to rise sharply as well.

In his charge to the new panel, the governor correctly outlined what's at stake: "Rising pension and retiree health care costs," he predicted, "means less money for ... education, public safety, environmental protection and health care." That means a much diminished California.

The panel can guide lawmakers to the right answers. But the governor and legislators must do what they failed to do on the prison front -- make the hard decisions necessary to fix the problem. Doing that would be notable -- worthy, in fact, of the proverbial blue ribbon.

Twelve to study public pension costs
Panel selected by state lawmakers, governor to issue report by 2008

http://www.thedesertsun.com/apps/pbcs.dll/article?AID=/20070221/NEWS01/702210323/1006
Keith Matheny
The Desert Sun
February 21, 2007

Twelve Californians have been appointed to lead a state group to examine and suggest solutions to the rising cost of public employees' post-retirement benefits.

State pension systems for government workers and teachers - CalPERS and CalSTRS - have a combined unfunded liability of $49 billion. And California may owe between $40 billion and $70 billion in promised but currently unfunded long-term retiree health care for state workers.

A four-day Desert Sun investigation in December revealed:

Coachella Valley cities' pension savings were wiped out in the dot-com stock market bubble that burst in 2000. The cities now face a collective unfunded liability of $51 million and rising. That's money that could go toward education, public safety, transportation and other public services.

Cathedral City's population increased almost 70 percent since 1990. Its emergency fire calls tripled in that time. The cost to run the city's fire department jumped almost $1.7 million in the past five years alone.

Yet the city's number of firefighters has remained virtually unchanged for nearly two decades because city officials see the cost of new hires' salaries and benefits as prohibitive.

Palm Springs and Cathedral City fire departments often run engines with only two firefighters, instead of the recommended four or five. It can cause delays in responding to emergencies.

The valley's three school districts have a combined $114.5 million retiree health care liability.

Governments such as Palm Springs and Riverside County are turning to borrowing millions in bonds to pay off portions of their worker retirement obligations.

Gov. Arnold Schwarzenegger, a Republican, appointed six members to the new commission. Assembly Speaker Fabian Núñez and Senate President Pro Tempore Don Perata, both Democrats, appointed three members each.

The positions do not require Senate confirmation, and the commission members will not receive a salary.

The panel will determine the full extent of unfunded health care liabilities owed by California governments to their workers and propose plans to address those obligations and promised pensions. The commission is to draft a report for the governor and Legislature by Jan. 1.

Perata in a statement praised the "high quality of experts" convened in the commission.

"This group is clearly capable of undertaking the important and difficult task of weighing public employee benefits and finding ways to manage costs without undercutting workers," he said.

Nùñez said the Legislature would pay close attention to the commission's "process and progress over the coming year."

"We need a careful review of pension issues that is fair and responsible to workers and taxpayers alike," he said in a statement.

Researching retirement benefits
Gov. Arnold Schwarzenegger, a Republican, appointed six members to a new commission to study the rising costs of post-retirement benefits for public employees. Democratic Assembly Speaker Fabian Núñez and Senate President Pro Tempore Don Perata appointed three members each.

"Soaring obligations of this type remain one of the biggest problems facing governments everywhere, for the simple reason that rising pension and retiree healthcare costs mean less money for other government programs such as education, public safety, environmental protection and health care,"
Gov. Arnold Schwarzenegger said in a statement Monday.

Named chairman of the commission was Gerald Parsky, 64, of Rancho Santa Fe, chairman of the Aurora Capital Group, a Los Angeles-based investment firm.

Parsky, a Republican, served in the 1970s as an assistant secretary with the U.S. Treasury Department, and has served as a member of the University of California Board of Regents since his appointment in 1996.

In addition to Parsky, members appointed to the commission by Schwarzenegger were:

# Matthew Barger, 49, San Francisco, Republican, asset management advisor for an investment firm.


# Paul Cappitelli, 49, Rancho Cucamonga, Republican, a member of the San Bernardino County Sheriff's Department since 1978, currently serving as commander of the West Valley Detention Center.


# John Cogan, 59, Portola Valley, Republican, senior fellow at the Hoover Institution and a professor of public policy at Stanford University.


# Connie Conway, 56, Tulare, Republican, vice-chair of the Tulare County Board of Supervisors.


# Curt Pringle, 47, Republican, Mayor of the City of Anaheim and former Assembly Speaker.


# Appointed by the Legislature to the commission were:


# Ronald Cottingham, Bonsall, Republican. President of the Peace Officers Research Association of California and a lieutenant with the San Diego County Sheriff's Department.


# Theresa Ghilarducci, Democrat. A national expert on employee pensions, trustee on General Motors Retiree Health Fund and a past presidential appointee to the advisory board of the Pension Guaranty Corp. Director of the University of Notre Dame's Higgins Labor Center.


# Jim Hard, Democrat, president of California's largest union of public employees, Service Employees International Union Local 1000, representing nearly 90,000 workers.


# Leonard Lee Lipps, Democrat, public school teacher and regional manager for the California Teacher's Association.


# Dave Low, Sacramento, Democrat, assistant director of governmental relations for the California School Employees Association.


# Robert Walton, Willows, Independent, retired in 2005 after 34 years in state government, including more than 30 years with the California Public Employees Retirement System, or CalPERS.


The positions do not require Senate confirmation, and the commission members will not receive a salary.

Unions' cozy seat in talks puts state in a funding crisis

By Dan Walters / The Bee's capitol bureau
Fresno Bee
http://www.fresnobee.com/204/v-printerfriendly/story/27963.html

02/04/07 05:59:40

When then-Gov. Jerry Brown and the Legislature handed public employee unions their long-cherished goal of full collective bargaining rights three decades ago, they probably didn't intend that financing pensions and health care for government workers would become a major headache.

If we've learned anything about California politics, however, it should be that decisions by voters and politicians often have unintended, long-term consequences. And the looming crisis in pensions and health care for current and retired public workers could not be a better example.

At the time, extending collective bargaining to public workers was portrayed as merely giving them the same rights private-sector employees had long enjoyed. But, unlike those in private employment, public unions can often circumvent the traditional contract bargaining process by applying direct political pressure on those in charge of the public purse.

That political factor mangles the arm's-length theory of labor negotiations. Quite often, politicians who are negotiating and approving union contracts owe their political careers to those unions — a phenomenon as evident in local governments and school districts as it is in the Capitol.

In the main, salaries have not been terribly distorted since politicians are constrained by the amount of money available to pay operating costs in any fiscal year. But in lieu of granting big pay raises, politicians and unions have steadily enlarged the array of fringe benefits whose costs can be hidden and/or delayed indefinitely.

The city of San Diego is the poster child for such misconduct, having boosted city pensions to satisfy its unions without making any provision to finance the future costs. It got into legal hot water only because it lied about its pension obligations in filings on city bond issues. It's apparently all right to conceal pension costs from voters, but not from Wall Street bankers.

So how big is our pension and health-care headache? Immense.

The Center for Government Analysis in Newport Beach, in a new study for the Howard Jarvis Taxpayers Foundation, says state and local government pension costs nearly doubled in the six-year period ending in 2004, to $10.2billion, but the state's 130 public pension systems saw their unfunded liabilities grow even more. The study found an actuarial surplus of $14.5 billion in 1998 had become a $50.9 billion deficit six years later.

Gov. Schwarzenegger's administration has declared that the California Public Employee Retirement System and the California State Teachers Retirement System together have $49billion in unfunded liabilities.

The Legislature's budget analyst has estimated that the state has an unfunded liability for retiree health-care costs between $40billion and $70billion and needs to set aside up to $6 billion a year for the liability.

The problem could grow worse as the baby boom generation begins to retire and takes advantage of the generous benefits that governors, legislators and local officials have extended in recent years, ranging up to virtually full salary retirements for police officers and firefighters.

So is anyone going to do anything about it? Schwarzenegger has appointed a commission to study the problem and make recommendations.

But that merely indicates that he is gun-shy after seeing a pension reform proposal shot down in 2005 and knowing that unions would resist any changes in the status quo.

It may take a San Diego-like disaster to move this political ball.

Dan Walters writes for The Bee's Capitol bureau. E-mail: dwalters@sacbee.com; mail: P.O. Box 15779, Sacramento, CA 95852.

Fiscal prudence urgently needed in coming years

KERN COUNTY
Fiscal prudence urgently needed in coming years
Investments considered as more boomers retire

BY JAMES BURGER, Californian staff writer
e-mail: jburger@bakersfield.com | Saturday, Jan 27 2007 10:55 PM
http://www.bakersfield.com/102/story/96754.html#

Last Updated: Saturday, Jan 27 2007 10:58 PM

Paying for retiree health care used to be easy for the county of Kern.

The county paid a little. The employee paid a little. The money was invested. That was enough.

Now it's not.

"Historically we have been able to fund this just fine," said County Administrative Officer Ron Errea.

But he said the cost of health care has climbed dramatically in recent years and a substantial chunk of county employees, many from the baby boom generation, are rushing to retire in the next few years. Paying for all that takes taxpayer dollars.

Now new rules from the Governmental Accounting Standards Board are forcing governments across the nation to tell the public how much those retirements are going to cost them.

Kern County hasn't finished crunching the numbers yet. An actuarial report is expected to be released in February.

It seems likely that there will be a lot of red ink in that report.

The county won't have to pay up immediately. In fact, there is no legal requirement that it set aside money now to pay for future retirement costs.

But to avoid bad credit and weaker bonding muscles, the county is looking for the best way to invest enough moneyeach year -- over 30 years -- to pay for estimated cost of retiree health care.

"It's a serious problem. It's constantly coming to the forefront," said Supervisor Ray Watson. "We are amortizing our liability. We smooth that by paying off that deficiency over 30 years."

In June 2005, actuaries estimated the county's retiree health care account was short by around $78 million.

This year the county will contribute $1.7 million to that account. Next fiscal year the amount the county contributes is proposed to more than double to $3.9 million in an effort to catch up with its looming debt.

County employees currently contribute eight-tenths of one percent of their base pay toward their retirement health benefits.

Next year the county wants to bump that to 1.85 percent, according to county officials. County unions would have to agree to that.

Errea said fiscal prudence demands that the county look for a way to fund the rising cost of health benefits.

If it doesn't deal with it, county officials say, its official debt level could burgeon and its bonding capacity could suffer.

But the county won't be able to establish concrete solutions until it has updated actuarial numbers.

Right now, the only plan is to pour more money from taxpayers and county employees into the retirement investment fund, they said.

Watson said the county and its unions need to talk about a way to provide health benefits to retirees without breaking the county's bank.

That may mean the county funds a lower level of defined benefits and have employees pay more in contributions to buy increased coverage, he said.

Chuck Waide, spokesman for the Central California Association of Public Employees, said the union is watching closely to see what the impact might be to county employees the union represents.

"All of us recognize that the cost of health insurance has skyrocketed," Waide said.

He said the hope is that employee's increasing contributions to their post-employment health care will control the costs.

"Our members are feeling it because (the contribution) keeps going up," he said.

But Waide said the issue isn't just about how Kern County deals with rising retirement costs.

The rising cost of health care, and retiree health costs, are national problems, he said, and they need a national solution.

Unfortunately, Waide said, nobody has come up with one yet.

Govt Pensions: When will the madness end?

Although the story below is an issue brewing in Orange County (behind the "orange curtain" as we like to say) it is emblematic of a wider problem. Govt. employees at one agency talk with their pals in other agencies or counties and generate an endless public sector (taxpayer financed) bidding war. A race to the top of the pay scale sorta speak whereas in the private sector, where outsourcing is common, we are at a race to the bottom, a race to eliminate pensions and even the jobs themselves. For God's sake the federal min. minimum wage is under 11,000 per year and we have LIFEGUARDS earning 115,000 a year for life (Dont forget lifetime pensions with cost of living raises and the best free health bennies in the biz). That also assumes these lifeguards are not "forced" to retire at 40 due to a job related disability (sun burn).

Here is a government solution I learned from Nancy Reagan: "Just say No" Thats right, no to pay raises. Then what? The lifeguards will quit? Where will they go? Will they go into that lucrative private sector and become extras on "Baywatch". Nope that's in syndication already. Maybe they can go work for Motel 6. Nope they have signs posted at the pool: "swim at your own risk no lifeguard on duty". Even if they did want to hire lifeguards they would have to wait in line behind the maids union, which is currently trying to boost their pay over the federal minimum. Plus those "benefits" at Motel 6 are only all the soap you can steal.

But what about the poor Newport Beach residents that might drown you ask. What about the "children"...oh my God. Well thats where Darwin's law comes in. Swim during a rip tide, alone, or into a shark and you won't be contributing to the gene pool any more. The City is safe as the government code in California gives them absolute immunity for people that die or are injured due to natural conditions. Tons of drowning cases out there where the city walks away from the case due to the fact that signs were posted: "Swim at your own risk: No lifeguards on duty (due to pensions)"...

Here is another solution: Hire more part timers. It is primarily a summer position. Hell their are great swimmers out there that would love to have this job. It beats working at McDonalds. Who would like to work on Baywatch and scam on chicks all summer? Lots of cities do that.

Another solution: let the voters (who are not so beholden to govt. unions and have more backbone) vote on these scams. I think the voters would vote the way I would: Outsource the lifeguards!!

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Newport lifeguards pushing pension issue
They want the same retirement benefit that police and firefighters in the city receive.
http://www.ocregister.com/ocregister/news/homepage/article_1557689.php

By JEFF OVERLEY
THE ORANGE COUNTY REGISTER

NEWPORT BEACH, CA – Seven months after their contract expired, Newport Beach lifeguards are still locked in negotiations with city officials.

The impasse centers on a request by lifeguards for a lucrative pension plan known as "3 percent at 50." Under such contracts, employees can retire at age 50 and get 3 percent of their salary for every year worked.

The payout, received annually for life, is capped at 90 percent of a worker's salary. For retirement plans, though, salary isn't just base pay, but also includes the value of certain benefits.

Similar arrangements are common for police officers and firefighters, and officials say they have been extended to lifeguards in such cities as Seal Beach and Huntington Beach.

In Newport Beach, police receive the 3-at-50 plan, and firefighters are due to switch over by year's end. Lifeguards currently have a 3-at-55 agreement, and non-safety employees get 2-at-55.

"We just wanted to be treated the same" as police and firefighters, said Brent Jacobsen, president of the Newport Beach Lifeguard Management Association.

Jacobsen said lifeguards face the same risks as their public-safety counterparts.

"How many times does a police officer or firefighter have to go swimming at The Wedge when it's 20 feet, or scuba diving at night? It's just as dangerous," he said.

It's not clear why council members have not agreed to change the benefit. Officials largely declined to comment, citing the confidentiality of contract negotiations.

But one issue could be cost. In 2005, Newport Beach faced an unfunded liability for public-safety pension plans of more than $50 million, up 20 percent from two years earlier. Last week, the City Council approved an agreement making the city's police the highest-paid in the county.

Annual pay for full-time lifeguards ranges from roughly $50,000 to $115,000, not counting overtime or benefits.

Perhaps mindful of those bills, the City Council has balked at boosting the pension benefit. Jacobsen argued that the cost would be "trivial" because the pension plan would apply only to the city's 16 full-time lifeguards, not seasonal workers.

The two sides haven't talked since early November, but the council's makeup has since shifted, with two new members joining since the fall election.

Negotiations are set to resume Tuesday, Jacobsen said.

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Lifeguards to shore up support for retirement
They want a benefit given to others but need to persuade a council majority that denied it in 2005.

By Alicia Robinson
http://www.dailypilot.com/articles/2007/01/27/publicsafety/dpt-lifeguards27.txt#blog

Newport Beach police and firefighters are eligible to retire at 50, and the city's lifeguards are now asking for the same benefit.

But they may have to win over the City Council, after being turned down for that benefit in their last contract.

Under the "3% at 50" provision, employees can collect 3% of their final salary for each year they worked with the city. So an employee who started working for the city at age 49 could retire at 50 and collect 3% of his or her final salary.

It's a common benefit that lifeguards in Huntington Beach, Seal Beach and San Diego, among other cities, enjoy, said Brent Jacobsen, Newport Beach Lifeguard Management Assn. president.

All Newport Beach public safety employees were given a "3% at 55" provision in 2000, and police were later granted 3% at 50. City firefighters' most recent contract lowers retirement to 50 at the end of 2007.

If lifeguards are granted 3% at 50, it would cover the 17 full-time lifeguard positions represented by the management association, but not the 225 seasonal lifeguards, who are covered by a different contract.

It's been a goal for the lifeguards for "quite some time," Jacobsen said, "but it didn't really become a reality until the fire [department] received it in this contract. With a group of 16, we weren't really in a position to go out and get something like that."

Now, with negotiations in progress, lifeguards are pushing for it more than any other benefit. But four of the seven council members — Leslie Daigle, Stevve Rosansky, Ed Selich and Don Webb — were on the City Council that turned the liifeguards down in 2005, so they may need to be persuaded.

Most council members could not be reached or declined to comment on the negotiations. Just this week, they voted for a new contract that made city police the best-compensated in the county.

Councilman Keith Curry, who wasn't on the council in 2005, said giving the lifeguards 3% at 50 wouldn't be that expensive because it doesn't cover many people. But he hasn't made up his mind. "The issue for me is going to be how do all of the elements [in the contract] fit together in terms of overall cost to the city," Curry said.

Former Councilman Tod Ridgeway, who was termed out in November, said he never supported retirement at 50 for lifeguards because "nine months out of the year, they're doing minimal work."

He also pointed to the city's $51-million unfunded pension liability for public safety employees, and he said last year one lifeguard earned $199,000.

"That's an extraordinary amount of money for a lifeguard," Ridgeway said.

City officials couldn't confirm Ridgeway's figure, but the 2006-07 budget shows the top-paid lifeguards, two battalion chiefs, will earn $172,915 in salary and benefits this year, not including any overtime.

Jacobsen rebutted Ridgeway's claim that year-round lifeguards work less in the winter. He patrols the beach and also prepares to recertify seasonal lifeguards, train new hires, and get the popular junior lifeguard program going, he said.

"In the middle of the night when it's cold and dark, it's the permanent lifeguard staff … that have to get in the wwater" for rescues, he said.

"The potential to risk our lives happens throughout the year."

Govt. Pensions: Federal pay, benefits double private sector's

Report: Federal pay, benefits double private sector's

8/4/06
By Karen Rutzick
krutzick@govexec.com

New figures from the Commerce Department's U.S. Bureau of Economic Analysis show average compensation for federal employees to be double that of private sector workers for the first time.

Federal workers earned an average of $106,579 in 2005, including benefits, or about twice the average private sector compensation of $53,289 with benefits included. This marked the first time federal compensation reached this point; for 2004 the bureau's statistics put it at slightly less than double the private sector's.

Without benefits, the difference for 2005 is less. Federal employees earned an average salary of $71,114 while their private sector counterparts earned $43,917.

Read the full article here: http://www.govexec.com/dailyfed/0806/080406r1.htm

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May 18, 2006
Pay Gap: A Different Take

By Karen Rutzick
krutzick@govexec.com

The pay gap between private and public sector employees seems to be a given. Just this week, 10 congressmen made their case for a higher 2007 civilian pay raise than President Bush has requested by citing a 30 percent private-public gap reported by the Bureau of Labor Statistics.

"The federal government may never be able to compete with the private sector, dollar for dollar, but we must ensure that we do not fall further behind in the battle for talent," Reps. Tom Davis, R-Va.; Jon Porter, R-Nev.; Steny Hoyer, D-Md.; Chris Van Hollen, D-Md., and others said in a letter to fellow members.

But a new paper from the libertarian Washington-based think tank the Cato Institute argues that the pay gap actually travels in the other direction. Pointedly titled "Federal Pay Outpaces Private-Sector Pay," the paper by Chris Edwards, the institute's director of tax policy studies, makes the case for freezing government salaries.

By bundling federal benefits -- including defined pensions, the Thrift Savings Plan and health care subsidies -- together with wages, Edwards calculated that the average federal worker earned $100,178 in 2004, compared to $51,876 in salary and benefits for the average private-sector worker. Those numbers were based on statistics from the Bureau of Economic Analysis.

"The federal civilian workforce has become an elite island of secure and high-paid workers, separated from the ocean of private-sector American workers who must compete in today's dynamic economy," Edwards wrote.

Read the full article here: http://govexec.com/dailyfed/0506/051806pb.htm

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Also for a really interesting read take a look at the Cato Institutes article on the "Parasitie Economy"

excerpt: "It is useful to describe the United States as having a dual economy. On the one hand, there is the private-sector economy, which produces goods and services in response to the wants of consumers and businesses. On the other hand, there is the government sector, which largely redistributes income. Typically, government is said to redistribute income from rich to poor or from young workers to older retirees, but increasingly there is evidence that individuals use government to redistribute income from the general taxpaying public to themselves. Author Jonathan Rauch has termed Washington, D.C., a "parasite economy."[2] Of course, not all governmental activity is of a parasitic nature. The protection of rights--through police, courts, and national defense--is an essential function of government. Many traditional functions of government such

as providing roads and schools do yield benefits to taxpayers, (though some of those services might be produced more efficiently in the private sector). However, as government as grown larger, the parasite economy--that is, the people who derive their livelihood from government spending and taxes--has flourished. The amount of government spending defines the potential "pie" from which the parasites ("rent seekers" to economists) try to siphon off income for themselves.[3]"

Read the full article here: http://www.cato.org/pubs/pas/pa-250.html#

Mallard Fillmore 9/14/06: