Blogging Bayport Alameda

July 22, 2011

Didn’t we almost have it all

Filed under: Alameda, City Council — Lauren Do @ 6:02 am

Here’s what I have been enjoying about the Hospital Board and the City Council lately, granted I don’t watch the Hospital Board as much as the City Council, but I have enjoyed the two chairs of these bodies really taking control and pushing back on blanket statements made by other Councilmembers or Boardmembers who have gone pretty much unchallenged for a while.

So last Tuesday the subject of the police contract came up and of course it was pulled from the consent calendar — and I’ll note that the City Manager’s office actually sent a Press Release out the day before the meeting to point out that the Police contract was on the agenda.

Staff talks about the contract and what it all means and how much it will save yadda yadda yadda, and then Doug deHaan talks about how this new contract does nothing to save any money right now.   Then after some more discussion and some folks pointing out that because the police (and the firefighters because they have the same contract) have not had any wage increases in the last few years and would not have any for the duration of the contract AND because they are contributing not only their share of their pension costs but also now they are contribution a portion of the City’s share they are, in essence, getting a pay decrease since their take-home salary will be less due to the increased contributions.   After Doug deHaan announces that there are no savings now, he then launches into this speech, I’ll transcribe it here, but I have the discussion here up until the vote:

I personally strongly support the police officers in every way or form.  The dialogue that I hear here tonight is not…that things are going to get better… We put together a blue ribbon commission that looked at fiscal sustainability, they are telling you, not just the wages are going to get you in trouble at a later point in time — and I hope that we all understand Economics 1A — it’s the future of what commitments are made.  So, it’s easy to say: wait till next year, we’ll work it out…

We haven’t addressed that one elephant in the room: the future obligations.

So then Mayor Marie Gilmore steps in and says:

You know, I’m sorry, I have to take exception to that.  You’re telling us that we have not addressed a future obligation when we have just…

Doug deHaan interrupts and says:

Oh, okay, OPEB is an excellent example.

For those that may not be up to speed on the lingo OPEB is “Other Post-Employment Benefits.”  So Marie Gilmore continues:

It is an excellent example, that’s exactly what we did.

And then channeling their inner third graders, Doug deHaan retorts back:

No we didn’t.

And Marie Gilmore counters:

Yes, we did.  We cut that liability in almost half.  And you’re upset because you’re saying that it doesn’t give us any current savings and at the same time you’re saying we’re not doing anything about future savings.  You can’t have it both ways.  We have done significant structural changes to take care of these future liabilities.

Doug deHaan then responds:

I do not believe that is the situation.

Beverly Johnson then steps in to say:

There seems to be a lack of of understanding, maybe the human resources director could explain to the Council again how the OPEB issue is being addressed by this contract.

So the Human Resources director has to, yet again explain how it all works.   Essentially she confirms what the other Council people understand, the changes negotiated in these contracts structurally modify these post retirement benefits.

After being schooled by the Human Resources director and his dias-mates — in a nice way — Doug deHaan then accuses the other City Council members of wishing and hoping that things will get better.   And when Marie Gilmore pushes back and says that no one has said that on the Council he looks at her askance and announced that they have all said it in the past.   Beverly Johnson pipes up and declares that she never said that and Doug deHaan assures her that he knows that she never said that, implying that the other three had.   So Marie Gilmore says:

We have acknowledged the fact that the economy isn’t going to get any better for the next four or five years.  We all realize that.  We realize that we are heavily dependent on property tax revenues to fund the municipal corporation here and property tax revenue are not going to be any better.  I don’t think anybody up here is kidding themselves as to what the economic forecast the next couple of years out is going to be, which is why we talked about sitting down in September as opposed to January and starting work on next years budget.  Why we’ve given direction to the City Manager to start talking to all our bargaining units to help us weather the storm because we understand that this is an on-going issue and we are no means finished by the fact that we have completed our safety contracts.

Despite not seeming to understand the contracts and their impacts on the City and “personally strongly support”[ing] the police officers, Doug deHaan votes against the contracts anyway, but not before rambling on about things that don’t really matter.

Let me just point out one thing though.   I think we can all agree that the new public safety contracts have terms in them that did not exist before.   I think we can all agree that the new public safety contracts have taken away some benefits from the public safety folks as well.   There is a cost savings to those takeaways and concessions.   Doug deHaan went waaayyy off message when he decided to declare that the contracts neither helped in the future or in present.   As Marie Gilmore said, he can’t have it both ways, but he certainly did try Tuesday night.

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32 Comments

  1. I found that conversation by Mr. deHaan to be very disturbing. I played it several times to try to understand what he was saying, and what he did not do was to offer what he thought should be done. What would have satisfied him? I think it may be either a huge pay cut or cutting the pension benefits and/or health care benefits back by a substantial amount for both current and future retirees. It is the nature of employment law and contracts that to make inroads into obligations the beginning point is what you do going forward. It may take some years to reduce the liability, but it does reduce. This contract results in a reduction of the future liability by nearly half. That is a significant amount. It also results, as with the firefighters, in these folks not getting any pay increase for I think seven years in total. No pay increase over that amount of time means they are in fact, receiving less pay, due to inflation. We are a bit fortunate right now that the inflation over the past 5 years has been small. Nevertheless, there has been inflation and these folks have gotten no increases. I do not believe that the pay/overtime/pension/health care situation from prior negotiations is all hunky-dory and I do believe that our current economic situation will require sacrifices from both City employees and residents. However, I don’t believe that Alameda is going over a cliff financially, the council and new city manager are working hard to bring things into order and are getting results.
    So once again, being critical of the decisions being made beg an offering of solid, well thought out solutions as an alternative. Ones that are realistic and within the realm of possibility of the governing laws.

    Comment by Kate Quick — July 22, 2011 @ 7:06 am

  2. The elephant in the room was the City’s unfunded pension liablity, currently $75 million. That’s one huge pot of cash that the City doesn’t have.

    While the Council took action to reduce the rate at which future dollars will be ADDED to the pot, the Council did not address how it would address what’s already in the pot and owing. A couple of baby steps – big whoop!~

    That was Mr. DeHaan’s point. As the Kevins have frequently noted, he’s right.

    Comment by Neal_J — July 22, 2011 @ 7:28 am

  3. The current cash savings are minimal, and do not come close to closing the operating deficit. As for the ~80MM-ish NPV of the OPEB, how is that reduced by half? I see no evidence of that.

    Nobody is talking about pauperizing the public safety employees. There is not a single person in this town who doesn’t appreciate them nor is there one who wants to gut either the police or fire depts. But facts are facts and numbers are numbers and those two combine to a deficit that was not properly addressed by these contracts. There are only two outcomes: A) the city continues to burn its reserves, albeit at a slightly slower pace, as described by the auditor & treasurer or B) significant cuts in current services so we can pay former officers instead of current ones (the ones who are actually protecting us).

    Huge cuts are not required, Ms. Quick, but small ones are. Your post #1 indicates that you think deHaan (et al) want to take a chainsaw to police & fire paychecks, when a surgical trimming will do the trick.

    Consider the example of AUSD teachers. In recent years, the money hasn’t been there. Teachers accepted layoffs and pay cuts to balance the district’s budget. They didn’t strike or try to buy a new school board, they accepted the fiscal realities. Note also that teachers earn SIGNIFICANTLY less than police & fire. Note further that other police & fire depts in the Bay Area have made more meaningful concessions than Alameda’s, while still remaining quite well-paid by civil service standards. Their failure to concede meaningfully is extremely short-sighted greed on their part. Council’s failure to act rationally is a gross breach of fiduciary duty to citizens & taxpayers.

    Comment by dave — July 22, 2011 @ 7:31 am

  4. >>> We are a bit fortunate right now that the inflation over the past 5 years has been small.

    Where do you buy your food and gas?

    Comment by Regular John — July 22, 2011 @ 7:32 am

  5. I love this canard of “no raises.” As if none of the police and firefighters ever get promoted. 70% of the budget is still 70% of the budget, it’s not a sacred cow. I find the comment by Kate to be disturbing because she clearly doesn’t understand that Alameda is going over a cliff financially and the majority of the council and new city manager are asleep at the wheel. What is the point of the City having an Auditor and a Treasurer if the Mayor and her cronies ignore them?

    Comment by Adam Gillitt — July 22, 2011 @ 7:52 am

  6. Granted, deHann was correct but unclear. I’d still like to hear what he would do.

    OPD Concessions:
    The concessions will save Oakland about $65 million over the next four years, Arotzarena said.

    In addition to contributing 9 percent of their pension costs, the officers agreed to delay previously negotiated cost-of-living increases until 2014 and give up two holidays per year through 2015.

    The agreement also calls for entry-level pay for new hires to be reduced by 10 percent and for the retirement age for new officers to be raised to 55 instead of the current retirement age of 50.

    Comment by Jack Richard — July 22, 2011 @ 8:19 am

  7. If anyone ever asks you what “spin” means, just refer them to this blog. Both the author and those posting are especially adept at it. For example:

    Marie Gilmore “steps in and says”, “counters”, and “pushes back”
    Doug de Haan “interrupts”, “retorts”, and “responds”
    Beverly Johnson “pipes up and declares”

    What picture do these verbs conjure about the speakers to which they are attributed?

    Both Kate and Adam are “disturbed”: Kate by deHaan’s conversation and Adam by Kate’s comment. They both also use the word “disturbed” because it sends the message that the person they are talking about is unsettling, or crazy, or scary, but most definitely wrong, but saying it this way is not so in your face and just a teensy bit passive aggressive.

    Don’t get me wrong. I’m not criticizing the technique. I’m just reminding people to be aware of it and how it may color our perceptions of what is being said. (I’m not even disturbed…just piping up.)

    Comment by Denise Shelton — July 22, 2011 @ 10:20 am

  8. 7. Well done, Denise. I suppose one learns many rhetorical tricks when one works in a Willie Brown administration.

    Comment by Jack Richard — July 22, 2011 @ 10:32 am

  9. Well saying “said” all the time would be a tad on the boring side. If you watch the video, “interrupts” would be the best descriptor for what Doug deHaan did. I also used the word “launches” for Doug deHaan as well. And Beverly Johnson also “steps in to say.” And Marie Gilmore I also used the simple “says” for her as well.

    But I’ll make a mental note that some folks would prefer the boring “says” or “said” in their transcriptions.

    Comment by Lauren Do — July 22, 2011 @ 10:48 am

  10. Somedays after reading I feel dizzy.

    Comment by frank — July 22, 2011 @ 11:07 am

  11. I prefer a boring straitforward statement of the facts. Leave the color commentary to sports & TMZ. Especially since Lauren didn’t note that Marie’s voice jumped up an octave when she entered the fray. And fewer narcissitic statements like “I don’t believe Alameda is going over a cliff financially” Unless you are the City Treasurer/Auditor, what you believe contrary to the math is neither helpful nor important. I think the most important thing Doug said was, referring to OPEB costs, :”You can’t keep up with them”. One city can’t really do anything about them & until recently, they weren’t much discussed, even missing from some of the Power Point presentations on the budget. But we can’t afford to forget about OPEB. They can’t be underestimated in their effect on the city’s finances, & I can’t fault Doug for keeping them in the forefront when others seem inclined to pat themselves on the back for small victories. I’m sorry I don’t have a solution (other than dismantling the Alameda Health Care District & giving THAT money to the General Fund!).

    Comment by alameda vigilante — July 22, 2011 @ 11:41 am

  12. For anyone who wants to listen to the budget discussion, here’s the video w/ the relevant starting points:

    Special Meeting of the Alameda City Council (3/29/11) re: General Fund Budget

    http://alameda.granicus.com/MediaPlayer.php?view_id=6&clip_id=766

    01:43:00: Kevin Kennedy begins comments
    02:03:55: Kevin Kearney begins comments
    02:12:25: Mayor responds to Kevins’ comments
    02:15:50: Kevin Kennedy responds to Mayor re solutions
    02:19:30: General council discussion begins

    (Mayor states to Kevins: “your input is always welcome, and always valuable, no matter how difficult sometimes it may be to hear,
    but we appreciate it, I appreciate plain and up front talking…”)

    Comment by John — July 22, 2011 @ 1:39 pm

  13. 9. Way to completely miss my point, Lauren. I simply meant to say that one only has to see which alternatives to “said” you attributed to each speaker to know how you want us to feel about them. Objectivity is hard. That’s why Fox News never bothers with it.

    Comment by Denise Shelton — July 22, 2011 @ 1:39 pm

  14. Denise, when I said I found his words “disturbing” it was NOT in reference to what Mr. deHaan was saying, as in I thought he was crazy, it was in reference to the fact that I was having trouble “getting” his point. I still have not heard from him exactly what he thinks the solution must be, and I would like him to say “I disagree with the contract and believe that instead of doing x, y, and z, we should have insisted on a, b, and c.” And then gone on to expostulate his reasons for what he DID want instead of the usual “Alameda is going over a cliff financially right now!”. I think that would have been far easier to have processed and been more helpful for the public at large to have understood his point. If I thought Mr. deHaan was disturbed, I would have said so. Upset, maybe, but not disturbed.

    Comment by Kate Quick — July 22, 2011 @ 2:08 pm

  15. Pinning a half cost reduction for retiree spousal benefits OF FUTURE EMPLOYEES does not significantly reduce the pension fund issues over the next 4-5 years which is where the cliff is. We need “structural” changes now and the animal shelter is a drop in the bucket. Mastick will be too. We may have to close the library altogether a few days a week and that still won’t cut it. Emplyment contracts have to be renegotiated over the next few months and the savings should begin as soon as feasible – not 2012-2013 budget. I would settle for January 2012 as an efffective date. We need to look to Oakland’s recent successful re-negotiations as a blue print. Where does a significant number of dollars exist? The public safety employees is the best first pass. Oh, and another thing, siting lack of raises during the past few years and into the next two means nothing to most of us who feel lucky if we still have a paycheck, let alone a raise.

    Comment by Nancy Hird — July 22, 2011 @ 2:17 pm

  16. The Red Cross moved to Alameda Point because they couldn’t afford the rent on Webster Street. It sounds like instead of closing the library, we need to close the Alameda Museum or move it to Alameda Point because the City still subsidizes 2/3rd of the rent for the Museum so it can be located in the Park Street business District.

    Comment by Dennis V. — July 22, 2011 @ 2:38 pm

  17. 15. Seriously, I’d be happy with just the paycheck.
    16. Bite your tongue! Are you trying to say that the museum is not a vibrant and essential part of the Park Street Experience? If they haven’t decided what to do with the old library, they could put it there.

    Comment by Denise Shelton — July 22, 2011 @ 3:13 pm

  18. 17. We must ALL make sacrifices. Would it be worth the taxpayers paying the high rents for the Museum to be located in the District if it was more than a storage room of leftover from estate sales? I bet if you look at the visitor and usage counts at the Library vs. the Museum, you would conclude the Museum should move to Alameda Point, a location rich in history.

    Comment by Dennis V. — July 22, 2011 @ 3:27 pm

  19. I was disappointed by what seemed to be Council member deHaan’s repeated contradiction of reality Tuesday night. I was there at the meeting and Lauren’s transcribed description is not “spin,” it is accurate characterization of what was said and how it was said. (Others sitting nearby shared my impressions of the conversation,BTW.)

    First, deHaan repeatedly denied that the new public safety contracts affected current costs when, in fact, they did reduce current expenditures. He could have accurately and justifiably argued that the contracts did not do ENOUGH to reduce costs, but he asserted “No we didn’t” in an absolute sense more than once when, in fact, both contracts do limit cost increases right away and REDUCE city expenses immediately to some degree.

    Second, the approval of these new contracts is a necessary first step in slowing down the growth in unfunded future pension liabilities, which did not develop overnight and cannot be “fixed” by the ratification of any current contract. And no one is claiming that ratifying these new contracts is the end of all efforts to meet the city’s future obligations.

    Third, deHaan seemed to assert that no one else was even aware of the unfunded future pension liabilities, despite regular and frequent statements to the contrary from all of his colleagues and many speakers (like myself) who advocate dealing with that staggering sum in other ways than he would. No one is denying or minimizing the seriousness of that $75-$80 million liability, but deHaan seemed to be OK with accusing anyone who disagreed with him of willful neglect of that “elephant in the room.” His explicit and inferred allegations to the contrary sounded inaccurate, unnecessary, insulting, and most un-collegial when I heard them Tuesday night.

    Fourth, resolving all of the $75-865 million unfunded liability was NOT on the agenda Tuesday night, nor would any reasonable and legal union contract have banished that unfunded liability in one fell swoop. This large a liability will take years to deal with, since it developed over many decades. And it IS OK to find solutions to that liability in innovative ways that are outside of our current annual budget processes.

    I wish that the mayor and council members could have been a bit more civil Tuesday night in discussing this, but I believe it was deHaan’s inflammatory and accusatory language that was responsible for turning up the emotional intensity in the first place. He did not need to contradict reality (or city staff or his colleagues) in order to raise perfectly valid points and he could have raised significant and real issues without mischaracterization of the facts or making false accusations against his colleagues.

    Comment by Jon Spangler — July 22, 2011 @ 4:10 pm

  20. I don’t think the fact that Doug is clumsy about making a point is worth so much discussion. That has always been the case and not likely to change much. It may be note worthy that some of his dais mates have finally had their fill. I take Lauren’s version as basically accurate and with minimal spin, but not everybody is as confused about what Doug is attempting to get at as he appears to be. However, I think the detractors of the safety contracts, with emphasis on the Kevin’s (mostly Kearny), should start offering some specific alternatives. BTW, preemptively, I don’t accept 10% cuts in salary across the board and I don’t want to invite any supposed alternative which is that extreme. There must be more nuance and compromise. If in fact council is resistant to the opinions of the auditor and treasurer they aren’t likely to want to hear their alternatives, but this ongoing discussion is repetitive and like the Republican’s in congress, those who dissent seem mostly focused on sniping at the majority on every issue ( as the Republicans are out to undermine Obama ) as opposed to focusing on what real solutions and compromise might be possible.

    Adam’s condemnation of the City Manager in 5 seems entirely premature, not like that matters to Adam. Cynics among us may raise an eyebrow at mention that these contracts can be reopened before they have expired because we don’t really expect that, but as Lauren has mentioned here in her blog, if we creep closer to Vallejo status the unions will have plenty of incentive to reopen and obviously many of us will agitate for that. By such a time I expect City Manager Russo to be better positioned to effect the negotiations than he was on this one and the entire course of events may take a different arc. Meanwhile, we have started with incremental change in the right direction. Last point on comparisons to surrounding municipalities, I think we should be very wary of apples and oranges. As one example it was pointed out to me that in Oakland recent wage concessions in safety contracts amounted to deferring a previously promised raise. I’m not the person to discuss these types of details, but there are some very opinionated people some of whom who appear to be better qualified, who I don’t feel are any less into spin that the blog host is alleged to be.

    one more time…. http://www.thedailyshow.com/watch/mon-july-18-2011/armadebtdon-2011—national-bulls–t-ceiling

    Comment by M.I. — July 22, 2011 @ 4:56 pm

  21. 20. Oh by no means is Lauren the only dervish in the daycare center. Only the most visible.

    Comment by Denise Shelton — July 22, 2011 @ 5:22 pm

  22. 20
    Remember, Mark, the rest of this country is center/right so don’t conflate the ‘sniping’ in Alameda with what’s happening on the national scene. The majorities aren’t the same.

    Comment by Jack Richard — July 22, 2011 @ 6:54 pm

  23. CalPERS actuary: pension costs unsustainable (8/10/09)

    http://calpensions.com/2009/08/10/calpers-actuary-pension-costs-unsustainable/

    The CalPERS chief actuary says pension costs are “unsustainable,” and the giant public employee pension system plans to meet with stakeholders to discuss the issue.

    “I don’t want to sugarcoat anything,” Seeling said as he neared the end of his comments. “We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) … unsustainable pension costs. We’ve got to find some other solutions.”

    ***
    Special Meeting of the Alameda City Council (3/29/11)

    http://www.cityofalamedaca.gov/getdoc.cfm?id=4844

    Mayor Gilmore stated the City’s expense line continues to rise; inquired whether most of the increases are due to increased health cost, OPEB and PERS, to which the Controller responded in the affirmative; stated one reason salary increases were left out in order to keep from clouding the picture; keeping the salary increase out shows the dramatic impact of the PERS and health increases, which the City does not have control over.

    Comment by dlm — July 22, 2011 @ 10:15 pm

  24. I could post something from the Fiscal Sustainability Report as well but by now everyone should be aware of it. I’ll quote Kevin Kennedy instead, who summed up the problem quite well: “It’s the time it takes the rat to get through the anaconda”. It’s the expenses related to *current* employees that have to be substantially reduced now and going forward and those related to public safety employees in particular.

    It’s politically easier to fall back on a two-tier system, that’s obvious, but it won’t be sufficient. Someone hired today who retires in 25 years w/ less expensive health coverage obviously does no good right now or anytime soon.

    The 2% increase in employee PERS contribution amounts to less than $2,000 a year. It’s not a terrible or unreasonable burden on someone whose average pay and benefits amount to $160,000 and more, and it’s not enough to make a dent in the city’s steadily rising PERS payments.

    It’s not going to address the underlying problem: the 3% at 50 formula for retirement is not sustainable. Many people have said this already and that’s the reality that has to be addressed. The city cannot afford to pay 50% of an employee’s base salary into a PERS account — that would be $45,000 a year for most police officers and firefighters, for pension contributions alone. It’s already paying 30% of base salary and more right now.

    My fear is that the City Council won’t do anything substantial until the city has nothing but desperate measures left. I commend Doug deHaan for recogniziing what’s really at stake here.

    Comment by dlm — July 22, 2011 @ 10:59 pm

  25. At the urging of dave I went back and sat through the entire special budget presentation from March. I have been trying to infer information from discussions with out nailing my ass to the chair for 2.5 hours. Now that Tour de France coverage is over I did it. Referring to my .20 above, I guess the specifics I asked for were more or less alluded to in references to San Jose where FD did take 10% cuts. I know they were highest paid in the nation but that City has tens of million more in their budget gap so I’m still concerned about apples and oranges, and I have a hard time with the idea that any group, no matter how well they are sitting should take a hit like that all at once. I have been going along with the idea we have some time in the next two years to ween our safety employees, but Kevin Kennedy was pretty emphatic in his opinion we are already way behind the curve. I want to reiterate what I was saying about Doug in 20. He has always frustrated me and it’s hard for me to resist and opportunity pile on criticism of his oratory skills, but even though he was wrong in the words he used, I can’t deny what he was attempting to emphasize about the impact of the contracts. Obviously, our city budget won’t wait for a social movement to solve some of these issues like health acre costs, but I’d really like to see significant health care reform which would help resolve the largest part of this benefits problem, and I think there is a place for cities to have a voice in that. I don’t agree with dave that 10% is a surgical trimming and even though he and I make a delineation between teachers and safety employees, I’m very fearful of opening a Pandora’s Box full of people who see all public employees as a monolith of greedy wankers. If I haven’t made any money in the last two years, I don’t see the solution as punishing everybody who is paid with tax dollars.

    According to the Kevins it will be too late in two years for political action, but both make interesting candidates, though I prefer Kennedy’s diplomacy over Kearney’s bravado. Unlike Doug, Jean Sweeney, or Adam, I could conceivably vote for either of them.

    Comment by M.I. — July 24, 2011 @ 12:21 pm

  26. Perhaps I am projecting here, as my own income is particularly volatile from year to year, but 10% IS a surgical adjustment. It’s not nearly as big a deal as what both public safety employees (hereafter PSE) and citizens face if this is not resolved.

    We are facing drastic cuts in services & staffing if these relaively minor concessions are not made. Is it worth slashing police patrols to “honor labor”? Close a fire station because well-paid firefighters won’t accept a small adjustment? Continue to watch our parks & public works deteriorate so that PSE can keep benefits that few if any taxpayers enjoy? Looked at in those terms, 10% is nothing.

    Two points to reiterate:

    1) Recommending small cuts does not mean one disrespects PSE and their services. The one time I had to call 911 I heard the sirens within seconds of hanging up the phone. In other non-emergency situations I have found them both prompt and extremely professional. I advocate for these reductions precisely because I want to keep such dedicated professionals working for Alamedans, not because I see PSE as “a monolith of greedy wankers” as Mark so eloquently put it.

    2) Even with a 10% cut, they will remain well paid by civil service standards. Compare their compensation to AUSD teachers or the their federal counterparts as Jack has noted, and it’s clear they are not facing poverty.

    If the choice is to kill the golden goose, or accept that she needs to turn silver, isn’t the latter the wiser course to take?

    Comment by dave — July 24, 2011 @ 1:12 pm

  27. This is not about “punishment” it’s about adjustment in light of a new reality. May I also point out that improving the City’s financial health is of benefit to everyone who lives or works here. A reduction in public employee costs will benefit even those very employees who are facing the cuts. Better a little less now than nothing later if the doomsayers are right and disaster looms. Hoping and having faith in a system that is so clearly broken is pure folly. There’s a show on TV called “Prince$$” where a financial coach re-trains the habits and the thinking of young women living beyond their means. In a recent episode, a personal image consultant in a high end department store (that’s a shop girl at the make-up counter) finds herself rapidly accumulating debt because of reduced commissions due to the economy coupled with an attitude of entitlement that led her to continue spending at the same rate she did when she was making more money.
    Now before you get your knickers in a twist that my comparison between a shop girl with expensive taste and our public employees is meant as an insult. It’s not. My point is that it does not matter if you deserve better or more due to the value of the work you do, or what you use the money you make for, the saints and the sinners are all subject to the same immutable laws of finance. Money works the same way for everybody. As a society, we’ve been trained to ignore that fact to our peril.

    Comment by Denise Shelton — July 24, 2011 @ 9:53 pm

  28. Here’s a good explanation of the way in which pension contributions are determined:

    Daniel Borenstein: Even when police contribute, taxpayers pay most of the pension bill

    http://www.contracostatimes.com/daniel-borenstein/ci_18392432

    As government workers are pressed to kick in, or kick in more, it’s a good time to review all the elements of pension payments.

    Most California public safety workers can retire at age 50 or above with starting pensions equal to 3 percent of highest salary for each year worked. For example, an officer hired in his mid-20s can retire 30 years later at 90 percent of top salary. Inflation adjustments follow.

    Pensions should be funded each year with enough money to cover the retirement benefits earned that year. After investment earnings, that should provide enough money to cover pensions when workers retire. But, if insufficient funds are set aside, or if projected investment earnings don’t pan out, that creates a shortfall, known as an unfunded liability. It’s a debt paid off over time as part of the total bill.

    In the 2010-11 fiscal year, the contribution for a typical police pension in the CalPERS system was 38 cents for every dollar of salary. By 2015-16, according to public pension actuary John Bartel, the price will hit about 45 cents if CalPERS’ investment projections pan out.

    Comment by dlm — July 25, 2011 @ 10:36 pm

  29. I think I’ll post the rest of this. it’s short and it explains where the pension payments go better than anything else I’ve seen.

    ***

    Let’s break down those numbers:

    First there is the price for benefits currently being earned. That cost is about 28 cents. What’s very important about this number is that it is not affected by stock market downturns. We often hear that public pension costs are so high because of investment losses from the Great Recession. If we hadn’t experienced those losses, the cost of police pension benefits currently being earned would still be 28 cents on the dollar.

    The 28 cents is supposed to be divided, with employees paying 9 cents and employers paying the rest. But many public agencies have agreed to pay both parts.

    In Pleasant Hill, Oakland and Walnut Creek, the debate is over whether officers should start paying part, or all, of the 9 cents. The city will still pay the balance.

    The other part of a pension contribution goes toward paying down the unfunded liability. In 2010-11, that cost was about 10 cents for every dollar of salary. That cost is borne entirely by the employer, the taxpayer. Thus, if investment projections fall short, or if insufficient money was contributed in past years, taxpayers make up the shortfall.

    In CalPERS, that liability is usually amortized like a 30-year mortgage. Notice that this is debt for labor that has already been performed. Yet, we are pushing the cost onto future generations. CalPERS currently has about $125 billion of debt.

    Of the 10-cent payment toward that shortfall, about 4 cents is because of retroactive liabilities created when pension benefits were increased across the state starting in 1999. The increases were applied not only to future years of employment for active workers, but also to their past years of service. Insufficient money was set aside to cover the pension costs for that past service, so a liability was created that is still being paid off today.

    The other 6 cents of the unfunded-liability payment is due to investment losses. But that liability doesn’t reflect the full cost of recent losses. CalPERS won’t fully recognize those for more than a decade. That’s why Bartel expects the payments for investment losses to increase to 13 cents by 2015-16. And that’s why the total cost will rise to 45 cents.

    So, in summary, for 2010-11, the average police pension payment is 38 cents of every dollar of salary. By 2015-16, using CalPERS investment assumptions, the payments will hit 45 cents. The fight in Oakland, Pleasant Hill and Walnut Creek is only whether officers will pay up to 9 cents of that cost.

    Finally, because of CalPERS’ rosy investment assumptions, the payments will likely be insufficient. If they are, that will create more unfunded liability, driving up payments even further in the future.

    Comment by dlm — July 25, 2011 @ 10:38 pm

  30. It looks like Alameda’s public safety employees are breaking new ground by paying for more than 9% of their pensions. Here are the excerpts showing that the tide may be turning for CalPERS.

    http://www.sacbee.com/2011/07/21/3783600/the-state-worker-six-reasons-pension.html

    CalPERS eased the pressure. The fund’s leadership has kept its investment returns forecast at 7.75 percent. Lowering the assumed rate of return – as CalPERS’ staff suggested – would have added hundreds of millions of dollars to government pension bills and handed reformers an obvious talking point.

    Pension funds have bounced back. CalPERS this week reported its investments returned 23 percent for 2010-11. CalSTRS reported 21 percent gains. Both lost a fifth of their value in 2008-09, which gave ammo to reformers.
    The pension protectors loaded up this week. Dave Low, chairman of union coalition Californians for Retirement Security, said in a statement that the news “should put an end to the doom-and-gloom scenarios of politicians who want to take a wrecking ball to our state’s pension funds.”

    Some ideas would change pensions for current employees. Legally iffy, at best.

    Comment by David M. — July 26, 2011 @ 3:55 pm

  31. I’ll have to go back and look at some of this information again before answering at any length. In any event, as it stands CalPERS will be raising contribution rates for many years to come, even with some improvements in their investment rate of return. What they’ve done is called “smoothing”, which is similiar to amortizing the losses over a long period of time, so they don’t get caught up in one shot.

    I’ve seen the average investment return they had for the past ten years, but I don’t recall the exact number. It was somewhere between 1% and 3% annually. That’s a lot of catching up to do.

    Here’s a survey done by the League of Cal Cities, published this past month, on pension reform. It’s true that many cities are just now negotiating the employee payment of the employee contribution, but some have moved on already to the employee payment towards the employer contribution. It’s new, but it’s not really “ground-breaking”.

    Anyway, as I said above, 2% of base salary for most police officers and firefighters is in the neighborhood of $1800 to $2000 annually. This is not a big deal, and the amount of huffiness on the part of the Councilmembers over this was kind of silly. Frankly I wondered, without sarcasm, if they even knew what it meant.

    2011 City Manager Pension Survey

    http://www.cacities.org/resource_files/29648.2011%20City%20Manager%20Pension%20Survey%20(Final%20Results).pdf

    Survey Respondents: 296 out of 449 cities that contract with CalPERS

    COST SHARING

    Cities were asked to provide information on whether they had negotiated an increase in employee cost sharing of pension costs.

    38% of cities responding have adopted some form of cost sharing with many of those changes occurring over the last two years.

    Trends in Fire Plans
    57% of cities that said they negotiated an increase in employee cost sharing indicated that their fire units will be picking up more of the pension costs. Formerly the common trend among these employees was to contribute 0% toward pension costs and now they are contributing 9%.

    It also appears that 10% of these agencies have asked their fire units to pick up a portion of the employer contribution rate. Agencies have negotiated a 2—4% pick up of the employer contribution.

    Trends in Police Plans
    73% of cities that said they negotiated an increase in employee cost sharing indicated that their police units will be picking up more of the pension costs. Formerly the common trend among these employees was to contribute 0% toward pension costs and now they are contributing 9%.

    It also appears that less than one-percent of these agencies have asked their police units to pick up a portion of the employer contribution rate. Agencies have negotiated a 1—4% pick up of the employer contribution.

    Comment by dlm — July 26, 2011 @ 10:14 pm

  32. Correction: Here’s a survey done by the League of Cal Cities, published this past month

    Should be: published this past March.

    Comment by dlm — July 26, 2011 @ 10:15 pm


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