Blogging Bayport Alameda

August 14, 2012

Growing gains

Filed under: Alameda, Public Resources — Lauren Do @ 6:04 am

This is a little on the old side, but I think it’s pretty interesting considering that there have been discussions about making the move to Alameda County Fire Department in order to save money.   There was even a petition, which ended up getting more signatures, a whopping 25, than the one asking the Democratic party to not endorse Rob Bonta for Assembly.

In Orange County, the Grand Jury looked at why the Orange County Fire Authority‘s, which serves more than 23 cities and the unincorporated area there, salary rates outpaced its growth.  From the Orange County Register’s blog:

Since the firefighting powerhouse was born in 1995, its labor costs have grown about 10 times faster than its staff has grown — and about 3.5 times times faster than the rate of inflation, the grand jury found.


Since 1995, OCFA’s annual budget has grown 146 percent, while its staffing has grown only 17 percent, the grand jury found.

If you ever get a chance to look at the salary list for Alameda County Fire Department, for those that clutch the pearls over the compensation for local Alameda public safety, the Alameda County Fire Department salaries must be heart attack inducing.

The notion that outsourcing to a county wide agency would be an automatic savings because somehow the County is more efficient is belied by the Grand Jury examination of the Orange County Fire Authorities personnel growth vs salary growth.

Although the Grand Jury report did, according to the blog:

It would prefer to see OCFA relate salaries and benefits “to what the market will bear, i.e., high applications numbers for a job would usually lead to offering lower salaries and benefits;” and it would like OCFA to tie salaries and benefits “to local economic indexes that reflect the economies of the community served.”

But then again, we recently saw what happened in San Carlos when a City decided to go much much lower for their salary offers than surrounding communities.

Speaking of Fire Departments, recall the Chevron refinery fire from last week (Day 10 of the Summer Olympics :) ) a tid bit that I heard on the news was the Chevron itself has a Firefighting force of 60 Firefghters.   Now I imagine that these are workers who are also fire fighters, but that they have that many people and needed the assistance of the Richmond Fire Department to put out that fire shows the severity of the problem.

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35 Comments

  1. I didn’t go any deeper into the San Carlos situation other than what you linked to but I didn’t see anything about them doing what they said the should do,ie, try to hire on the ‘open market’. Sounds like all they did was try to grab other overpaid personnel from sister cities. Any dunce knows that wouldn’t work.

    Call us when you find what happens when a city actually does go to the ‘open market’. Or do the unions so control the firefighter trade that there is no open market?

    Comment by Jack Richard — August 14, 2012 @ 9:09 am

  2. Your answer is unskilled scab labor? Really?

    Comment by Seth — August 14, 2012 @ 10:47 am

  3. 1. Most fire departments in the bay area (including the AFD) have open hirings with minimum requirements.

    Comment by dc — August 14, 2012 @ 11:01 am

  4. The Success of the City of Sandy Springs Georgia

    Comment by John — August 14, 2012 @ 11:06 am

  5. Firefighter
    Salary Schedule | Benefits | MOU
    Job Code: 4500
    CSB 2004-07-14 rev. 2004-07-02

    Definition
    Under general supervision performs duties to prevent or limit loss of life and property in emergency situations; maintains related equipment and records and performs other related work as required.

    Education
    Graduation from high school or the equivalent.

    Certification
    Must possess the following current certifications or their equivalent as approved by the appointing authority as a condition of initial and continued employment:

    •California Emergency Medical Technician (EMT 1 or higher) Certificate

    AND

    •Other certifications as designated.

    Age
    Must be 18 years of age at time of filing date.

    Residence
    Must reside within a 50-minute response distance by the completion of probation.

    http://www.cityofalamedaca.gov/City-Hall/Firefighter

    Comment by John — August 14, 2012 @ 11:30 am

  6. CTRL+VCTRL+VCTRL+VCTRL+VCTRL+VCTRL+VCTRL+VCTRL+VCTRL+V

    Comment by Seth — August 14, 2012 @ 12:16 pm

  7. Sandy Springs is interesting – very interesting, though not really relevant. Sandy springs set up a new town with new rules, take it or leave it. That can’t really happen here in Alameda, and I say it SHOULDN’T happen here in Alameda.

    Whatever you think about deals that have been cut in the past with public employees, these were deals made in good faith between the city and the employee groups.

    When any employee says I will do that job for you for this price and you say “ok” and that employee does the job, you, the employer, are on the hook for full payment. Big money guys like the thought of defined contributions because they ensure investment in their cockamamie schemes on wall street. Defined benefit plans are there for employees once the employees have lived up to their side of the bargain. Everyone should want a defined benefit plan. Defined contribution plans are just gambling. If you are contributing to a 401k, you are gambling. If you could get a defined contribution plan, wouldn’t you go for it and defend it?

    When you take away benefits from employees who have lived up to their part of the bargain, that is called stealing. When you suggest bankruptcy as a way to get around this little legal snafu, that is called being a jerk AND a thief.

    The economy is bad right now, no doubt. The returns on investment in defined benefit plans are not what they should be right now, which means employers have to pay more right now. That’s ok by me, because when the economy was strong, most employers stopped paying their full contribution because returns were so good. None of this changes the FACT that employees have been living up to their part of the bargain.

    The people saying let’s just go bankrupt and clean the slate are the same people that got loans that were too big and walked away from their personal debt. That is smart, and clever, but is certainly not righteous.

    Comment by Seth — August 14, 2012 @ 12:36 pm

  8. I just read what I wrote and want to modify my last: I am not saying that people who have defaulted due to true economic hardship such as the loss of a job are in any way scamming the system. I was only referring to those people who did the math and decided to walk away from their responsibilities because it was economically convenient, not needed.

    Comment by Seth — August 14, 2012 @ 12:41 pm

  9. Meanwhile, some Alamedans are making news!

    http://www.tecca.com/news/2012/08/14/steve-jobs-robbery/

    Comment by alameda — August 14, 2012 @ 1:55 pm

  10. California Goes Bankrupt
    One California city after another becomes insolvent as the state’s economic crisis worsens.

    Bankruptcy is not a great option but at least it gives cities a chance to get their house in order and start fresh. Unfortunately, Vallejo and Stockton refused to tackle existing pension debt in their bankruptcy plans. Orange County emerged from bankruptcy in the 1990s in better shape than ever, but as writer Chris Reed explained in Calwatchdog, subsequent boards of supervisors then began spending like crazy on public-sector compensation.

    Bankruptcy cannot stop future officials from wasting the taxpayer dollar. But when there’s no money, there’s nothing left to do. In Scranton, Pa., a judge issued an injunction to stop the mayor’s plan to begin paying all city employees minimum wage. But there’s no money left to pay any more than that, he said. The city will gladly pay more as soon as it has the cash to pay it.

    Only when the money runs out will cities find the necessary solutions. That’s perhaps the saddest commentary on the situation in California cities these days.

    http://reason.com/archives/2012/07/20/california-goes-bankrupt

    California Still Dead: CalPERS Bribes, Tax Assessor Bribes, Stockton Bankruptcy

    Updates on three tales of the Golden State’s decline that Reason has covered in the past:

    http://reason.com/blog/2012/06/27/california-still-dead-calpers-bribes-tax

    Detroit Has Run Out of Other People’s Money
    If there is a cure for Motown’s fiscal woes, it’s bankruptcy.

    http://reason.com/archives/2012/07/03/detroit-has-run-out-of-other-peoples-mon

    Comment by John — August 14, 2012 @ 3:30 pm

  11. Public-Sector Pensions: The Coming Crisis

    Nothing in the United States more resembles the current situation in Greece or Spain or Italy than the soaring cost of public-sector employees, especially their pensions. It is, as Warren Buffett has said, “a time bomb.” Consider these facts:

    ■In California, total pension liabilities—the money the state is legally required to pay its public-sector retirees—are 30 times its annual budget. Annual pension costs rose by 2,000% from 1999 to 2009.

    http://graceuniversity.edu/iip/2012/07/12-07-07-1/

    Comment by John — August 14, 2012 @ 3:41 pm

  12. At the risk of further feeding the trolls, I have to ask: If I owe more principle on my mortgage than I make in a year, is my house underfunded? If I owe 30 times my income, should I file for bankruptcy and refuse to move from my house? No, because a mortgage is a long term investment with structured payments, just like a pension system. A pension is a loan that EMPLOYEES GAVE TO CITIES in lieu of salary increases during good times. Alameda said, “I know cost of living is going up, but we can’t afford to pay you more cash; the economy is picking up and we’ll gladly pay you Tuesday for your service today. Have a pension”

    To quote your post, John:
    “But there’s no money left to pay any more than that, he said. The city will gladly pay more as soon as it has the cash to pay it.” I doubt it – not without a court order, at any rate.

    In Scranton, since you mentioned Scranton, they are trying to borrow from the employees’ pensions to balance the books: http://thetimes-tribune.com/news/scranton-seeks-16m-loan-from-unions-pension-fund-1.1348472 . Is that the fund that is woefully underfunded? Is that the city borrowing money from employees AGAIN? Are we talking public servants or public slaves? Let’s just declare bankruptcy. Never mind all the money the employees loaned us out of their own pockets. We need a clean slate. That sounds good. I’ll use that. bankruptcy=clean slate.

    Now repeat after me: bankruptcy=cleanCTRL+Vbankruptcy=cleanCTRL+Vbankruptcy=cleanCTRL+Vbankruptcy=cleanCTRL+Vbankruptcy=cleanCTRL+V

    PS Warren Buffet also said he should get taxed more to pay for government.

    PPS CTRL + VCTRL + VCTRL + VCTRL + VCTRL + VCTRL + VCTRL + V

    PPPS bankruptcy is a good. It’s a clean slate. It’s not slimy at all. If I acknowledge that it’s unpleasant, then I can go ahead and do it without feeling bad. Then, I will have more money in my pocket because I took it from the public employees.

    Comment by Seth — August 14, 2012 @ 4:46 pm

  13. Seth, say your mortgage payments keep increasing because your confidant, on his own, agreed to increases because your confidant got kickbacks from the lender. What happens if you, but not your confidant, find yourself financially unable to pay the mortgage on your house?

    Comment by Jack Richard — August 14, 2012 @ 5:44 pm

  14. We had a 5 Million budget by Fire in 1987 and it is now 23 Million.

    Inflation adjusted from 1987 to 2012 the Fire Budget should be 10,115,096.

    So were paying about double …inflation adjusted…..Probably around what the Federal Firefighters pay schedule is.

    $10,115,096.83

    Looks like we overpaid about 100 Million over past 10 years in the Fire Dept.

    Add in the 50 Million we still owe that is not in Budget to these same employees and past employees. The Real Costs are much larger but are not in Budget.

    If I want to buy a Car and the National Average price of that Car and model is 49,000 and with all the Extras its 68,000.

    I want to buy the same car with extras and support the Federal Government and their model and the Local Price from buying it from them is 60,000 and 78,000 with all the extras.

    Then there is the Seth Model. We can Buy Exact same car and Pay 195K.

    They keep selling price has not gone up last 5 Years.

    Comment by John — August 14, 2012 @ 6:20 pm

  15. The Car Salesman say we can only look at other local dealerships pricing and can’t look at what the rest of the country is paying and what the Government is Charging. We can only look at the other 22 local Dealers that are going broke because of their pricing policies.

    What is not mentioned is we still owe 50 Million that we haven’t paid the salesman yet…..They still want us buying these cars at these rates. They also gave us a Deal and let us use Magic Defer Dollars.

    Smells alot like what is going on in Greece and Spain.

    How can we solve the problem Seth?

    Comment by John — August 14, 2012 @ 6:34 pm

  16. Seth has the answer, John. It’s in his #12, the crack on Buffet, you know, not the all-you-can-eat buffet, the all-you-can-tax Buffet.

    Comment by Jack Richard — August 14, 2012 @ 6:52 pm

  17. Whether we’re talking houses, cars or public services, it’s important to realize that we’ve already taken delivery and got quite a bit of use out of it. It’s not right to then say, “I just don’t want to pay you back anymore” to the people who have provided that service in exchange for what we’ve promised. Revenues are down because tax revenues are down, because we are paying less tax. That doesn’t mean that the bills don’t need to get paid. You’ve been paying employees with magic defer dollars for quite a while now. That doesn’t mean that employees don’t deserve to see cash some day.

    Also, it’s not the same car for twice the price. There was a warranty worked in. Work has been done and is ongoing and the thing has actually increased in capability and value since it was purchased. Updated training and new training in new disciplines have been performed. New equipment and apparatus have been purchased. It’s a brand new fire department that comes with seasoned personnel training new personnel on an ongoing basis.

    Comment by Seth — August 14, 2012 @ 10:03 pm

  18. #17: “It’s not right to then say, “I just don’t want to pay you back anymore” to the people who have provided that service …”

    That’s an interesting argument. I have a relative, now in her early 60’s, who worked for American Airlines for many years. She got early retirement at age 60, then they went bankrupt, then they dropped her small pension. It was picked up by the federal pension guarantee fund, so that much was taken care of. That’s the PBGC — Pension Benefit Guarantee Corp — which covers pensions up to a certain limit only.

    More recently, she got a letter from AA that they’re dropping her health care, which she told me was “pre-funded”. It’s still not clear where this stands or how soon it will happen, but it’s frightening for anyone, and especially someone who’s been diagnosed with Parkinsons, as she has been. She’s 62 now, and she won’t qualify for Medicare until she’s 65.

    None of this should happen, but it does. This is the reality that people in the private sector face. You can’t go to people operating in this reality and say in effect, we deserve to be exempt from that, we deserve to get absolutely everything that’s ever been promised to us, regardless of the consequences for you, the taxpayers.

    The counter argument will be, of course, that everybody should have the guarantees that the public sector has. The thing is, they don’t and they never will. The private sector has been moving away from defined benefit pensions for decades now, and it’s not coming back.

    You’re asking for a double standard — and a gold plated retirement on top of that, at age 50. It’s all going to hit the wall at some point. It’s CalPERS that’s protecting public employee contracts from bankruptcy courts right now, by threatening to appeal court decisions in favor of cities. The bankruptcies will continue to multiply, and then we’ll see what happens.

    Comment by dlm — August 14, 2012 @ 11:55 pm

  19. How ironic that it appears the Chevon fire was ignited by one of its own FIRE trucks! I guess you CAN have too many firefighters, at the wrong place, at the wrong time! What’s that saying..too many cooks spoil the broth?

    Comment by vigi — August 15, 2012 @ 10:08 am

  20. Warren Buffet On State Employee Pension Reform- Collective Bargaining

    Comment by John — August 15, 2012 @ 11:47 am

  21. How Safe Are Your Muni Bonds? Not Very, Warns Warren Buffett

    A couple of years ago, when testifying in Washington, D.C., about the state of the U.S. economy, billionaire super-investor Warren Buffett warned Congress of a looming “terrible problem” with U.S. municipal bonds.

    Now, Buffett is back, and warning that the crisis is closer than ever.

    Inhibitions Evaporate

    Whatever the motivation for these cities violating the bankruptcy taboo, Buffett believes that they’ve started the ball rolling in what could soon become a national trend.

    The trend may not get as bad as Meredith Whitney’s famous 2010 prediction of “hundreds of billions” of dollars in defaults, granted. But the way Buffett sees it, every time you hear about “very sizable cities like Stockton or San Bernardino” declaring themselves insolvent, the “stigma” of other cities admitting they screwed up and can’t pay their bills gets a little bit smaller. “The very fact they [file] makes it more likely” that other cities will follow suit, Buffett says.

    The bad news, obviously, is that insurers’ ability to pay isn’t exactly certain. Insurer MBIA (MBI), for example, has only $3.6 billion in the bank, which won’t make much of a dent if $2.8 trillion worth of muni bonds start to go bad. Also, MBIA has $13 billion in debt of its own. Assured Guaranty is in a little bit better shape, but Ambac has already filed for bankruptcy itself.

    What does all of this mean for investors who’ve put their faith in “safe, tax-free” muni bonds? One thing’s for certain: It’s not good. If more munis start defaulting, and their “muni bond insurance” policies turn out to be worth less than the paper they’re printed on, it’s taxpayers who will be left holding the bag. A bag that when peered into, will be found depressingly empty of money.

    http://www.dailyfinance.com/2012/07/19/warren-buffett-muni-bond-default-crisis-warning/

    Comment by John — August 15, 2012 @ 12:00 pm

  22. And your point is? Try using your own words to form a coherent argument. You’re all over the place here, John. Is you’re point that Stockton jumped off the bridge and now you want to? Is your point that Warren Buffet says raising taxes is an option that ought to be considered? If you’ve got an argument to make, make it. Don’t leave me to guess which part of Warren Buffet you want me to take as truth and which part you want me to ignore.

    Comment by Seth — August 15, 2012 @ 5:28 pm

  23. What was his solution Seth?

    Comment by John — August 15, 2012 @ 5:42 pm

  24. I think he makes a recommendation for a solution around 6:50 into his video.

    Comment by John — August 15, 2012 @ 5:53 pm

  25. We need to stop the Bleeding Seth…..We don’t need to keep paying 200K + on Average Total compensation when the Average Firefighter in US and Government Firefighter total Compensation in 50% less than the City of Alameda.

    Occupational Employment and Wages, May 2010

    33-2011 Firefighters

    Control and extinguish fires or respond to emergency situations where life, property, or the environment is at risk. Duties may include fire prevention, emergency medical service, hazardous material response, search and rescue, and disaster assistance.

    Employment estimate and mean wage estimates for this occupation

    Annual Wage 47,730

    http://www.bls.gov/oes/current/oes332011.htm

    http://www.payscale.com/research/US/Job=Fire_Fighter/Salary

    Earnings About this section
    Median annual wages of fire fighters were $44,260 in May 2008. The middle 50 percent earned between $31,180 and $58,440. The lowest 10 percent earned less than $22,440, and the highest 10 percent earned more than $72,210. Median annual wages were $44,800 in local government, $45,610 in the Federal Government, $25,300 in other support services, and $37,870 in State governments.

    Median annual wages of first-line supervisors/managers of fire fighting and prevention workers were $67,440 in May 2008. The middle 50 percent earned between $53,820 and $86,330. The lowest 10 percent earned less than $40,850, and the highest 10 percent earned more than $108,930. First-line supervisors/managers of fire fighting and prevention workers employed in local government earned a median of about $69,000 a year.

    According to the International City-County Management Association, average salaries in 2008 for sworn full-time positions were as follows:

    Position Minimum annual base salary Maximum annual base salary
    Fire chief $78,672 $104,780
    Deputy chief 69,166 88,571
    Battalion chief 66,851 81,710
    Assistant fire chief 65,691 83,748
    Fire captain 60,605 72,716
    Fire lieutenant 50,464 60,772
    Engineer 48,307 62,265

    Comment by John — August 15, 2012 @ 5:59 pm

  26. dlm, interesting you should have an airline example. I might be the only person on the planet not involved in that industry that believes that air travel is not expensive enough. Not too long ago a plane crashed in NY and killed 50 people (http://abcnews.go.com/Blotter/faa-enacts-rules-fight-pilot-fatigue/story?id=15204948#.UCxDUaMrKw4). One of the things to come out of that plane’s black box was a conversation between the pilot and co-pilot about compensation and lack of sleep trying to make ends meet. We’ve got airline pilots making less than bus drivers. Something is wrong here: competition and the free market have resulted in an industry that squeezes employees to the point of decreased public safety. “Major” airlines are sub-contracting out flights to cheaper airlines under their name. “Major” airlines like touting their safety records out of one side of their mouth, while making agreements with smaller providers out the other side. The last thing we need here is government regulation, right? We don’t need well paid and well rested pilots; we need cheap tickets? Adopting a “never gonna happen” attitude towards better working conditions is admitting defeat. I have conversations with my better half all the time about the difficulties of organizing labor in her profession. There are options. Organization is the first step.

    As far as the double standard that you mentioned goes, I’ll admit to believing in different standards for different jobs. I don’t have enough fingers and toes to count all the firefighters I know who have given a lot of their bodies – sometimes their lives – to the job. By age 50, most of us can get out not too broken to enjoy a retirement – not necessarily a long retirement, but a retirement none the less. A lucky few get out quite healthy. I hope to be one of them. Now, I’m not claiming we’re all leaving work as paraplegics, but I am telling you this job can take a serious toll. I’m also not saying we didn’t know the deal when we got into this profession – quite the opposite. I’m saying all parties need to live up to their part of that deal.

    Comment by Seth — August 15, 2012 @ 6:29 pm

  27. Really John? CTRL+V again?

    Comment by Seth — August 15, 2012 @ 6:29 pm

  28. Ask the Airlines and Car Companies what happened to their retirement.

    When pension plans fail, it is usually because the employer has gone bankrupt. At that point, the P.B.G.C. steps in, takes over the plan, and begins paying the retirees their benefits. Congress designed it to cover a basic benefit-no more than about $54,000 a year for a single worker who is 65 years old when a plan fails. People who have been promised richer benefits, or who are younger than 65 when their plan fails, have their benefits reduced, sometimes sharply.

    The pension guarantor is not funded by tax revenues. It finances its operations by collecting premiums from employers, and by collecting the remaining assets in the plans it takes over. It adds these assets to its own investment portfolio and uses the principal and any investment income to pay retirees their benefits. It is currently responsible for benefits due to 1,305,000 people.

    The P.B.G.C.’s own finances have weakened in recent years, as important sectors of the economy, like steel and airlines, have restructured in bankruptcy, sending big, underfunded pension plans to the government. Many observers predict that at some point the taxpayers will have to bail out the P.B.G.C. Proposals to strengthen its finances before that happens have been hard to get through Congress.

    http://topics.nytimes.com/topics/reference/timestopics/organizations/p/pension_benefit_guaranty_corporation/index.html

    Comment by John — August 15, 2012 @ 6:37 pm

  29. Your better half an airline pilot, Seth?

    Comment by Jack Richard — August 15, 2012 @ 7:11 pm

  30. not even close. Jack

    Comment by Seth — August 15, 2012 @ 8:43 pm

  31. 23: Dear CTRL+V (aka John),

    The answer to Alameda’s current pension and budget issues is being pursued–now–on a couple of fronts, as has been discussed in these blog comments more than once.

    1. The citizen’s budget task force has been studying the problem and the City Council will take up its report(s) and recommendations this fall.

    2. The City has already reopened negotiations with its two largest public safety unions to see how to reduce the city’s long-term liabilities.

    Both of these are legal options available to the City of Alameda, and they are both sensible, careful approaches to a very complex set of problems. And these fiscal issues are far more complicated than any “cut-and-paste” solutions posted in a blog comment–even mine–might be, no matter how appealing some might seem at first glance.

    “The grass is always greener on the other side of the fence…”

    Comment by Jon Spangler — August 15, 2012 @ 9:02 pm

  32. California scrambles to pay its bills with more borrowing
    The Los Angeles Times | by Chris Megerian | August 14, 2012
    Embedded in a Monday report from the California controller is a statistic showing just how much the state is straining to pay its bills before November’s vote on higher taxes.

    Controller John Chiang, who manages the state’s cash flow, finished July with more than $18 billion in outstanding loans after using high-speed accounting to cover day-to-day expenses. That means he borrowed some money from the state’s 500-plus “special” funds, used it to pay a bill and promised to repay it later when more tax revenue rolls in.

    It’s a standard maneuver, especially at the beginning of the fiscal year, when expenses outpace revenues. But the controller leaned more heavily than usual on this tactic last month, tapping 81% of the money available for short-term borrowing, up from 48.4% in July 2011.

    Read more: http://www.statebudgetsolutions.org/publications/detail/california-scrambles-to-pay-its-bills-with-more-borrowing#ixzz23gwnj7X1

    Comment by John — August 16, 2012 @ 12:33 am

  33. Solutions to the public pension crisis
    State Budget Solutions | by Bob Williams | August 1, 2012

    Public pensions at the state and municipal levels are unsustainable in their current form. State Budget Solutions’ recent study by Andrew Biggs found that public pensions are underfunded by $4.6 trilion. States and municipalities must achieve fundamental reform. If reform does not happen, essential public services will have to be cut and dedicated government workers laid off, disrupting or eliminating public health, safety and education.

    Switch to Defined Contribution System

    The most effective reform is implementing a defined contribution pension plan. By putting all employees, both new and existing, into a defined contribution plan, which is similar to a 401(k) style plan found in the private sector. Such a move means that existing defined benefit accruals for current employees would be frozen and employees would be moved to a defined contribution plan with the previously accrued amount placed in their new defined contribution account.

    The best solution is moving all employees to a defined contribution system, but at a minimum, new employees should be enrolled in a defined contribution system.

    Other Reform Options

    Although implementing a defined contribution system for all employees is the most effective pension reform, other solutions are also available.

    Primary Reforms to existing defined benefit plans

    •Cap employer cost (i.e. state will pay no more than 10% of salary toward an employee benefit);
    •Require the full ARC (or Normal Cost) of the plan to be paid each calendar year or legislative per diem will be canceled until full ARC is paid;
    •Require that the ARC (or Normal Cost) be calculated using a realistic discount rate (either the treasury rate or the bond rate of the plan sponsor);
    •Smooth pension wealth accrual making it a constant % of earnings(i.e. a cash balance or constant accrual plan).
    Close Loopholes to Reform Pensions

    •Eliminate double-dipping;
    •Eliminate spiking;
    •When calculating base pay, do not based the calculation of retirement pay on anything other than base salary;
    •Require any purchase of service credit to be at full actuarial cost or prohibit the purchase of service credit;
    •Eliminate cost-of-living adjustments or tie them to the CPI.
    Secondary Reforms to existing defined benefit plans

    •Increase employee contributions;
    •Increase retirement age;
    •Increase vesting period;
    •Impose penalty on retire/rehire -new employer must pay pension;
    •Increase the number of years used in final-average-salary calculation;
    •Require that any purchase of service credit be at full actuarial cost (or prohibit the purchase of service credit);
    •Cap retirement benefits at not more than 100% of final average salary;
    •Eliminate pensions for employees who are convicted of work-related crimes;
    •No pension benefit for voluntary service;
    •Have tight review of disability claims.
    Increase transparency

    •Use generally accepted accounting practices;
    •Discount rate for liabilities should either be the treasury rate or bond rate of sponsor;
    •Eliminate smoothing of asset valuation in favor of market or fair value as of the actuarial reporting date;
    •Same realistic discount rate should be used to calculate the ARC/Normal Cost;
    •Require retirement system to annually report to Governor, Legislature and put on its public website:

    Committee and board meeting minutes online;
    The discount rate used to calculate pension liabilities and the value of those liabilities if a risk-free discount rate was used;
    Assumed rate of investment return for the purpose of projecting contributions and how the contributions would change if a lower assumed investment return was used;
    The period over which unfunded liabilities are amortized and how contributions would change if unfunded liabilities were amortized over a period equal to the estimated average remaining service periods of employees covered by the contributions;
    The period over which gains or losses are written on/off (smoothing): and also disclose the funded status on the basis of market value with no smoothing;
    The market value of assets and the difference between market value and the system’s actuarial value of those assets;
    Require the State Auditor or State Treasurer is to evaluate the report and submit an opinion of it to the legislatures.
    When addressing the difficult topic of pension reform, it is worth keeping in mind the lessons Utah legislators learned as they enacted pension reform. Those lessons include

    •Ask the hard questions/demand data.
    •Be hypothesis driven/avoid ideology.
    •Involve all parties/build partnerships.
    •Circulate reform proposal broadly.
    •Be kind, polite and responsive.
    •Keep moving forward.
    •Demand comprehensive, long-term financial modeling from pension actuaries.
    •Reality is NOT negotiable- let the data do the work.
    •Future employees are not an effective lobbying force.
    •Know the details and you will own the issue.

    Read more: http://www.statebudgetsolutions.org/publications/detail/solutions-to-the-public-pension-crisis#ixzz23gz32yS1

    Comment by John — August 16, 2012 @ 12:34 am

  34. U.S. Public Pensions Earn 1.15% for Worst Showing Since 2009

    In the last three weeks, the California Public Employees’ Retirement System, the biggest U.S. pension, reported returns of 1 percent for the fiscal year ended June 30. New York City’s $122 billion pension funds reported preliminary returns of 1.7 percent, and Maryland’s $37.1 billion plan earned 0.36 percent.

    Read more: http://www.statebudgetsolutions.org/publications/detail/us-public-pensions-earn-115-for-worst-showing-since-2009#ixzz23h1Eaw3c

    Comment by John — August 16, 2012 @ 12:43 am

  35. Jon I’m just trying to get educated on the Pension Situation. I see NOTHING coming from the Budget Task Force commitee except saying it is being studied..

    Tiny gain for CalPERS

    SACRAMENTO — The nation’s two biggest public pension funds reported meager returns for the last fiscal year, raising the prospects that state and local governments and school districts may have to contribute more toward their workers’ retirements.

    The California Public Employees’ Retirement System posted a 1% return on its investments for the fiscal year that ended June 30. The smaller California State Teachers’ Retirement System reported a 1.8% annual return.

    CalPERS’ performance, announced Monday during a board meeting, missed the fund’s self-imposed benchmark of 1.7% growth for its $234.3-billion portfolio, Chief Investment Officer Joseph Dear said.

    The return also was well below the target for CalPERS’ long-term growth strategy of a 7.5% average annual rate, which is needed to pay for retirement benefits for more than 1.6 million members.

    “The last 12 months were a challenging period for all investors, and the ongoing European debt crisis and slowing global economic growth increased market volatility and reduced equity returns,” Dear said.

    CalPERS’ biggest losses were in stocks of public companies, down 7.2%, and investments in private-equity firms, down 5.4%. Public equity amounts to about half the fund’s total investments. Bonds and other fixed-income investments gained 12.7%, while real estate rose 15.9% and infrastructure investments increased 8.4%.

    No substantial turnaround in the equity markets is likely this year, Dear predicted, and CalPERS’ weak returns are expected to translate into demands for higher contributions from member government agencies beginning next summer.

    The two pension funds’ paltry returns also are expected to heighten the debate over the need for reform of retirement benefits provided to state and local employees.

    Public pension funds statewide are reporting growing long-term liabilities that leave them at risk of not having the financial wherewithal to meet future retirement obligations.

    Three cities have sought bankruptcy protection, most recently San Bernardino, partially to protect themselves from swelling pension fund debts.

    Gov. Jerry Brown has proposed a 12-point plan to reduce pension costs, but the Democrat-controlled Legislature this year has been slow to act on the governor’s proposal.

    CalSTRS, meanwhile, is expected to increase its calls on lawmakers for authorization to increase contributions made by school and community college districts to help fund educators’ retirements.

    CalSTRS also has a target average annual return of 7.5% for its $150.6-billion pension fund for 856,000 public school educators and their families.

    CalSTRS lost 3.1% in its global stocks portfolio, which makes up about half its total investments. Real estate, however, showed a 9.2% gain, while private equity investments rose 5.9% and fixed-income bonds were up 7.3%.

    Investment earnings alone won’t put CalSTRS on a sound financial footing, Chief Executive Jack Ehnes said. The state Legislature, he said, needs to pass a law allowing for regular, gradual increases in contributions by the state and other CalSTRS participants.

    Comment by John — August 16, 2012 @ 12:59 am


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