Taxpayers Going Postal Over Public Employee Pensions, Perks. Unions’ miscalculation: Opting for secrecy.

BY PETER SCHEER—For public employee unions–those representing police, firefighters, teachers, prison guards and agency workers of all kinds at the state and local level–these are the worst of times.

Despite record high membership and dues, and years of unparalleled clout in state capitols, public sector unions find themselves on the defensive, desperately trying to hold on to past gains in the face of a skeptical press and angry voters. So far has the zeitgeist shifted against them that, on one recent weekend, government employees were the butt of a Saturday Night Live skit, followed, the next day, by a New York Times magazine cover article proclaiming the “Teachers’ Unions’ Last Stand.”

Public unions’ traditional strength–the ability to finance their members’ rising pay and benefits through tax increases–has become a liability. Although private sector unions always have had to worry that consumers will resist rising prices for their goods, public sector unions have benefited from the fact that taxpayers can’t choose–they are, in effect, “captive consumers.”

At some point, however, voters turn resentful as they sense that: (1) they are underwriting, through their taxes, a level of salary and benefits for government employment that is better than what they and their families have; and (2) government services, from schools to the DMV, are not good enough—not for the citizen individually nor the public generally—to justify the high and escalating cost.

We are at that point.

In California, government sector unions, once among the most entrenched and powerful labor groups in the country, mainly have themselves to blame. For most of the post-war period, they were a force for progressive change, prospering by winning over public support for their agenda.

In the 1970s and 80s they backed laws like the Public Records Act and Brown Act to make state and local government more transparent. Because unions enjoyed broad-based political support, efforts to enhance government accountability and responsiveness to voters were seen–correctly–as benefiting the unions and their members.The public interest and public employees’ interests were aligned.

But the unions switched strategies. Although the change was gradual, by the 1990s California’s government unions had decided that, rather than cultivate voter support for their objectives, they could exert more influence in the Legislature, and in the political process generally, by lavishing campaign contributions on lawmakers. Adopting the tactics of other special interest groups, government unions paid lip service to democratic principles while excelling at the fundamentally anti-democratic strategy of writing checks to legislators, their election committees and PACs.

While not illegal (in fact, such contributions are constitutionally protected), the unions’ aggressive spending on candidates puts them on the same moral low ground as casino-owning tribes, insurance companies and other special interests that have concluded that the best way to influence the legislative process is to, well, buy it.

At some point California’s government unions decided that, rather than
cultivate voter support for their objectives, they could exert more
influence in the Legislature, and in the political process generally, by
lavishing campaign contributions on lawmakers. Adopting the tactics of
other special interest groups, government unions paid lip service to
democratic principles while excelling at the fundamentally
anti-democratic strategy of writing checks to legislators.

Public unions in California turned distrustful of voters and ambivalent about government transparency. In the mid-1990s unions backed improvements to the Brown Act, California’s open meeting law, but also inserted a provision assuring that the public would have no access to collective bargaining agreements negotiated by cities and counties—often representing 70% or more of their total operating budgets—until after the agreements are signed.

What happens when voters and the press have no opportunity to question elected officials about how they propose to pay for a lower retirement age, healthcare for retirees’ dependents, richer pension formulas and the like? The officials make contractual promises that are unaffordable, unsustainable (and, in general, don’t come due until after those elected officials have left office). In the case of Vallejo, in northern California, this veil of secrecy, and the symbiotic relationship it fosters, has led to municipal bankruptcy.

The biggest blow to unions’ public support has come from revelations about jaw-dropping compensation and pension benefits. Police have received unwelcome attention for budget-busting overtime and the manipulation of eligibility rules for “disability pensions,” which provide higher benefits and tax advantages. Other government employees, particularly managers, have been called out for “pension-spiking:” Using vacation time, sick pay and the like to boost income in the last years of employment, which are the basis for calculating retirement benefits.

Such gaming of the system boosts starting pensions to levels that can approach, and even exceed, employees’ salaries. Some examples from the reporting of the Contra Costa Times’ Daniel Borenstein: A retired northern California fire chief whose $185,000 salary morphed into a $241,000 annual pension; a county administrator whose $240,000 starting pension was 98 per cent of final salary; and a sanitary district manager who qualified for a $217,000 pension on a salary of $234,000. At a time when most Californians anticipate an austere retirement (if they can afford to retire at all), government pensions are a source of real voter anger.

The harm to the credibility of public employee unions from these excesses is made far worse by the unions’ attempts to hide them. The revelations about pay and pension abuses have surfaced only as a result of lawsuits. (Disclosure: The First Amendment Coalition has been a plaintiff in several of these cases.) Public employee unions, rather than taking the lead to stop abusive compensation practices, have vigorously opposed disclosure of individual employees’ salaries and pension amounts.

Public employee unions need to reboot. The old strategy of cynically buying political influence and excluding the public from decision-making has run its course. Unions can rebuild public support by recommitting to an agenda of open government in the public interest. If they don’t, they will be further marginalized.

Peter Scheer, a lawyer and journalist, is executive director of the First Amendment Coalition.

Share on facebook
Share on twitter
Share on linkedin
Share on email
Share on print

17 Comments

  • Actually, the angry taxpayers’ argument is backwards. Instead of being bitter that public employees have decent salaries and benefits, private sector workers should be pressuring employers to pay similar salaries and perks, instead of the ridiculous, stripped-down “benefits” available to the vast majority of private sector workers. If anyone’s “Cadillac” plans should be attacked, it should be those of excecutives, who generally are overpaid and are not even compensated in correlation with their work product (if flying around in learjets and going on golf outings is really “work”).

    True, it’s more an employers’ than an employees’ market these days, but workers — in both the private and public sectors — must stand in solidarity against the kind of unfettered corporate greed that has decimated what once was the middle class in the past 30 years.

    Please, no more of these articles giving voice to the corporate media’s attacks on public sector and union-negotiated wages and benefits.

  • I’m sorry Eichler1 but I just don’t buy that argument any more. I’ve been digging into Mendocino County’s debt for several years now. The County developed $350 million of debt over the past 15 years – 85% of which is unfunded retiree benefit obligations. The County is terminating 10% of its workforce because it has to eliminate a $7.6 million deficit. It will pay nearly $10 million next year on unfunded pension debt above and beyond the $9 million it will pay for its “normal” yearly pension contribution.

    Our County didn’t report this debt to the people until reformed government accounting standards forced it to. Our little county of 90,000 people has the highest debt, highest interest expense, and highest debt payments per resident of all California counties.

    The County’s bargaining units pressed for higher salaries and higher retiree benefits and the elected politicians gave it to them without any idea how it was going to be paid. SEIU – a really big union that represents most County employees – bargained for these increases but never did the analysis necessary to figure out the County wasn’t coming close to doing what it needed to do to make those retiree benefit payments. And given the government accounting rules at the time – those unfunded benefits were never reported to the people.

    I’m a life long Democrat who expects government services to be funded honestly, fairly, transparently, in service to the people. Way too many local governments – and the state – have hugely failed in those duties.

    And now billions of this debt is being forced onto our kids – and they aren’t going to get one dime’s worth of value from it.

    We are going to find ourselves at a crossroads sooner than most think. The public is not going to increase its taxes to both maintain services and also make pay the rapidly increasing payments on these unfunded retiree benefits. And at some point they are going to “rebel” about the cuts in services.

    If you build your castle on sand it will not last. That’s what California’s public employee unions built their members retirements on – economic “sand”.

    Thomas Jefferson said “the earth belongs to the living”. He meant previous generations can not impose political requirements on future generations.

    Anyone who thinks these unfunded retiree debts can’t be changed hasn’t read much history.

  • Greed can exist where a living heart beats. And the only protection for the general public is in having a choice. Should we be surprised what has happened with public employee pensions? Of course not, it is what happens with monopolies, government or private a like. Is there are easy solution? No, not really, because there are somethings only government monopoies can take responsibility for. But it helps if we keep government at a minimum and make sure government business is kept in the open. It is time to rethink the idea of governments unions as well. Should we make them illegal?

  • Eichler1

    Spoken like a true Socialist.

    Your unions bought the disgusting politicians that have voted these benefits on the public employees and if the private sector made the same as you then we would all be in the same boat and no one would have anything. You would need to spend more of your retirement buy the goods and services that would pay for our obscene retirements, (Socialism). Your attempt at misdirection might work on a public employee but the private sector isn’t that stupid and we are the ones picking up the check for your retirements. Get off the Gravy Train or we’ll push you off.

  • The only difference between a union and a ponzi scheme is the way they are spelled

  • Eichler1 certainly ignores the competitive reality of private employment if, union or no union, when costs outstrip the ability to remain competitive, firms close their doors and layoff people. In the public sector, there is no reality check such as competition provides, so increasing demands and their costs are simply passed on to taxpayers. Essentially, public workers unions hold the taxpayer hostage. However, there is a point at which the taxpayer becomes unwilling or unable to support the lavish perks and demands of public employees that must be fed by increasing taxes. This revolution is long overdue.

  • Government is only as good as the people who serve in it and no one should be protected from bad performance. In general, unions help to keep salaries for the working class from falling through the floor, but until civil service and union rules go to “at will” and stop protecting employees based on seniority, we all lose. Not always, but far too often, the best and the brightest with the most work incentive are let go to protect the positions of long-term lackeys with no reason to put in any real effort, undermining service and rewarding poor service with pensions after as little as 20 years.

  • Please check out http://www.sfsmartreform.com to see how you can help save our city!

    Jeff Adachi, the Public Defender of San Francisco, is working with San Franciscans for SMART reform to put a new law on the ballot that saves $170 million annually to support these vital services by requiring city employees to contribute more towards their own pension and health benefit system.

    If you want to get involved send us a message at: http://www.facebook.com/pages/San-Francisco-CA/San-Franciscans-for-Smart-Reform/122513711102177?__a=3

    Read more: http://www.sfgate.com/cgi-bin/article/comments/view?f=/c/a/2010/06/12/INSD1DRDIC.DTL&session=mCJ%2FyE38eadbX5OM5lPMPhPNX5O2bbRdpsJh5lHhpmQaHoHukzMLH%2FULXjPKLfEtWWc872c&plckOnPage=3&plckItemsPerPage=10&plckSort=TimeStampDescending#ixzz0qlKPBSh9

  • San Francisco Public Defender Jeff Adachi is the only public figure with the courage to take on pension reform. He has drafted a measure that will save San Francisco $170 million as soon as it passes and he is making heroic efforts to get the signatures he needs to get this measure on the November 2010 ballot. Due to budgetary constraints, this is the first summer that San Francisco will not offer summer school to students. Yes, it will take a revolution for the people of the City and County to get involved and take action to save this city and now is the time. Please visit: http://www.SFsmartreform.com to learn how you can help Jeff get the sustainable pension reform measure on the November 2010.

  • Dan Borenstein has done a truly superb job of learning enough about how pensions work to tease the PR from the facts; Dan is what newspaper people used to be all about.

    Perhaps to help him a little further on his research, the 09/10 Contra Costa Grand Jury just came out with a report on pension spiking, report #1010, listed here:

    http://www.cc-courts.org/index.cfm?fuseaction=page.viewpage&pageid=5093

    And even though the CC Times won the lawsuit for access to public salaries and has the database here:

    http://www.contracostatimes.com/public-employee-salaries

    And, there is at least one public agency in Contra Costa, the First 5 Commission, who has still not shared their employee salaries with the public – – and we should know more about that given the Grand Jury report just put out on them (#1007) and discussed in detail here:

    http://www.halfwaytoconcord.com/grand-jury-first-five-commission/

  • Because of labor unions, salary and benefits have doubled every 12-15 years, sooner or latter, people in the public sector start making over $100K per year; additionally their pensions are linked to their high salary which are increased by COLAs. This means that most government sector employees will be making more in their retirement than they made when they were working.

    Using a COLA of only 2%, CalPERS retirees receive the following payouts:

    Total Pension Payouts
    Pension
    $100K–10-Years: $1.1M | 20-Years: $2.5M | 30-Years: $4.1M
    $150K–10-Years: $1.7M | 20-Years: $3.4M | 30-Years: $6.2M
    $200K–10-Years: $2.2M | 20-Years: $5.0M | 30-Years: $8.3M

    Police and Fire Department employees are routinely drawing over $100K in the larger cities and some over $200K, with their pensions at 90% of their high salary. In another decade, or so, the public sector will totally bankrupt the private sector with their pension demands.

    Non-public safety CalPERS-based pensioners can look forward to as much as 80% of their high years salariess:

    http://www.scribd.com/doc/32579238/A-Look-At-Santa-Clara-CA-Pension-Payouts

    Comments from public sector employees that private sector employees should be advocating for similar programs demonstrates how little public sector types understand the massive liabilities that these “defined benefit” programs have created. Most state governments are destined to go broke in the next twenty years or so, unless there are sea-changes put into effect that radically alter the current pension “albatross” around the taxpayers’ necks.

    There are other options:

    1) Radically reduce the pension multiplies so that the payouts do not make multi-millionaires out of government employees

    2) Shift all employees into the US Social Security System.

    3) De-link pensions from salaries.

    4) Create a top salary for pension awards (like $150K).

    5) Don’t award pensions at all, increasing the employees’ salary to reflect the present value of the pension and let the employees create their own retirement accounts.

    6) De-link pensions from COLAs after, say, 5-10 years.

    This issue needs a complete modeling of the State’s (and all municipalities too) financial futures. The current plan is just too much of a “quickie” fix, without any evidence of long-term understanding of the real costs.

  • I would also suggest some alterations in “fringe benefits” to top management public sector employees, let me start with: (and you can check with your local governments to see if these fringes apply to your city)

    1. Employer’s cost to PERS – have employee pay this
    2. 401 – Employer pays up to 9% matching employees 9% of base salary. Lower this percentage or abolish this benefit altogether. This is a total of 18% of managements salary to 401 monthly.
    3. Contract employees aka City Attorney or City Manager’s signing bonus to their 457 retirement fund of a lump sum.
    ***This is Three Retirement Funds that the City taxpayers pay into.
    4. Now, this is probably going to make your blood boil, so you may not want to read any further.
    5. Automobile Allowance – $100 – $550 per month for automobile allowance
    6. Mileage – now if this isn’t enough, you can get reimbursement for mileage, even though you get automobile allowance.
    7. And even though you get Automobile allowance, mileage, you can still drive a City Vehicle. How great is that!
    8. Computer Allowance – $2,000 to buy technology to enhance your work performanc, need I say more? Even though you have a computer at work, what the heck, why not have a new laptop at home, and a printer, what the heck, buy my kid a laptop because she is going to college this fall! Oh, and? you can even pay for internet service at home for an entire year to enhance my work experience.
    9. Sick leave, vacation leave, compensation time earned, overtime, holiday time, administrative leave, not to mention paid holidays!

    Listen folks – this is easy, you can’t really win with the big guns, but you sure can start at this level and put an end to all this crap!

  • Public employee unions in the Bay area, and apparently much of the rest of California, are effectively management and labor. They control elections by buying candidates. I know a young politician in the Bay who realizes that the rising costs of health care and pension benefits will cripple his agency’s ability to provide services yet has no interest in doing anything about it. His career would be dead if he took on his paymasters.

    Public employee benefits will still greatly exceed benefits in the private sector even if Adachi’s measure passes. Kudos to Jeff for tackling this issue, but it’s still a half-measure until more steps are taken to curb pension spiking by senior managers.

    What bothers me the most is that the unions show zero sensitivity to the difficulty of convincing taxpayers to grow revenues when the public is disgusted by stories about cops retiring at 55 with 300K a year pensions every year. I remember a few years ago traveling in union circles where leaders were pulling out all the stops to try and convince their memberships to support universal health care. Why bother, members reasoned, raising our taxes when we already get platinum level benefits? The selfishness of the modern union movement limits its ability to make its case to the public. I don’t think things will turn around for labor until they realize the consequences of putting their interests ahead of the public interest.

    I’m a hardcore progressive activist. Every progressive out there should take up this banner. If you want better transit, better education, better parks, better government, you have to realize that progressive support depends on public trust.

  • I think we’re well past the point where merely public employee retirement reform will be enough.

    Rather, it’s the more extreme measure of public employee union reform that’s necessary. To whit, stop recognizing them as anything other than the political associations they are.

    I have never understood how public employees were permitted to unionize at all. They are, after all, servants of the people, their fellow citizens, not traditional employees. “Collective bargaining” only makes sense when there’s someone to negotiate against, clearly a party lacking in this equation.

    I’m also shocked that public sector unions aren’t seen by private sector unions as eroding their legitimacy. Unionization was an important response to the employment abuses of the industrial revolution. For civil servants to unionize implies that they expect their employers, their fellow taxpayers, to abuse them. No wonder taxpayers are angry. Perhaps it’s time for the traditional unions to be angry, as well, lest they be viewed similarly as wanting special treatment the rest of us don’t get.

    In short, I’m in favor of the abolition of public sector unions, but I firmly support private sector unions.

  • The amendments proposed to “fix” this problem will do little more than delay the arrival of the same economic demise. . . . unions and negotiators are now emerging from the bargaining table with “concessions” – – for future hires (!)

    Current concessions are little more than a shell game aimed at convincing taxpayers that there is some level of concern for this economic time bomb by municipal employees. Meanwhile, these same unions are equally busy defusing the only offense local municipalities have left in their aresenal which has the potential to ELIMINATE this problem – – – NOW.

    Chapter 11, while unsettling to those who are uninitiated is a great way for municipalities to rid themselves of a majority of current economic obligations – – – just as has been occurring in the private sector for many years. The unions know it and they’re busy trying to ensure it is NOT used to wipe out pension debt that has already been established and will, in most instances, wipe out many municipalities – – – even with no future hiring.

  • The People of California should go postal over what was done in their name in Case 8CA10541. That case will show how out of control this city is and how much money they waste on prosecuting innocent and law abiding citizens.

  • State and municipal pension funds continue to fall so far behind growth promised under their false assumptions that right now taxpayers owe them trillions of dollars just to balance obligations already accrued. Check the latest quarterly report from the U.S. Census Bureau.

Comments are closed.