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By BRETT WILKISON
THE PRESS DEMOCRAT
Critics point to the consequences of growing pension payments, including a reduced county work force and cuts in government services, as an urgent cause for change.
Across California, some 100,000 to 150,000 local and state jobs could be cut by 2020 to pay for increased pension and retiree medical benefits, said Girard Miller, a senior strategist with PFM Asset Management who specializes in public sector retirement plans.
“It’s the issue of the day,” said Sonoma County pension overhaul advocate Tom Lynch.
Experts warn that as the number of retirees swells, the attempts at reshaping the system can be overshadowed by the sheer size of the benefits already promised.
“It’s closing the barn after the horses are gone,” said Ethan Kra, chief actuary for Mercer, a global consulting company.
Options for overhauling public systems are limited compared with those available to private corporations, which can more easily freeze retirement benefits for existing workers, set higher employee contributions and lower benefits going forward.
As a result, public sector pension changes have focused on reducing benefits for future workers. Sonoma County this year began discussing possible changes along those lines.
That approach will fall short of solving the problem, experts and critics said, and it punishes new workers for the largess allowed their predecessors.
Those workers “should be waking up that they have money being taken out of their pockets to fund retirees,” said Marcia Fritz, a California pension overhaul advocate.
Employee representatives counter that county workers already make among the highest contributions to their pensions statewide. Critics ignore that in their calls for overhaul, union officials say.
“I think it’s a lack of understanding, especially about the Sonoma County system,” said Ed Clites, president of the Sonoma County Law Enforcement Association.
Employee leaders seethed last week when several speakers at an economic conference in Petaluma compared public sector pensions to fraudulent “Ponzi schemes.”
Robert Moffett, chapter president of Service Employees International Union Local 1021, the county’s largest union, called the comments “irresponsible.” He said they “trivialize the sacrifices of public servants.”
Still, support for wider changes appears to be growing.
California’s Little Hoover Commission last week recommended that more aggressive steps, including a freeze on benefits for current workers, be authorized and put to work at the state and local level to rein in pension costs.
At the heart of that push is a fundamental change to public sector pensions that would require government workers to share in the investment risk with taxpayers.
Seeing a threat to their bottom line, most private companies made similar changes to their retirement plans decades ago.
Pension overhaul advocates say the public sector should follow suit.
“The real danger continues to be, what if the investment tanks?” said Bob Andrews, a former private retirement plan administrator and Santa Rosa resident who has joined those calling for changes to public sector pensions.
“Discussions like this can make people’s eyes glaze over,” he said. “But if there’s something important to remember it’s that money going to pensions has skyrocketed. With falling tax revenues, what that means to taxpayers is that services will be curtailed.”
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I’m also a fan of Norman De Vall, John Sakowicz, and the other public affair shows at KZYX. Paul Hanson, of KZYX Community News, also does a good job.
Those shows, more than our local newspapewr, are on top of the dire state of Mendocino County finances.
Correction — Ms. Massey, who blogged below and who a member of KZYX, I believe, and one of our listeners in Ohio, is mistaken. The show with Joe Nation is confirmed for Friday, March 11, at 9-10 AM.
Professor Nation will be our second guest. Our first guest is to be announced.
Tomorrow’s public affairs show at KZYX, on March 4, is the “Public Access Show”, with host Norman De Vall, and guest, Kendall Smith, chair of the Mendocino County Board of Supervisors.
Norman is a truly capable host, and he is a retired member of the Board of Supervisors. Offhand, I cannot think of anyone who loves Mendocino County — particulary its coast — more than Norman De Vall.
Although I have not seen Norman’s talking points for tomorrow’s show, it’s a pretty safe bet that the subject of our county’s troubled pension system will come up.
See what the California Municipal Bond Advisor has to say about Mendocino County: http://www.californiabondadvisor.com/bondupdates.html
Once again, our broadcasts can be heard live in all of Mendocino County, west Lake County, south Humboldt County, and north Sonoma County. We also streamm live from the web at http://www.kzyx.org. Shows are also archived.
Also, I want to reiterate that I hope to have Lisa Maldanado, of the AFL-CIO North Bay Labor Council, as a guest on a future show. I respect her and her advocacy of working women and men.
For the record, my grandmother, Mary Avallone, was once a very active member of the International Garment Workers Union. Other members of my family were, or are, members of unions. And my Aunt Edith Avallone’s brother, Vince Tese, was former Governor Mario Cuomo’s chief-of-staff.
I cannot think of a stronger supporter of unions than Mario Cuomo.
That said. what’s going on in Wisconsin and in many other parts of the United States is very sad. Taxpayers should not be pitted against public worker unions. All workers are taxpayers. Their interests should be aligned, not in conflict.
But the truth remains that states, counties, and cities are broke and can’t balance their budgets.
And with changes at Moody’s, Standard and Poor’s, and Fitch, bond rating companies will now include pension obligations — funded and unfunded — as a factor in determining bond ratings and creditworthiness. This will severely limit the ability of states, counties, and cities that are “underwater” to borrow their way out of deficts.
It’s why I have zero tolerance for corruption and public malfeasance. We can’t afford it.
CORRECTION: THE SHOW IS NEXT FRIDAY MARCH 11TH.
I listen to John Sakowicz on KZYX and have learned a good deal about the BOS/ Pension woes. Mr. Sakowicz has thoroughly presented this and other issues on “The Truth About Money” which as he states, will broadcast again this Friday, March 4. Please, listen to the show if this and other financial matters are of importance to you and your family. It does no good to bury one’s head in the sand.
Mary
Looks like I’m going to have Joe Nation as a guest on my radio show, “The Truth About Money”, at KZYX&Z.
We’ll talk about the broken public pension system.
So, tune in at 9-10 AM, Friday, March 11. Live broadcast is heard in all of Mendocino County, west Lake County, south Humboldt County, and north Sonoma County. The show streams live from the web at http://www.kzyx.org.
We’ll take a few listener calls, so take your best shot.
Also, we hope to have Lisa Maldanado, of the AFL-CIO North Bay Labor Council, as aa guest in the near future.
It was probably a good idea not to structure the show as a debate between Joe and Lisa, because I’m not a completely neutral moderator. In truth, I am a sharp critic of the Mendocino County Employee Retirement System.
For example, recently, my colleagues in the taxpayer activist community and I found multi-million dollar discrepancies between the actuarial report and the auditor’s report.
Exhibit 1: page 24, in Section V, Assets and Liabilities, of Buck Consultants Actuarial Report, for the the fiscal year ending June 30, 2010, shows county contributions — the dollar amount that the Board of Supervisors authorizes as its contribution toward employee pensions — to be $19,349,348.
Exhibit 2: page 10, in the Statement of Changes in Plan Net Assets Section, of independent auditor Jim Sligh’s report, for fiscal year ending June 30, 2010, states the very same county contributions to be $14,736,333.
Where did this $4.6 million difference go?
This is only one example of several serious discrepancies.
A discrepancy of $6.53 million exists for investment returns.
A discrepancy of approximately $43 million exists in net assets.
In the above three examples, apples were compared to apples, and oranges.
Misconduct? Incompentence? Failures of communication?
We don’t know.
What we do know is that no one on either the Board of Supervisors or the Retirement Board discovewred the discrepancies.
Neither did the pension administrator.
Or the county’s chief executive officer.
Or our county’s treasurer or auditor. Or district attorney.
Citizen watchdogs caught it. Taxpayer activists. Ted Stephens. John Dickerson. And myself.
In other words, our government has failed the people of our county. But Mendocino County is probably no worse than every place else.
I said it before, and I’ll say it again: Mendocino County is but a microcosm of what’s wrong in California and what’s wrong across the United States.
There’s no accountability in government, because we live on borrowed money. And we keep rolling that debt over. We keep refinancing bad debt.
Consequently, our children and grandchildren will be stuck with our profligate spending habits. It’s like a Ponzi scheme.
It’s true for every level of government — federal, states, counties, and cities.
I think that’s pretty much Joe Nation’s message. So tune in next Friday morning.
Stephen — Although I agree with you that special interests groups across the board are way too powerful, and although I agree with you that the U.S. needs campaign finance reform, I have to disagree with you about the thugs at SEIU.
It is most definitely true that Illinois ex-governor bad boy, Rod “Blago” Blagojevich, first turned to the shot callers at SEIU when he tried to sell Obama’s vacant Senate seat.
Google up Rod Blagojevich and Tom Balanoff. Read the transcipts of the FBI wiretaps.
The point is that Blago owed his job to SEIU.
The point is also well taken that SEIU and other public employee unions “hire” or “fire” their bosses every four years.
Other special interest groups, like Wall Street or Big Pharma, may have undue influence, but public employee unions actually actually buy and own their bosses. It’s a unique situation.
Google SEIU LOCAL 221 in San Diego. Watch the related YouTube video. It will make your blood run cold.
The SEIU buys political favor just as the Petrochemical, Pharmaceutical, Agriculture, Automobile, Mining and every other industry or trade group so lets not get too picky about how the system works. Conservatives like to point the finger while ignoring the same “problems” on their side. Personally if I was offered a 20/90 plan I would jump at it. Now, it’s a crazy deal really when you think of it but who would not jump at that? Now granted you may have to run into a burning house, or get shot at, these things are stressful I think so maybe I’ll pass. These plans were agreed upon and NOW we all come to the realization that it was a bit much. Stop blaming the employees and start blaming the GOVERNMENT who agreed to the deals. Unions do what they are paid to do, get the best deal possible. If the governments agree to such bad deals maybe the people should have paid attention to what the government was doing. Maybe we will all pay better attention now. Why is it that some people think the pension problem is an outrage but there is no outrage over the fact that no one of significance has gone to jail over the mortgage fiasco? Until we can reach a point where political dogma does not rule the day we will never be able to solve a thing, time to grow up and work to make things better as opposed to keeping power.
It is time to break the public sector unions such as SEIU, AFSCME and the NEA in this state. They have bankrupted most of the states where they have controlled the public bargaining process.
The public special preference employees working for the cities, countys and state government are receiving pay, benefits and pensions that are only dreamed about in the private sector. They have job security often protected by union rules and by civil service rules which protect them from layoffs and disciplinary action for cause.
Until unions are prohibited from bargaining with the local and state government public officials they put into office we will have an ongoing fiscal crisis caused by ever increasing pay increases and pension increases.
It is time for a change we can believe in.
In the true sense of the word, there no collective “bargaining” by public employees in getting their obscenely generous pension benefits awarded. SEIU didn’t have to “bargain”.
Why? Because SEIU bought and paid for the public officals who signed their contracts. Such is the power of special interest gropus and campaign contributions. Money talks. Until we have campaign finance reform, money is all that matters.
Do you doubt SEIU’s power?
I refer you to the FBI’s wiretaps of disgraced, former Illinois governor, Rod Blagojevich. When Blagojevich was trying to sell Obama’s vacant Senate seat after Obama was elected President, who did he turn to?
To Tom Balanoff, head of SEIU, that’s who.
The tapes speak for themselves.
Which brings me back to my original point. SEIU doesn’t negotiate. They don’t bargin. They buy politians.
Imagine if you got to hire your own boss. Now imagine you got to rehire — or fire — your boss every four years.
Don’t you think your boss would agree to almost anything you suggested, including the suggestion that your benefits be guaranteed by the state constitution? You bet your boss would agree!
Hence, there’s no way for the taxpayer to discharge these obligations…except through bankruptcy.
Look for more county and city governments to go the way of Vallejo.
Look also for the states to petition Congress for changes in the bankruptcy code, so they, too, can get out from under the crushing weight of all these obligations and public debt.
Look finally for the coming tidal wave of municipal bond defaults.
Here in Mendocino County — a tad bit more corrupt than our neighbors; our treasurer and pension administrator, Tim Knudsen, diverted $9.6 million from the pension account — default and bankruptcy may be our only hope.
Sorry for this rant, but it is truthful.
Anyone who says that collective bargaining is the problem, and that unions sit on both sides of the table is 100% wrong.
I spent over 30 years working in and around city, county and state governments. The government sides were ALWAYS represented by non-union members of the executive branch – ie. the governor’s office, the CAO or the City Manager. They were not usually very nice about it.
The typical approach was “we’ll give you minimal or no salary increases, and we’ll raise your contributions for benefits and the pension fund, in exchange for a future promise on pension benefits.” I will concede that they got the high salaries and therefore bigger pensions as a result of their own tactics.
So why are we having a budget crisis that didn’t exist 2 or 3 years ago? It’s because corporate criminals in the finance and mortgage industries colluded with politicians (mostly Rs but some spineless Ds) to trash the housing and stock markets, as well as the overall economy. So the issue is REVENUE and INVESTMENT RETURN problems that should be temporary, assuming the economy ever recovers from deregulation – or worse, failure to fund enforcement of existing regulations.
So when fiscal conservatives scream for job and benefit cuts, they’re pursuing their long-held goal of eliminating all unions and reducing government services and employment. If you think that firing hundreds of thousands of government employees is going to improve revenues, services or the overall economy, you’re dreaming.
Each of those fired employees will move out of Sonoma County (too expensive to live here), will not be paying taxes and will not be spending money at local businesses. Plus, a lot of them are eligible for a (generally) small pension, so that will make the “pension crisis” WORSE, not better.
How about a temporary “dime a drink” tax? Or employers and developers can temporarily start paying a higher share of the real costs of government that profit them – things like roads, police, fire, schools, water and sewer, building inspections, public health, food inspection, unemployment, etc.
At the federal level, why are Social Security and Medicare taxes only paid by those making less that about $106,000? The rich get exactly the same (likely more) SS and Medicare benefits as lesser-paid employees. How about temporarily raising that income limit instead of assuming we’re all going to live longer? LOTS of people have to die young to make the current system work. Most likely those doing the toughest jobs.
Of course, once you’re dead you may lose interest in these issues, as survivor benefits are WAY lower than employee benefits. But let’s get the widows and orphans, too?
So now we have a “perfect storm” of economic conditions that encourage fiscal conservatives to dismantle unions and cut jobs, salaries and benefits. Great, if we’re going to defund unions, let’s do the same to the corporate influence on politics by reversing last year’s Supreme Court decision that calls corporations “people” and gives them unlimited power to make campaign contributions.
A lot of people DIED early in the twentieth century to give us ALL the right to union representation, and give us ALL the benefits that YOU in the private sector now enjoy. Things like the 40-hour week, ovetime pay, paid vacation and sick leave, family leave, and the ability to bargain fairly for wages and benefits – including retirement benefits – whatever form they take. And SS and Medicare benefits for your parents, which you would otherwise have to pay for. Assuming you would.
With the demonization of unions and government employees, we’re heading straight to hell together. If the ship is sinking, then we’re all going down together.
Hopefully not at the 18 cents an hour wage paid in China and India, which is one of our real problems.
Stu,
How many CEO’s are there in California?
How many retired public employees are there making over 100k in California?
Critical thinking hurts sometimes.
So, a CEO, a private industry worker, and a unionized public employee are sitting at a table. On the table lies a plate of a dozen cookies. The CEO takes 11 of the cookies, then looks at private industry employee and says, “Careful, I think that public union guy’s trying to take part of your cookie.”
Sad but true.
CW,
Give me a break. There was no “bargaining” involved. True bargaining requires unrelated parties negotiating for their own best interests. When your union reps are are sitting on the management side of the table purporting to represent the public interest, that’s not bargaining. That’s a sham.
As for the statutory and regulatory hurdles to pension reform, it looks like they will have to come from Sacramento. But with a union-backed majority in both houses as well the governor’s office, don’t expect any movement there. Not until the financial pinch becomes so severe will the Michael Allens, Noreeen Evans and Jerry Browns of Sacramento address this issue. I’m not holding my breath. Nor will I support any more taxes going to maintain thiis dysfunctional system.
All of these appeals for “fairness” and public employee “sacrifice” is nonsense offered up by union representitives.
The taxpayers fulling understand what has been going on. The public unions have setup a very sweet deal for the public employees and maintained it by electing officials who authorized the whole deal on a continuing basis.
Public employees have a choice just as everyone else has in this society. If you don’t like the job or the pay, quite. No one is forcing these public employees to continue to work for the county.
Punishing employees is absurd on the face of it. Economic reality will force huge changes in pension benefits whether the county likes it or not. The choice is with the county to make it a very hard landing or a lighter touch down.
Time to stop the crying and get to work fixing this very broken antiquated system.
The pension plan should have been 100% funded by the employees. That way there would never have been a burden on the taxpayer.
Government needs to wake up. The taxpayers are unhappy with how their monies have been spent.
It took bargaining to obtain these benefits. I seriously doubt the pension reform advocates would support balancing the cost of these benefits to what was bargained away to obtain them. Would they be interested in a lower pension for the time being, adjusted for superior returns in the future if the investments come through? I doubt it. They want to take away and lower everyone. I doubt a fair adjustment mechanism will be built into the “fix” they want. They want to have at the patient with an axe, instead of a scalpel.