Monday, June 28, 2010

The Myth of the Scheming Public Employee

By Steven Tavares

Gov. Arnold Schwarzenegger said last April, the state has slugged through an Internet and housing bubble and now faces a looming public pensions bubble. All were caused by economic hubris and greed and inflicted financial harm on most of those with no part in its failure. The issue is endemic to many state houses across the country and has percolated down to cash-strapped counties and cities, including San Leandro.

Unions contend Sacramento is waging a war on its hard-fought employee benefits. Schwarzenegger convinced a small, but notable group of public employee unions to slash benefits for new hires, but other groups may not be as helpful until a possible Democratic governor takes over next year. A recent piece by George Skelton in the Los Angeles Times says public employees and their benefits, though, are not the problem and are taking the undeserved brunt of calls for budget reform in California.

"One persistent myth about the perpetually bleeding state budget is that it's all the fault of public employee unions," wrote Skelton. "In truth, California's budget nightmare stems from a devil's brew of sins: lack of discipline on both spending and tax-cutting in the past; an outdated and unreliable tax system too susceptible to economic booms and busts; the unhealthy dependence of local governments on Sacramento; and a dysfunctional state budgeting process that requires a gridlock-generating two-thirds majority vote."

Skelton says cutting benefits and wages has not lowered the state's $19 billion deficit--only raising taxes will help alleviate the situation. San Leandro is slated to contribute close to $10 million in pension costs. Its over $7 million deficit was barely balanced for this next fiscal year even though 350 of its city employees agreed for the second consecutive contract to take make contract concessions. San Leandro employees will pay more for their health care starting next year and lose nearly five percent of their salary through 12 furloughs days. The San Leandro police officers may also make concessions in the coming weeks to further lower the city's financial burden.

An illuminating article in last week's New York Times Sunday Magazine by Roger Lowenstein does well to explain how public pensions are positioned in the coming years to wreck state budgets across the country, but it is not solely the fault of pernicious public employees and their rascally job protections.

"Pension funds subsist on three revenue streams: contributions from employees; contributions from the employer; and investment earnings," said Lowenstein. "But public employers have often contributed less than the actuarially determined share, in effect borrowing against retirement plans to avoid having to cut budgets or raise taxes." Unsustainable returns and dubious investment plans have also put pressure on state funding of pension, said Lowenstein.

Conversely, you can easily find a pro-business, anti-union argument calling for lower expenditures to public workers without mentioning how the budget decisions in state capitols contributed far more to the crisis than ballooning worker benefits. A opinion piece from January in the Wall Street Journal by Steven Greenhut puts the onus solely on workers with typical emphasis on the minuscule number of public employees who earn pensions of over $100,000 at the relative young age of 50. For good measure, Greenhut also slips in the conservative conceit of union-splitting union by calling on members to vote on the organization's political involvement.

In San Leandro, it is interesting that mayoral candidate Stephen Cassidy has called on city employees to pay more towards their own pension, while Mayor Tony Santos has publicly massaged his overwhelming union support in the city. Santos, though, has pulled on both sides of the argument masterfully by describing Cassidy as a conservative because of his stances on public employees and their pension, while he has made significant cuts with layoffs, wages and pensions for new hires. Santos said recently Cassidy's idea for lowering the city's responsibility to city employees was "disingenuous" since any changes are subject to collective bargaining, but Santos might be amendable to some sort of two-tier system proposed by some on the right where new hires receive a less generous package than existing employees.

The clamor for deep-rooted pension reform is supported by a vast majority of Californians. A generation of public employees earning less money and benefits coexisting with those making far more appears to be the path sought by weak-kneed political expediency and a slight defeat for proponents of labor.

PHOTO: Members of the California Assembly in chambers.


  1. It's not a myth. It's reality that ALL public employees are overpaid and over compensated in their pensions. It is absolutely ridiculous to pay someone their full wages when they "retire" at age 50. 50!! Are you people NUTS!

  2. What does Cassidy know about working stiffs? He's a lawyer for crying out loud and he doesn't need the money. I wish I could try and play mayor without getting a salary like he says he'll do. I'll just play resident and hope to pay the rent.

  3. It's as if "Manuel" enjoys saying foolish things in public. Extraordinarily few public sector workers are able to retire at 50, none from the general class of staff.

    Please read, "Manuel". George Skelton is no liberal, he's written plenty of columns ripping public workers, but at least he asks us to grapple with the facts of our broken State budget. From his column:

    "Based on my e-mail, many people believe that the way for Sacramento to make ends meet is to cut state employees' salaries by, say, 10%. Well, in the last year, most have been cut by 14% through furloughs. And the state still has a $19-billion projected deficit.

    "For the fiscal year starting July 1, Gov. Arnold Schwarzenegger is proposing to cut salaries by 5%, require workers to contribute an additional 5% of pay to retirement and cut the workforce by 5%. That would save a mere $1.8 billion.

    "Even if Schwarzenegger could fire every state employee under his control — roughly 230,000 — it still wouldn't balance the books.

    "Fire every prison guard, every CHP officer, everyone who works at the DMV, everyone who works for the state parks system … and you're still not there," notes H.D. Palmer, spokesman for the state Finance Department.

    'That's because roughly 70% of the state general fund flows out to local governments and schools, one of the unintended consequences of Proposition 13, which slashed the property tax 32 years ago.

    "And those pension costs? The governor has budgeted $3.8 billion in state contributions for the next fiscal year. But only $2.1 billion of that would burden the bleeding $83-billion general fund. The rest would come from self-sustaining special funds.

    "So even if employee pensions didn't cost the state a cent — an impossibility — the savings would fill only 11% of the general fund deficit hole."

  4. Doug Jones is a verfiable lunatic. To actually justify the obcense pay and benefits of government workers is ludicrous. Where does that guy think all the money that's going to Cities and Counties??? It's going to pay and salaries. Another disengenous argument by those who want to free load off of the government.

  5. You read nothing of Skelton's column, I see. Do you read?

  6. It's a myth that public employees cannot contribute more. From Skelton's article:

    "Based on my e-mail, many people believe that the way for Sacramento to make ends meet is to cut state employees' salaries by, say, 10%. Well, in the last year, most have been cut by 14% through furloughs. And the state still has a $19-billion projected deficit.
    For the fiscal year starting July 1, Gov. Arnold Schwarzenegger is proposing to cut salaries by 5%, require workers to contribute an additional 5% of pay to retirement and cut the workforce by 5%. That would save a mere $1.8 billion."

    How about if Schwarzenegger cuts salaries by 50%, requires workers to contribute an additional 50% of pay to retirement and cut the workforce by 50%. That would save a 'mere' $18 billion, knocking off most of that $19 billion projected deficit.

    There are a lot of people out of work right now that would love to make half of what public employees make, with half of the benefits.

    Public employment was never supposed to be a glamorous job. It was supposed to be a job that promised security in exchange for lower pay. Public employees have had it both ways for a long time, resulting in deficit spending as well as poor performance by entitled public employees. Ever been to the DMV? Are you happy with the service? Public employees can't expect to have it both ways without consequences to the future of the state. They should accept lower wages, or 'at will' terms of employment. The same deal that everyone else gets. Especially considering that everyone else has to pay for them.

    Local sales taxes in Alameda used to be 5%. Now they are 10%. When will this trend end? When it gets up to 50%, 75%, 100%?