According to this New Yorker blog post
, a federal judge has said Detroit could legally cut the pensions
it has already promised to workers as part of its bankruptcy plan, even though the Michigan constitution says the government can’t go back on pension promises. The justification for this decision is that federal law supersedes state law "and, according to Judge Steve W. Rhodes, pension cuts are just fine under federal law."
Retirees who are counting on pensions for their retirement and as a result have no other savings to rely on will be left high and dry if more cities do what Detroit is doing.
According to the Beacon Hill Institute, Massachusetts faces a $23 billion pension liability that is currently unfunded. Cities and towns across the state face billions more in unfunded pension liabilities.
What does our future hold? Are we doing to leave retirees in the lurch, a la Detroit? Or will we act now to implement prudent reforms that allow us to make good on our promises but stop promising more than we have.
by Farah Stockman in today's Boston Globe questioning whether the Boston City Council should approve a 25% pay raise for Boston police over six years:
Here’s a fun fact that didn’t come up in yesterday’s City Council hearing: 141 cops in Boston earned a bigger paycheck than the mayor did last year. That’s right. Mayor Menino earns $175,000. If you count base pay, the Quinn Bill education bonus, details, and overtime, 141 cops earned more.
Another fact: Nearly a third of all Boston police officers earned more than Governor Deval Patrick. The governor earned $137,000 last year. About 600 cops took home more.
No one disputes that police officers, many of whom work long hours and face danger in their jobs, deserve to be well-paid for what they do. But take a good look at police salaries, and you’ll find that they already are.
Boston police officers are among the best-paid public employees, not only in the city, but in the country. Eighty-six earned more than Secretary of State John Kerry. Nine earned more than the vice president. As in, of the United States.
She goes on to note that the average patrolman took home $109,847 in 2012 which is far higher than many Boston residents earn, and to point out what the city will not
be able to afford if this pay raise is passed:
If police accepted a 12 percent raise like everybody else, the city would have an extra $71 million over six years to make a game-changing investment in something else. That’s enough to send 7,100 kids to a year of quality preschool, something Marty Walsh called a top priority. Consider that a grant of just $4 million helped turn Orchard Gardens K-8 school from one of the city’s worst schools into one of the best. If police took a 12 percent raise, instead of 25, we could afford 17 more Orchard Gardens. The arbitrator mentioned that police keep us safe, and that safety is the key to prosperity. He’s right. But the highest level of safety and prosperity will be achieved when everyone in this city has a shot at a good education and a job, not just Boston police.
According to today's Boston Globe
, Gov. Patrick released a plan today in which future state and municipal retirees would have to pay $1,000 more a year for health care coverage:
- Most public employees would have to work until age 60, not 55, before they become eligible for health care benefits
- Employees would have to accrue 20 years of state or local service, up from the current 10.
- Currently, most state and local workers pay 20 percent of their premiums if they have worked for 10 years... under the governor’s plan, they would have to pay 50 percent of their premiums if they retire after 20 years of service.
- Only after 30 years of service would the government pick up 80 percent of their premiums, leaving them with 20 percent of the cost.
Why is he taking this step? Because "state and local governments cannot support the $40 billion they face in long-term health care costs." Meaning the taxpayers cannot afford this long term liability!
The Globe reports that the governor’s proposal is a result of a commission consisting of labor and retiree groups as well as state and local officials. This should give it a higher likelihood of passing, but it will doubtless still be an uphill slog so if you support it, let your elected representatives know!1. Call or email the governor and thank him for taking this step to rein in future liabilities on the taxpayers.2. Contact your state rep AND your state senator and urge them to support the governor's retiree health care cost reform package!
Remember the triple dippers
? The folks getting a pension, unemployment, AND a paycheck? Well the Municipal Unemployment Insurance Task Force has published a report
and a set of common sense solutions, including:
■ A legislative change that would no longer allow retirees who return to work for their previous public sector employer to collect unemployment if their annual pension is $53,920 or higher, because their pension offset would be the same as or greater than their unemployment benefit.
■ Employees who work at schools but are not paid by schools — such as crossing guards — would become ineligible to collect unemployment benefits during vacations.
■ Teachers who are informed in the spring they may not be hired back in the fall remain eligible for unemployment insurance, but under a new system being implemented by the Division of Unemployment Assistance, those benefits will stop if teachers receive notification they have been rehired for a comparable position by their current school district or another school district. (Here is the Boston Globe article on this topic from a few weeks ago)
What is the lesson learned from the WIsconsin election result? That Democratic leaders should not assume that their voters are knee-jerk pro-public sector union. 17%
of pro Scott Walker voters said in exit polling that they support President Obama, but only 6% of anti-Scott Walker voters said they are supporting Mitt Romney.
Deval Patrick and Democratic House and Senate leaders in Massachusetts showed with their support for municipal health care reform last year that it is possible for Democrats to do right by the public (in that case, schoolchildren) even when it means bucking the unions. If Democrats did more of that, they'd probably win over more voters.
... this one
isn't true anymore, thanks to Voters Count!
From the Sunday Globe editorial page
: "The Patrick Administration is pushing ahead with a costly and unfair policy by imposing a project labor agreement on the $260 million reconstruction of the Longfellow Bridge. Its rationale for falls far short of justifying a union-workers-only pact that would put upward pressure on the project price, while effectively excluding the state’s many non-union construction workers and firms from the project.
...Restricting competition in that manner carries a cost. A study of Massachusetts school construction projects by the Beacon Hill Institute, Suffolk University’s market-oriented think tank, estimated that PLAs added 12 percent to construction costs. (Institute studies of school construction in Connecticut and New York found that PLAs led to even larger increases in bids or actual construction costs). Even if the effect were only half that, it would mean an extra $60 million for these two projects. The state can’t afford to pay that kind of pointless premium. The Patrick administration should reverse this decision."
From yesterday's Wall Street Journal is this piece
about RI State Treasurer Gina Raimondo who achieved the following changes to RI pension rules:- S
hifts all workers from defined-benefit pensions into hybrid plans, which include a modest annuity and a defined-contribution component;- In
creases the retirement age to 67 from 62 for all workers; - S
uspends cost-of-living adjustments for retirees until the pension system, which is only about 50% funded, reaches a more healthy state.Ms. Raimondo
is a Democrat, former venture capitalist, was a Rhodes Scholar at Oxford and has a bachelor's in economics from Harvard and law degree from Yale.
"A government that doesn't work is in no one's interest," she says. "Budgets that don't balance, public programs that aren't funded, pension funds that are running out of money, schools that aren't funded—How does that help anyone? I don't really care if you're a Republican or Democrat or you want to fight about the size of government. How about a government that just works? Put your tax dollar in and get a return out the other end."
Governor Andrew Cuomo recently signed pension reform into law
in New York State over bitter opposition from public sector unions. This is in spite of the reforms being relatively modest: - changes only apply to new hires- retirement age raised to 63 from 62- workers now have to contribute
3-6% of their salaries
Today's Boston Globe
reports that 45 cities and towns have sent letters to the Department of Unemployment Assistance detailing what they see as abuses in the system:
■After taking mandatory retirement at age 65, some former police officers and firefighters collect unemployment benefits along with their pensions.
■Teachers who have been informed that their contracts may not be renewed for the following academic year receive a notification letter in the spring, and many receive a lump-sum payment in June to cover their salary through August. Despite being under contract, receiving pay and medical benefits, some file for and receive unemployment compensation benefits in July and August, then resume teaching when the school year begins.
■Teachers in an area of “critical need’’ are allowed to return to teach at full pay after they retire, without any income limitations or pension offsets. Once the school district fills the position, however, the retiree is allowed to collect unemployment benefits in addition to his/her pension.
■When they are paid by the municipality (and not the school district), some school bus drivers are eligible for unemployment benefits for school vacations, holidays, and other days off. (It was not mentioned in the letter, but municipal officials said that school crossing guards and substitute teachers also have filed for and received unemployment benefits because school was not in session or they were not called in to work.)
■One municipality hired a reserve police officer full time, and sent him to the state’s police academy. The recruit did not receive a passing grade at the academy and was returned to the reserve ranks, where he or she applied for and was granted unemployment benefits.
"Lynnfield Town Administrator Bill Gustus authored the letter that detailed holes in the state’s unemployment compensation system as it relates to municipal employees, including scenarios that were termed “questionable’’ or, in one case, defying “the laws of sanity.’’