Pension Funds - the next bail out.

[utrecht]

Quote:

Originally Posted by Bimmerbill When I left my fed job in 2000, I got almost a 50% increase in pay. It was the IT field. I still think there is a large pay disparity in IT between public/private. Heck, the state of NH is hiring IT guys and my brother makes more. He drives a trash truck...

Anyone want to respond to this? This is an actual case...not some stat that was quoted in some article that nobody can even verify.

[Leonidas]

Quote:

Originally Posted by ERD50 They should compensate police officers (all employees actually) no higher or lower than what is needed to attract qualified people for the job.

DING! DING! DING!

I could hire you an entire police agency for just about any salary amount you wanted to pay. Probably fill a stadium with all the people who would take $1 a year. Not the people you really want to give badges, authority, and access to.

There is a consistent average of applicant rejection for major police agencies in the U.S.: 95-98%. The funny thing is that during poor economic times we get more applicants, but the rejection rate stays pretty consistent. Probably because, unlike most jobs, our qualification demands reach into areas of consideration that would be illegal hiring practices for most employers. Credit history, drug & alcohol use, criminal behavior (not limited to convictions, or even arrests), physical fitness, etc.

When the budget crunch is on there is a lot of pressure to lower standards. We had a mayor once who realized she could hire people as cops all day long even if she cut the salaries and reduced benefits. She was absolutely right about being able to hire people - she was just totally wrong about them being the kind of people you wanted doing that job. And there were years of ugly outcomes as a result. People who should never been hired were given badges, and, unlike the average job, the damage they do affects innocent people in some profound ways. Experienced employees who did the job right were lured away by other places. Many took pay cuts to go to federal agencies because the benefits were better, the retirement was better, and there was the potential for salary improvement in the future.

Quote:

Originally Posted by Midpack Exactly why are government/munincipal employees supposed to be protected by the rest of us no matter what? I suppose you're going to contend that everyone should get SS with no reduction in benefits forever too.

It's part of the same equation. Consider the military - what would the retention rate be for experienced NCOs and officers if the pension, salaries, hiring, training, etc., were cut because of a temporary budget shortfall? When the budget is fixed and you go back to hiring, where do you find a platoon leader who has actualy led troops in combat? A rotary wing pilot who has conducted hundreds of insertions and extractions in hot landing zones safely? A sonar chief who knows the difference between an enemy sub opening its missile doors and whales humping?

And if you find them, how much will it cost to lure them back?

And the people that stayed while their compensation and retirements were jacked with - how motivated and dedicated are they going to be?

People that join the military, become cops and firefighters, do it for a lot of reasons. Most of them have profound feelings of loyalty and a commitment to service. But they have families and dreams like everyone else and money is obviously an important element there. There comes a point in budget cutting when those people decide that they're just not going to do more with less today.

We went through about a decade of seeing our salaries and benefits erode and cut partly because there was a period of fiscal difficulty, and partly because the elected officials thought they could cut us and still achieve the same results.

"Why do we spend so much money on training cops? Can't they just get most of it in the form of experience?" Followed a few years later by, "Why have we lost so many lawsuits for failure to train or supervise?"

"Hey, if we have only three firefighters per truck, look how much money we will save." Followed a few years later by, "Why did three firefighters die in this building?"

Eventually we had difficulty in hiring qualified applicants, we lost tons of experience (it takes years to make a rookie into a capable field officer, and a decade to take a capable field officer and make him a good detective), and eventually commitment and dedication fell off the chart. Going from #3 in compensation in the country to #5 in the county caused a lot of people to take a hard look at why they were risking their lives and busting their butts for an employer who did not care.

You can cut salaries and you can cut pensions, but you have to realize there will be an impact on performance. And the impact is not something like it will take a few months extra to roll out our next product. It's more like, "Sorry sir, we have nobody available at the moment. Can you put out the fire / shoot the intruder / stop the bleeding by yourself?"

[ziggy29]

Quote:

Originally Posted by utrecht Anyone want to respond to this? This is an actual case...not some stat that was quoted in some article that nobody can even verify.

One cherry picked example does not a robust argument make:

Government salaries vs. private sector salaries - CNN.com

It depends, on some degree, to what sector you're working in. And anecdotally -- admittedly not a solid argument -- what I've seen in recent years indicates that most public sector pay is catching up to the private sector even as the difference in the gap in the value of their respective employee benefits widens.

For example, someone could counter with another cherry-picked example from the link above for librarians:

Government average: $74,630
Nationwide average: $49,110

Again, this is but one example that can be cherry-picked to make a point that doesn't necessarily tell us anything about the picture overall. But across all the occupations listed there is no clear trend that public sector workers are paid less overall.

[ziggy29]

Quote:

Originally Posted by Leonidas People that join the military, become cops and firefighters, do it for a lot of reasons. Most of them have profound feelings of loyalty and a commitment to service. But they have families and dreams like everyone else and money is obviously an important element there. There comes a point in budget cutting when those people decide that they're just not going to do more with less today.

See, here's the thing. When people talk about public sector pensions, it seems like all we hear about are the military, cops, firemen and so on.

But there are a huge number of government workers who are not in these public safety/national defense positions. What about things like clerical or administrative staff? IT guys? People in HR or Finance? Do they need "retention" any more than the private sector does? And if retention for these jobs was so critical, why doesn't the private sector continue paying pensions to people doing those jobs to encourage longevity? Seems that if longevity were that crucial in those positions, businesses would be paying out pensions or at least longevity bonuses...

[youbet]

Quote:

Originally Posted by Leonidas When the budget crunch is on there is a lot of pressure to lower standards.

The quality of the work force is determined by the standards that are kept. The ability to attract and retain employees willing and able to work at those standards is a function of the salary offered.

It is not a case of higher salary = better workers. It is the case that higher standards = better workers and the salary needs to be set where it attracts and retains the desired quantity of employees.

[Westernskies]

Quote:

Originally Posted by Bimmerbill my brother makes more. He drives a trash truck...

....for the county.

[eridanus]

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Originally Posted by utrecht Eridanus...I dont know if your numbers are correct, but assuming they are..its very close. Hardly a good argument that public employees are riding a gravy train.

My numbers are correct for one municipal area for an Engineer III. That's the only open city engineering job available.

It's not as close as it seems.

The private engineer has to save $17,000 a year starting at age 22 (or whatever age we want to start with). The public engineer can save 7.5% each year regardless of salary. This means that the public engineer has a MUCH better standard of living than the private engineer in the early years. For example,

22 yo public engineer: $35000 pays in 7.5% = $32375 to live on
22 yo private engineer: $40000 pays in $17,000 = $23000 to live on (!)

We can play with the numbers but compounding works for the private engineer and not for the public engineer. If the private engineer contributes less in her 20s, she would have to contribute MUCH more in her 30s. The public engineer contributes 7.5% each year, regardless.

Medical benefits are a lot of what we discuss on this ER board. A private engineer, if she can even qualify for a plan, may be paying $500/month or more. The public engineer stays in the city pool. No worry about being denied for a pre-existing condition.

Private pensions take a beating when the company can't afford them anymore. The PGBC can and does reduce benefits. For public pensions, taxes are raised. This is unsustainable. GM has finally admitted this, and cities will have to admit it in the future.

[youbet]

Quote:

Originally Posted by ziggy29 See, here's the thing. When people talk about public sector pensions, it seems like all we hear about are the military, cops, firemen and so on. But there are a huge number of government workers who are not in these public safety/national defense positions. What about things like clerical or administrative staff? IT guys? People in HR or Finance? Do they need "retention" any more than the private sector does? And if retention for these jobs was so critical, why doesn't the private sector continue paying pensions to people doing those jobs to encourage longevity? Seems that if longevity were that crucial in those positions, businesses would be paying out pensions or at least longevity bonuses...

A key difference between govt employers and private employers is that govt employers generally offer compensation packages that sweep across the entire workforce without regard to recruiting or retention concerns for particular skills.

Example: My dad was a janitor for the Chicago Public Schools. That means he had a union job that required appropriate Dem Party connections. His compensation was 3X that which janitors for parochial schools received. (If you have read my posts over the years, you know that I and the rest of the family performed many "volunteer hours" for the local Dem organization to keep dad, his brother and his BIL, who all worked for the city, securely employed). There was no recruitment or retention reason for dad's compensation package to be as good as it was (although I appreciated that we led a more or less normal life on a janitor's salary). It was just a function that, at the time, the municipality of Chicago was an excellent payer and jobs were tied to the political machine. So janitors were rolled into the package and, thankfully for us, highly overpaid.

An example of equal pay across broad categories of job funtions would be teachers. Generally, in Illinois public education, teachers receive pay based on length of service and amount of education. Subject matter taught is not considered. In our area, special ed, language, math, science and certain vocational areas have shortages at existing pay levels. General elementary classroom teachers, subject area teachers associated with Liberal Arts majors such as history, English, and the like, are in oversupply at existing pay levels. Yet, the unions are successful at keeping with the tradition of equal pay for all subject areas. In local private schools, there is more flexibility in pay to allow administrators to recruit and retain difficult to find subject matter teachers by paying more.

[Leonidas]

Quote:

Originally Posted by ziggy29 See, here's the thing. When people talk about public sector pensions, it seems like all we hear about are the military, cops, firemen and so on. But there are a huge number of government workers who are not in these public safety/national defense positions. What about things like clerical or administrative staff? IT guys? People in HR or Finance? Do they need "retention" any more than the private sector does?

Hey, we agree completely here.

I remember being a 20 year-old rookie in court one day and watching a city attorney blow a case. We're talking a simple misdemeanor case that I could have won, but this guy was a disaster. When I commented something to that effect the reply I got from an experienced hand was "What do you expect for $8 an hour?"

My experience has been that they paid slave wages to the non-classified folks, but they never expected much out of them. The standards of production and quality were a lot lower than they should have been, but anybody who was worth a darn wasn't interested in the low pay, or they quickly left for the private sector where they made more. What was left were mostly the unwanted, unwilling, and incompetent.

Quote:

Originally Posted by youbet The quality of the work force is determined by the standards that are kept. The ability to attract and retain employees willing and able to work at those standards is a function of the salary offered. It is not a case of higher salary = better workers. It is the case that higher standards = better workers and the salary needs to be set where it attracts and retains the desired quantity of employees.

I thought that was the main point of my post. If you want to hire and retain the right people you have to pay. And compensation includes benefits and pension rights. If you cut one factor you have reduced overall compensation and your ability to hire and retain qualified employees is reduced. A good pension allows agencies to be less generous on the salary side and still be competitive. Plus it has the added benefit of putting the financial burden of that on to some other sucker's budget.

I was a supervisor in recruiting at the height of this mess. We were under constant pressure to modify our standards so we could hire people at lower overall costs. Our standards were developed by an outside group that did an excellent job in defining the minimum standards for a beginning officer. After they were developed we never lost an EEO complaint on hiring practices. We even explored giving the local EEOC office a copy of our standards manual if they would stop forwarding complaints that were easily defeated and wasted so much time responding to.

Recruiting was pressured to relax their scrutiny of applicants. We were told "The academy will weed out the ones who can't be trained." The academy was pressured to retain cadets at a higher rate. They were told "The field training program will weed out probationaries who can't apply the training." FTOs who tried to fail poor probationary officers were sometimes browbeaten into changing grades. The field training command often overruled FTOs and their supervisors and allowed the unqualified to stay.

Nothing gross and glaring, just little things here and there.

But the end result is that small deviations from standards can create catastrophes:

Quote:

The officer involved, rookie Arthur Carbonneau, did not pass a weapons-handling stress test as a cadet. He still graduated because of the department's reliance on overall averages. Carbonneau later failed his initial field training in part because he was easily flustered, the documents show. Also, Carbonneau testified he never had learned that he should not draw and point his weapon at someone who did not present a real threat to him or others. Carbonneau, who resigned from HPD and was convicted of criminally negligent homicide in 2005, said he had done the best he could with Escobar, given the training he had received, according to a deposition.

BTW, Carbonneau's comment that he never learned not to point a weapon at someone not posing a real threat is vehemently denied by his firearms instructors.

Carbonneau incompetently shot and killed a 14 year-old boy in 2003. It was just one of two shootings of young teens that year which were alleged to be the result of officers using improper tactics and standards with their weapons.

I don't know if Carbonneau was a hiring mistake, but it seems evident that he was sure as hell a retention mistake. As a result, someone's child is dead, a man who should never have been allowed to go about armed as a police officer lives with tremendous guilt, the taxpayers are out several millions dollars ($1.5 mil judgement, legal fees, new training and administrative procedures, etc.).

I recognize that there have been pension abominations made, mostly by shortsighted elected officials who only care about "cleaning up" this year's budget and to hell with the future. My pension is independently administered and doing okay so far. But I am trying to point out that military and classified civil service pensions and retirements (police and fire) are a different creature for good reasons. These are jobs in which human beings making critical decisions is the difference between really good things happening or really horrible things happening.

You can look at my pension and say "that's screwed up and could have been done better", and I would probably agree with you. But if you look at my pension and say "that's screwed up because I didn't get the same thing", or "that's gotten to be too expensive and I don't want to pay it" then I disagree with you.

You can hire Arthur Carbonneaus all day long and they will be cheaper in the short run. In the long run they are very costly. And you can see that the price is paid not just in dollars, but in innocent blood as well.

Or you can hire people like me, and you can expect and receive a much better employee who won't cost you as much as a Carbonneau in the long run. But I'm not cheap. And if you decide you want to reconfigure the pension, that's fine - but you are going to pay up somewhere else in the compensation package or I'm not doing the job. When people like me don't want to do the job then you can either go with the Carbonneau plan and wait for the obvious results, or you can do the job yourself.

It's a matter of pay me now or pay me later - your choice.

[al_bundy]

Quote:

Originally Posted by utrecht Anyone want to respond to this? This is an actual case...not some stat that was quoted in some article that nobody can even verify.

i've seen NYC IT jobs advertised that pay around what the private sector pays. same with federal government jobs. a lot of federal IT jobs are now through contractors and they pay private sector wages.

everything will vary depending on the government that is paying and the local populace

[utrecht]

I agree 100% with what Leonidas just said, especially the part about lowering hiring standards in a critical job such as a police officer. We've also had similar situations where people were hired against recommendations of multiple layers of people in the hiring process and the results were disasterous.

I also agree with Ziggy in that public pensions should be seperated with sworn personnel (cops and fireman) being totally seperate from civilain jobs within government. In fact thats how my department's pensions are handled. Not only are they seperate, but the civilians have totally different (and lower) pension benefits than we do. It seems that just about every complaint Ive heard in this thread about public pensions doesnt apply to my city and we are doing it right. If every government agency handled their pensions the way we do, I doubt we would even be having this discussion, which is hard for me to believe because just about everything else my city does is royally screwed up.

[jug]

I guess the only good business to be in right now is at the printing presses at the Fed.

Folks, Welkommen to de Weimar Republic ll, take off your coats, have a seat and be sure to bring in your veel barrels of Reichbucks to pay for the bottled water.

Our special is shoe soup, mit potatoes, carrots, onion, and celery, a bargain at only 2 billions of Reichbucks

Jug
Jawohl

[Leonidas]

Quote:

Originally Posted by utrecht I also agree with Ziggy in that public pensions should be seperated with sworn personnel (cops and fireman) being totally seperate from civilain jobs within government. In fact thats how my department's pensions are handled. Not only are they seperate, but the civilians have totally different (and lower) pension benefits than we do.

Same here, police, fire and all other municipal employees each have their own system. Fire pension is the best, mostly because they were at war with the last mayor and he was less generous to them on pay - which lead to a lowered pension obligation. Different with police, he was overly generous with us and forgot to clue the pension board in on his plans and decided to short contributions at the same time. It overextended us to less than 100% covered and the pension had to sue the city to get them to stop screwing the system.

The all other municipal system is a complete disaster. Run by people who are at best incompetent, and suspected of being corrupt, they just about ran their pension into the ground. The city has been scrambling for years now trying to un**&# it all, but I don't know how they're going to fix that mess. The topper was they pushed for an 80% pension. That didn't last long, and to be honest most of those folks never made much money, but the gray-haired rats were jumping off the ship while that deal was in effect.

The bad thing is that the police and fire pensions, although generally healthy, get tarred with the same brush whenever they start talking pension contributions over at city council.

Quote:

Originally Posted by utrecht ...which is hard for me to believe because just about everything else my city does is royally screwed up.

I got a promotional test question right once based on knowing city policy. The question asked what was the best practice standard for some procedure, and I was having a problem until I decided to just pick the exact opposite of current city policy. Bingo! Right Answer! Which proved the point many have been making here for years, if the city does it, it has to be screwed up.

[Bimmerbill]

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Originally Posted by al_bundy a lot of federal IT jobs are now through contractors and they pay private sector wages.

Yes, but even the ones that offer benefits don't offer the gov't pension.

In my case I was a network manager, GS-12, the top technical IT guy in our organization. Wage back then was $52K. I jumped ship to LU, asked for $70K, and got it along with a $5K sign on bonus and stock options (which ended up being WAY underwater). Other benefits were pretty similar, with slightly more vacation time thru the gov't and more sick time thru the gov't.

Of course, I was laid off in 2002 during the tech bubble bursting.

[al_bundy]

i think the whole government pension thing is overblown

say you retire at 50 with a pension of around $35,000. By 70 you've collected $700,000 without COLA increases.

if you start a 401k in your 20's then it's not very hard to save $1 million or more by retirement which you can also will to a surviving spouse and/or your kids. and the money is your pot where you can live off the interest/dividends and keep the pot. and you get some great tax benefits with a 401k while you pay more taxes as a government employee if you don't have the 401k like add on they have. can't remember the name

[Westernskies]

Quote:

Originally Posted by al_bundy i think the whole government pension thing is overblown say you retire at 50 with a pension of around $35,000. By 70 you've collected $700,000 without COLA increases. if you start a 401k in your 20's then it's not very hard to save $1 million or more by retirement which you can also will to a surviving spouse and/or your kids. and the money is your pot where you can live off the interest/dividends and keep the pot. and you get some great tax benefits with a 401k while you pay more taxes as a government employee if you don't have the 401k like add on they have. can't remember the name

...you forgot to factor in benefits, most importantly medical. That changes your whole equation.

[ziggy29]

Quote:

Originally Posted by Westernskies ...you forgot to factor in benefits, most importantly medical. That changes your whole equation.

And the decades of peace of mind that come with greater job security and far less dependence on the stock market for your retirement. That's worth something, though you can't really assign a dollar value to it.

[utrecht]

Lets not forget that as Al Bundy said, with the 401K, you (your heirs) keep the money forever. With a pension, you collect until you die and thats it. If you die early you dont collect much of anything so in those cases the govt worker with a pension gets royally screwed. In some cases your spouse with get a percentage of the pension but its severely reduced.

Also, medical benefits? Who said all public employees get some great medical benefits in retirement? Mine arent all that great at all.

[Westernskies]

I think it goes deeper than that.

Many (and I qualify this with a BIG not everyone) in the public sector have an entitlement mentality with regard to pensions - what are you going to do for me?

Most (and I qualify this with a BIG not everyone) in the public sector have an entrepreunerial mentality with regard to pensions - what am I going to do for myself?

I believe a "share the pain" program should apply to public pensions that are underfunded and/or have lost money in the recent downturn. Those that were properly funded and administered should have no worries.

And, regarding the discussions around a disparity in benefits, how many retired public service employees are getting ZERO health care benefits? What would the equivalant percentage be in the private sector?

[utrecht]

You know the public sector is open to...well... the entire public, right? If its so great..what are you waiting for?