Re: Local Governments Founded in Deception
Rhode Island Association of School Committees Executive Director Tim Duffy commented as follows to the post in which I suggested that pension problems are a self-inflicted wound among governments, especially local governments:
The wound is not a locally self-inflicted one. School committees are not responsible for pension debt. We do not negotiate these benefits with unions. The rates we pay are determined actuarially and that is driven by factors set in state law. How long it takes an employee to become vested, when they can retire, when they can begin to draw down a pension, what % of pay the pension is set at, how much their pension increases annually, COLAs, are all embedded in state statute. During the 1990’s recession the state changed the employer contribution ratio, from 60% state – 40% local to 40% state – 60% local. So when the retirement board changes the actuarial assumption, as they should, and it results in an increased unfunded liability, locals get to bill the pay.
A lot of communities are doing less with more, but our hands are tied by collective bargaining statutes that create an unleveled playing field in favor of the unions. Teacher unions can employ work to rule as a protest against management and hurt students in the process. Illegal teacher strikes, while infrequent, don’t result in any financial penalty for teachers. Binding arbitration awards for police and fire have largely ignored a community’s ability to pay and in many instances have set conditions for retirement, selected costlier health care providers, and set manning and staffing levels.
When the legislature passed 3050 lowering the property tax cap, a bill we supported, it also required the state to fund mandates passed by the General Assembly or initiated by regulations of a state agency. The FY 2012 budget, like budgets before it, does not appropriate money for mandate reimbursement. In many instances local government is failing, but not necessarily due to any fault of locally elected officials. Rather much of the failure can be laid at the feet of state leaders who have passed the accountability buck down to the locals while denying them the authority to act in the interests of their citizens, taxpayers and students.
That’s a reasonable response, but it requires a certain amount of acceptance of Rhode Island’s paradigm for governance. Having watched school committees play at bringing negotiations to a close while continuing to promise that any raises would be retroactive, no matter how many times the union scuttled an agreement, I’m not willing to buy into the game.
More importantly, local government has played its role in the system of unions dominating the Statehouse and the Town Hall, as well, cycling taxpayer dollars into public-sector coffers.
As the elected officials closest to the voters, school committees (and town councils) should have pushed back harder. So, “self-inflicted” may be too strong, but only if one excludes passivity.
As the General Assembly has changed the pension system detrimentally to municipalities, those local governments should have taken steps to decline participation in the system altogether. If that didn’t prove feasible, they should have insisted that new costs be worked into existing personnel costs, pushing salaries and other benefits down, as well. Let the unions decide whether they’d rather take their winnings in cash, benefits, or retirements.
There are surely dozens of actions, practical and political, that school committees could have taken to fight back. To my experience, they’ve been content to play along, complaining about labor and the legislature, to be sure, but also observably happy to have places to which to pass blame.
And if the system had pushed back more, then at the very least, those with an investment in the pension system wouldn’t have been so complacent about its being sacrosanct.
As I commented in that post originally, if there is a law stating that the Assembly must fund their mandates, and they aren’t, why aren’t mayors suing the Assembly for being in violation of the law?
If we’re not talking just teachers pension plans, I can relate to a self inflicted wound. In my community, the police had a private pension plan that they started back in the 70’s at a 9.25% contribution by employees. Sometime in the 80’s, the fire department started a plan with the same company at 8% contribution. The Town in their infinite wisdom and for simplification purposes decided to reduce the police contribution to match the fire contribution. A few years later they added a compounded COLA during negotiations with the police union without any increase in contribution. Needless to say by early 1990 after a plethora of disabilities, the Town was faced with a major unfunded liability. The Town and union battled for more than ten years over who was responsible all the while only the Town’s contribution increased. Finally in 2003, the Town moved over to MERS and is still contributing to the private plan just to keep it afloat for retirees. If that’s not self inflicted, I don’t know what is.