Bond holders vs. Calpers - who gets priority when CA cities go BK

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Submitted by ctr70 on December 9, 2012 - 11:40am

http://www.economist.com/news/united-sta...

Good Economist article about how it could go to federal court over who gets priority for payment when CA cities go into BK. Bondholders want Calpers to get treated like any other unsecured creditor.

Bondholders are challenging Stocktons eligibility for BK b/c it makes no effort to tackle the bloated pension pay outs.

A ruling against Calpers claims to seniority in BK may make BK look more attractive to more cities. Ruling in favor of Calpers could lead to credit downgrades for CA city MUNI debt, the could hurt their ability to borrow.

Will be interesting to see how this plays out.

Submitted by CA renter on December 10, 2012 - 4:52am.

In bankruptcy, employee compensation is a priority claim. These pension contributions are a part of employee compensation.

It's doubtful that a court decision in favor of CalPERS would have any affect on the credit ratings since it's always been understood, at least in California, that pensions take priority over unsecured bondholders. If a government entity is a bad credit risk, then that will affect its credit ratings; but it has always been understood in public policy circles (and, presumably, among serious bond investors) that pension funds have priority. This is a topic that has been discussed for decades, so it shouldn't take anyone by surprise.

One more thing: the battle is not between "taxpayers" and public employees. The notion that taxpayers are going to cover all losses originates from the privatization movement that has been trying to eliminate unions for a long time (so they can take over public assets and revenues, NOT so that they can save taxpayers money). It is primarily bondholders (and other unsecured creditors), not taxpayers, who will take the hit in the event of a bankruptcy.

Naturally, Wall Street -- populated by by those in the privatization movement as well as bondholders and other "investors" -- wants to strip unions of their rights and reframe this issue as a "taxpayers vs. union" issue as part of their propaganda, but that's not what it really is. Joe Sixpack will not benefit one single bit by the decimation of unions. To the contrary, it will negatively affect wages and benefits in all other industries because those employers won't have to compete with public employers (and their better wages and benefits) for employees, and J6 Taxpayer will not see a dime in savings.

The pension reform bill has already addressed many of the problems with CalPERS. Just to be clear, it is not just "taxpayers" who are having to pay for the additional pension contributions, especially after Jerry Brown's reforms passed. "Taxpayers," BTW, includes public employees who often pay at least as much, as a percentage of income, as most of the "rich" who are whining the most, because these public employees are W-2 earners and don't get to fraudulently deduct all of their "business expenses" or get preferential tax treatment like those who have passive earnings.

Submitted by bearishgurl on December 10, 2012 - 11:04am.

Thanks for beating me to the punch, CAR. The above is another one of your great, educational posts. For the most part, the general public does not understand these concepts unless they are explained to them in plain language ... just as you did here :-]

Submitted by davelj on December 10, 2012 - 12:39pm.

CA renter wrote:
In bankruptcy, employee compensation is a priority claim. These pension contributions are a part of employee compensation.

Whether or not pension contributions are "part of employee compensation" is up for debate. Certainly, the *employee* contribution portion of the total contribution is probably sacrosanct. But the status of the *employer* contribution portion is what judges will be deciding.

Recall that when a corporation goes bankrupt and its pensions are taken over the the Pension Benefit Guaranty Corporation that the maximum pension benefit guaranteed by PBGC is ~$56K annually. Benefits above that level are lost - and constitute a haircut to the pension fund - just like the haircut that the bondholders take. So, while it's not an apples-to-apples comparison, there is precedent in the corporate world for pensions taking a haircut in bankruptcy.

My point is that it remains to be seen what happens to public pensions in bankruptcy. I suspect they will be cut back but that most or all of the cutbacks will occur for those with large pensions, just as in the case of the PBGC.

You make it sound like this issue is settled. I can assure that it's not. Not by a long shot.

Submitted by bearishgurl on December 10, 2012 - 1:11pm.

davelj wrote:
CA renter wrote:
In bankruptcy, employee compensation is a priority claim. These pension contributions are a part of employee compensation.

Whether or not pension contributions are "part of employee compensation" is up for debate. Certainly, the *employee* contribution portion of the total contribution is probably sacrosanct. But the status of the *employer* contribution portion is what judges will be deciding.

Recall that when a corporation goes bankrupt and its pensions are taken over the the Pension Benefit Guaranty Corporation that the maximum pension benefit guaranteed by PBGC is ~$56K annually. Benefits above that level are lost - and constitute a haircut to the pension fund - just like the haircut that the bondholders take. So, while it's not an apples-to-apples comparison, there is precedent in the corporate world for pensions taking a haircut in bankruptcy.

My point is that it remains to be seen what happens to public pensions in bankruptcy. I suspect they will be cut back but that most or all of the cutbacks will occur for those with large pensions, just as in the case of the PBGC.

You make it sound like this issue is settled. I can assure that it's not. Not by a long shot.

davelj, I understand that it is the employer-contribution of the pension that the judge for the Stockton BK will be deciding upon. However, the rights to a public pension, the formula for qualifying for that pension and the formula for determining its amount are steeped in state law. A private corporation's pensions are not. The question of law is whether a federal judge can trump state law. If this BK judge makes a ruling against the City of Stockton pensioners, I have no doubt that it will be summarily appealed ... in short order. As a matter of fact, an appeal will be likely ready to file prior to the hearing when the issue is supposed to be decided ... just as a precaution.

Perhaps some of the CA inland cities and counties which were grossly overbuilt during the millenium boom and whose RE markets then crashed (ex: Stockton) will now begin to see greater property tax proceeds in the coming months/years. This should ameliorate most of their general fund shortfalls and enable them to pay what they promised into the pension funds. And there is nothing precluding these jurisdictions from shoring up their own house by removing the health-plan allowance from MOST retirees (for those where their HC allowance is NOT protected by law), and, of course, eliminating defined benefit plans for those hired after a certain date and/or future hires.

You are correct in that this issue will not be "settled" until the "fat lady" sings. And that will likely be a few years from now.

Submitted by bearishgurl on December 10, 2012 - 1:19pm.

davelj wrote:
...My point is that it remains to be seen what happens to public pensions in bankruptcy. I suspect they will be cut back but that most or all of the cutbacks will occur for those with large pensions, just as in the case of the PBGC...

davelj, Let's use the City of SD's DROP program as an example and also the thousands of "deals" CA jurisdictions made with tenured employees to get them to retire a little early, such as adding additional year(s) of service on at the end of a career in order to "spike" their retirement pay.

These machinations, however long a "past practice," are NOT protected by law. I agree that former employees who are receiving extraordinarily high pensions which have nothing to do with years of service and their highest 1-3 years of pay are being unjustly enriched and their pensions could be subject to a cut in a municipal or county BK.

Submitted by bearishgurl on December 10, 2012 - 1:48pm.

As to a possible Federal appeal of this issue by CA unions, I just don't see these (BK) CA jurisdictions winning on this issue. CA labor laws, including the right of collective bargaining, the mechanisms by which employees earn pensions and the remedies for contract enforcement mirrors its well-established counterpart of the National Labor Relations Act (NLRA) body of Federal law. The labor lawyers will simply compare the origins of the prevaling CA law to the NLRA and argue the applicable parts of the NLRA before the Federal appeals court and win. Slam dunk.

That's what I predict will happen.

Submitted by ctr70 on December 10, 2012 - 7:02pm.

I'm fine with pensions as long as their is NO tax payer guarantee at all, they are 100% self-sustaining. If the investments tank, the difference should not be made up by tax payers, the recipients should get less. If they don't get the 8-9% target return, tax payer money should not back these defined benefit pensions up.

Submitted by CA renter on December 10, 2012 - 10:42pm.

ctr70 wrote:
I'm fine with pensions as long as their is NO tax payer guarantee at all, they are 100% self-sustaining. If the investments tank, the difference should not be made up by tax payers, the recipients should get less. If they don't get the 8-9% target return, tax payer money should not back these defined benefit pensions up.

Here's the problem:

You don't want to pay for any portion of possible pension losses for public employees. That's cool, but I don't want my tax money to subsidize the profits of employers who hire low-wage or illegal immigrant workers (who use the majority of public welfare benefits and are very costly for the education system), nor do I want to pay to subsidize the profits of landlords, commercial building owners, owners of large tracts of land, etc. when they are not paying market-rate property taxes as a result of Prop 13. I also don't want to pay for the enormous profits (and personal incomes) of private contractors who offer their services to the government. On a federal level, I HATE paying for totally unjustifiable wars that kill tens of thousands of innocent people, and I HATE paying for the spy infrastructure that is used to spy on American citizens in our own land. I also hate paying for "diplomatic missions" in foreign countries where we overturn popular and/or democratically-elected leaders.

I also HATE paying for the exorbitant incomes of C-suite executives and certain shareholders and investors, etc. not to mention celebrities, whenever I have to buy goods and services (and don't kid yourself: all too often, we do NOT have a choice).

This is just my short list, BTW.

[edited to add]... My biggest pet peeve: the Wall Street bailouts where the bonuses were quickly flowing back to pre-recession levels and higher! You also have to add what savers are losing as a result of these artificially low interest rates that are forced on us by the Fed so that certain "preferred" entities can maintain their wealth via artificially inflated asset prices. Then, there are the home buyer tax credits, and govt-guaranteed loans, the public-private investment deals (where taxpayers take the losses and private, well-connected individuals get all the profits), loss sharing agreements, govt-backed loans for speculators (like having GSE and FHA loans for speculators and those who are not owner-occupiers), etc. I could go on and on...

Yep, we all have to pay for things that we don't like in a civilized, democratic society. ALL of us. And I truly believe that police officers, firefighters, nurses, teachers, etc. are nowhere near the top of the list (if on the list at all) of things that taxpayers have to pay for in our current system, but shouldn't be paying for.

So...what's the answer? Should we only be able to allocate our money directly to the causes we're willing to pay for? Not saying that's necessarily a bad thing, but one has to wonder how that would work in the real world.

Submitted by CA renter on December 10, 2012 - 10:32pm.

davelj wrote:
CA renter wrote:
In bankruptcy, employee compensation is a priority claim. These pension contributions are a part of employee compensation.

Whether or not pension contributions are "part of employee compensation" is up for debate. Certainly, the *employee* contribution portion of the total contribution is probably sacrosanct. But the status of the *employer* contribution portion is what judges will be deciding.

Recall that when a corporation goes bankrupt and its pensions are taken over the the Pension Benefit Guaranty Corporation that the maximum pension benefit guaranteed by PBGC is ~$56K annually. Benefits above that level are lost - and constitute a haircut to the pension fund - just like the haircut that the bondholders take. So, while it's not an apples-to-apples comparison, there is precedent in the corporate world for pensions taking a haircut in bankruptcy.

My point is that it remains to be seen what happens to public pensions in bankruptcy. I suspect they will be cut back but that most or all of the cutbacks will occur for those with large pensions, just as in the case of the PBGC.

You make it sound like this issue is settled. I can assure that it's not. Not by a long shot.

Big difference: the PBGC is a public *insurance* entity for *private* pension plans, and they have little control over these pension funds (especially before the Pension Protection Act of 2006), whereas the state and local pension funds are NOT insurance funds for pensions; they are the pension funds themselves, and have more control over the types of investments and contribution requirements for covered pensions.

I would also add that the pension contributions ARE a part of an employee's compensation because the employers/employees take into account the total compensation for their employees during contract negotiations. Other items are increased or decreased based on the different components of employee compensation, including pension contributions.

Submitted by sdduuuude on December 11, 2012 - 2:22pm.

CA renter wrote:
Should we only be able to allocate our money directly to the causes we're willing to pay for?

Yes.

CA renter wrote:
Not saying that's necessarily a bad thing, but one has to wonder how that would work in the real world.

How about a tax form that looks like this:

Govt Entity A: ____%
Govt Entity B: ____%
Govt Entity C: ____%
Govt Entity D: ____%
Govt Entity E: ____%
Govt Entity F: ____%
Govt Entity G: ____%

TOTAL: 100%

I betcha schools, military, police would have all the money they need and a whole bunch of stuff the government does now would, appropriately, go unfunded. We would realize exactly what the people want from their government.

Submitted by bearishgurl on December 11, 2012 - 4:04pm.

CA renter wrote:
. . . I would also add that the pension contributions ARE a part of an employee's compensation because the employers/employees take into account the total compensation for their employees during contract negotiations. Other items are increased or decreased based on the different components of employee compensation, including pension contributions.

Absolutely true. At a "bargaining table" for a public sector contract, it is not uncommon for the employer to "take away" a benefit for another and the union to agree to it.

For instance:

-new "Cafeteria Plan" (giving employees more choice) in exchange for lowering the employer healthcare contribution;

-"enhanced" retirement benefits (changes in pension formula) in exchange for changing sick and annual leave to "personal leave" and dropping the rate of employee leave accruals;

-2 to 3 more step-increases for "maxed out" employees in crowded career clusters in exchange for reduction or elimination of shift differentials in same career cluster;

-and the addition of vision care and health club/alternative medicine discounts in exchange for charging smokers and obese employees a little higher employee contribution of benefits.

I'm not saying all of this is done but only that the parties can make any agreement in there (which follows the law) that each side agrees to.

Both sides privately "caucus" throughout the sessions to determine the value of the "whole nut" (all the agreed-upon proposals and those still on the table thus far) that they will be paying out or giving up, as the case may be.

Submitted by SK in CV on December 11, 2012 - 4:10pm.

bearishgurl wrote:
CA renter wrote:
. . . I would also add that the pension contributions ARE a part of an employee's compensation because the employers/employees take into account the total compensation for their employees during contract negotiations. Other items are increased or decreased based on the different components of employee compensation, including pension contributions.

Absolutely true. At a "bargaining table" for a public sector contract, it is not uncommon for the employer to "take away" a benefit for another and the union to agree to it.

For instance:

-new "Cafeteria Plan" (giving employees more choice) in exchange for lowering the employer healthcare contribution;

-"enhanced" retirement benefits (changes in pension formula) in exchange for changing sick and annual leave to "personal leave" and dropping the rate of employee leave accruals;

-2 to 3 more step-increases for "maxed out" employees in crowded career clusters in exchange for reduction or elimination of shift differentials in same career cluster;

-and the addition of vision care and health club/alternative medicine discounts in exchange for charging smokers and obese employees a little higher employee contribution of benefits.

I'm not saying all of this is done but only that the parties can make any agreement in there (which follows the law) that each side agrees to.

Both sides privately "caucus" throughout the sessions to determine the value of the "whole nut" (all the agreed-upon proposals and those still on the table thus far) that they will be paying out or giving up, as the case may be.

Yeah but....

I'm not sure any of those bene's are treated as priority claims in bankruptcy. Hourly and regular wages are priority claims. I think overtime is. I'm pretty sure vacation and sick time are not. Non-wage benefits for public employees? That's what the bankruptcy court will decide.

Submitted by bearishgurl on December 11, 2012 - 4:41pm.

SK in CV wrote:
...I'm not sure any of those bene's are treated as priority claims in bankruptcy. Hourly and regular wages are priority claims. I think overtime is. I'm pretty sure vacation and sick time are not. Non-wage benefits for public employees? That's what the bankruptcy court will decide.

Good point, SK. I DO believe annual leave is a "wage" because it has to be paid out upon termination. And some government charters have a provision for sick leave to be added to the length of service for retirement purposes but this is NOT codified in state law.

It will be very interesting to see how the BK court rules in the Stockton case, even though the ruling will very likely be appealed if not in favor of the retirement board/unions.

I see this as a time and money-wasting uphill battle for a city who should probably concentrate on getting (and keeping) their house in order regardless of how the court rules. If that means layoffs and RIFs, its citizens will have to get used to less services. If they can't staff enough employees for their state and Federally mandated programs, then they will have to seek funds from the state/Federal govm't to run these programs or send those patrons elsewhere to apply for benefits.

Of course, we all know BK would not have been necessary had Stockton (and all other similarly-situated CA cities/counties) not allowed their jurisdiction to become grossly overbuilt during the "millenium boom," resulting in the need to hire massive amounts of employees for nearly every one of its agencies to serve their exploding populations. Many of their "newcomers" have now exited the region, leaving hundreds of still-vacant homes, condos and apartments in their wake, resulting in the decimating the value of their RE (beyond the value it was when Big Development first came in) and thus a much lower amount of property taxes coming in (after assessment appeals and Prop 8 downward adjustments).

These City Councils and Boards of Supervisors made their own beds by pandering to Big Development and unfortunately must now sleep in them.

Submitted by bearishgurl on December 11, 2012 - 4:48pm.

sdduuuude wrote:
...I betcha schools, military, police would have all the money they need and a whole bunch of stuff the government does now would, appropriately, go unfunded. We would realize exactly what the people want from their government.

This would all be fine if some of these programs weren't "Federally mandated." Unfortunately, CA jurisdictions have historically never received near enough from the Federal govm't to run their "mandated" programs (personnel costs, mainly) as most of the money they DO recieve is passed thru to the eligible beneficiaries in the form of benefits. There are far more "needy" individuals and families here in CA than the Federal govm't cares to acknowledge.

This problem is particularly pronounced in historically lower-income agricultural cities such as Stockton.

Submitted by no_such_reality on December 11, 2012 - 5:10pm.

bearishgurl wrote:

I see this as a time and money-wasting uphill battle for a city who should probably concentrate on getting (and keeping) their house in order regardless of how the court rules. If that means layoffs and RIFs, its citizens will have to get used to less services. If they can't staff enough employees for their state and Federally mandated programs, then they will have to seek funds from the state/Federal govm't to run these programs or send those patrons elsewhere to apply for benefits.

Vallejo is how looks.

Bond holders eat it.

City services shredded, RIFs of 30%, 40% or 50% of staff, including police and fire. The Police department is reduced by 38% of peak staffing in 2004, the fire department reduced 30%.

Increased contributions to pensions for the remaining workers to actually pay as you go.

Concessions from unions on Pensions.

And a 1% sales tax.

That is the future. Get used to it.

Submitted by bearishgurl on December 11, 2012 - 5:26pm.

no_such_reality wrote:
bearishgurl wrote:

I see this as a time and money-wasting uphill battle for a city who should probably concentrate on getting (and keeping) their house in order regardless of how the court rules. If that means layoffs and RIFs, its citizens will have to get used to less services. If they can't staff enough employees for their state and Federally mandated programs, then they will have to seek funds from the state/Federal govm't to run these programs or send those patrons elsewhere to apply for benefits.

Vallejo is how looks.

Bond holders eat it.

City services shredded, RIFs of 30%, 40% 50%, or 60% of staff, including police and fire. The Police department is at 38% of peak staffing in 2004, the fire department at 30%.

Increased contributions to pensions for the remaining workers to actually pay as you go.

Concessions from unions on Pensions.

And a 1% sales tax.

That is the future. Get used to it.

The Vallejo City Council fvcked themselves (and their constituents) royally over the Mare Island redevelopment project(s) debacle after the Navy closed the base and gave the land back to them. Again, this was primarily caused by its Council pandering to Big Development and in the end, not getting their fair share of taxes or a fair cut of the their sales profits.

A few months ago, I was working on a "study" of the depth and breadth of these blunders and how it affected Vallejo's finances adversely and I had to stop due to to other commitments. I'll made an effort over the holidays to complete it and post a thread here.

There was absolutely no reason whatsoever that this VERY well-located waterfront small city with multiple industries should have EVER had to succumb to BK! None at all! This city is VERY conveniently located, VERY well established and had no open space available for tract OR multifamily development that wasn't "gut & rebuild infill,"....that is, until the Mare Island base reverted back to them.

I'll get on PACER as soon as I can and try corroborate your story, NSR.

Submitted by no_such_reality on December 11, 2012 - 9:30pm.

BG, most politicians in most cities are being just as stupid as the ones in Vallejo.

That's the point those of us on the reign Government in side have been making. As you say, they shouldn't. Well, they have. And most of the others have too.

That's the point.

Submitted by bearishgurl on December 11, 2012 - 9:46pm.

no_such_reality wrote:
BG, most politicians in most cities are being just as stupid as the ones in Vallejo.

That's the point those of us on the reign Government in side have been making. As you say, they shouldn't. Well, they have. And most of the others have too.

That's the point.

I agree, NSR, because I've seen it first hand ... countless times. HOWEVER, the main thrust of Pigg assertions on this board has been that long ago contracted for (and codified in state law) PUBLIC PENSIONS were the source of the BK's.

Nothing could be further from the truth.

Submitted by no_such_reality on December 11, 2012 - 9:50pm.

The pensions, the work schedules, the lax management, the staffing levels, and the politico pandering all go hand in hand.

The pensions are just the most obvious piece that is out of whack. It's the easiest piece to see how poorly the politicians have been at being stewards of our resources.

Submitted by CA renter on December 12, 2012 - 3:34am.

no_such_reality wrote:
The pensions, the work schedules, the lax management, the staffing levels, and the politico pandering all go hand in hand.

The pensions are just the most obvious piece that is out of whack. It's the easiest piece to see how poorly the politicians have been at being stewards of our resources.

It's the easiest to see because it's the most transparent. If you've seen what (I'm assuming) BG and I have seen, you'd know that there is a ton of fraud and abuse, and the vast majority of it is related to **private** contractors (ever hear about the $40 screwdrivers, etc.?) and other "special interests" like developers who end up costing taxpayers millions or billions of dollars...but by the time the problem becomes obvious, they are long gone, leaving public sector employees as the convenient scapegoats for the eventual economic consequences.

Mind you, the reason you're hearing so much about public pensions is NOT because they are what's causing the financial problems (3-5% of the state's budget, for instance), but because the private interests who are looking to take control of public assets and revenue streams are trying to get unions out of their way. They are trying to villainize public sector employees and unions because unions are the only thing standing between them and their goals.

http://alecexposed.org/wiki/Privatizing_...

I can assure you, the "private market" Utopia does not exist. If there is any evidence to show that, over time, the privatization of goods and services traditionally provided by govt entities results in improved services for similar or lower costs, I'd like to see it. All that we'll get from privatization is the loss of the few remaining decent jobs that are available to the general public. Taxpayers/consumers of public goods and services will not benefit from privatization. There is no **evidence** to show that they will, not even from right-wing sources.

http://www.nytimes.com/2012/06/22/opinio...

http://government.cce.cornell.edu/doc/vi...

Submitted by davelj on December 12, 2012 - 1:41pm.

CA renter wrote:

Big difference: the PBGC is a public *insurance* entity for *private* pension plans, and they have little control over these pension funds (especially before the Pension Protection Act of 2006), whereas the state and local pension funds are NOT insurance funds for pensions; they are the pension funds themselves, and have more control over the types of investments and contribution requirements for covered pensions.

Which is why I specifically stated "it's not an apples-to-apples comparison."

California's state constitution is its own beast but - and I quote Gene Fama here - "Most state constitutions provide that the state first has to service its debt, then make its pension payments, then pay for services. What remains to be seen is whether this order will be enforced when - not if - a state declares bankruptcy."

Interesting times...

Submitted by davelj on December 12, 2012 - 1:52pm.

A side thought experiment on the topic of public unions.

As has been discussed before, the vast majority of metro areas in the US are serviced by volunteer fire departments (these tend to be small markets, but they are numerous). However, virtually ALL of the major metro markets (not a lot of markets - by definition - but lots of population) are serviced by a full-time, paid fire department.

Clearly, there are lots and lots of folks who would be happy to volunteer to help out the fire department, even here in SD. They'd go through the training, etc etc... and work essentially for free.

If the unions were amenable, we could start integrating such folks into the current fire department and have them working for and alongside the full-time folks. Over time we could strike a balance between volunteer and full-time workers that better fits our financial wherewithal.

So, why doesn't this happen? I know the answer but I'm wondering what others think is the barrier.

Submitted by SD Squatter on December 12, 2012 - 5:42pm.

CALPERS trying to rewrite city bankruptcy rules

Bloomberg:
"The California Public Employees’ Retirement System is trying to rewrite the rules for bankrupt cities, claiming that it should get paid before almost everyone else, including bondholders."

http://www.bloomberg.com/news/2012-12-12...

Submitted by SK in CV on December 12, 2012 - 6:08pm.

SD Squatter wrote:
CALPERS trying to rewrite city bankruptcy rules

Bloomberg:
"The California Public Employees’ Retirement System is trying to rewrite the rules for bankrupt cities, claiming that it should get paid before almost everyone else, including bondholders."

http://www.bloomberg.com/news/2012-12-12/calpers-bankruptcy-strategy-pits-retirees-vs-all-others.html

That's opinion that is not consistent with bankruptcy law. Chapter 9 is pretty unique, and there isn't all that much in the way of precedent. But the rules regarding priorities of claims remains. And debts to employees are priority claims, even in chapter 9. Calpers is not trying to rewrite any existing law. The law simply does not exist.

Submitted by CA renter on December 12, 2012 - 9:53pm.

davelj wrote:
A side thought experiment on the topic of public unions.

As has been discussed before, the vast majority of metro areas in the US are serviced by volunteer fire departments (these tend to be small markets, but they are numerous). However, virtually ALL of the major metro markets (not a lot of markets - by definition - but lots of population) are serviced by a full-time, paid fire department.

Clearly, there are lots and lots of folks who would be happy to volunteer to help out the fire department, even here in SD. They'd go through the training, etc etc... and work essentially for free.

If the unions were amenable, we could start integrating such folks into the current fire department and have them working for and alongside the full-time folks. Over time we could strike a balance between volunteer and full-time workers that better fits our financial wherewithal.

So, why doesn't this happen? I know the answer but I'm wondering what others think is the barrier.

That's already been discussed here:

http://piggington.com/comment/reply/1399...

CA renter wrote:

In general, volunteer departments are in rural areas where paid fire departments are not needed, or where they can't afford one. If you look at a map of the U.S., you'll quickly see why we appear to have such a large volunteer force. Things are different from department to department, but in many (most?) cases, these departments would not have a staffed station. If a call comes in, the volunteers carry radios around with them and they meet where the call is located (usually one or two will go to the station first to get the engine, or it's possible someone might bring the engine home). Can you imagine the reponse times in an urban/suburban setting?

In urban/suburban areas, if there is a volunteer component to a paid department, it would be used for training new recruits. Of course, the promise/hope of a job in the paid force is the incentive that makes these kids work for "free" (it still costs the department WRT administrative and training costs, equipment, insurance, etc.). If they don't think the volunteer experience will land them a job, or significantly increase their chances, I guarantee you there would be precious few full-time volunteers, if any (and the ones who would volunteer F/T are the weird "groupie" types that are actually very dangerous -- nobody wants to hire those).

AND...

CA renter wrote:
davelj wrote:

That makes sense but if 73% of all fire fighters are indeed volunteers and we know that a huge proportion of the total population in the U.S. is in urban areas, then there must be a lot of volunteers in some major metropolitan areas as well. I agree that the rural model doesn't translate perfectly to the urban model, but clearly a lot of folks are willing to do this work on a very part-time basis for free. In my view, we should figure out how to use these folks.

I could be wrong, but I think you've just nailed one of the biggest reasons why 73% of firefighters are volunteers. If each part-time FF is considered a "volunteer," then it makes sense that more firefighters are volunteers vs professionals. Many of them might work for a day or two a month (maybe more, maybe less), so you need far more of them to get the same coverage. The professional departments would have fewer firefighters because everyone is full-time. Just guessing this, but your post actually made me realize this is a big reason for the population difference between volunteer and professional departments.

Trying to clarify it a bit: it's possible that 73% of the firefighters are covering only 10-20% (or less) of the calls. I don't know this, though. Will try to find numbers...

And this...

CA renter wrote:

While looking around for more info on volunteer departments, I just happened to come across this. Of course, they are blaming the unions for the volunteers' poor performance! (Isn't it ALWAYS the union's fault? /sarcasm)

Supporters and critics of the reserve program seem to agree on one thing: performance at some of the reserve stations is weak. Critics are pushing to an end to the program while backers hope to revamp the existing system.

Of the stations that could be cut during Thursday's meeting, Midway City boasts the best volunteer performance in the first six months of 2010. The 13 volunteers there responded to 51 percent of 156 calls the station received. Station 24 in Mission Viejo -- with 16 volunteers -- responded to less than half of its 283 calls.

Other stations fared far worse: Station 23 volunteers in Villa Park managed to respond to one of the 59 calls they were dispatched to.

"There's no question, the numbers stink," said Brad Reese, a Villa Park councilmember and member of the OCFA board who supports the reserve program.

Other stations, however, such as Emerald Bay and Modjeska Canyon have responded to more than 90 percent of their calls.

http://www.ocregister.com/articles/progr...
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It needs to be said because there will be some people who still don't get it, professional firefighters respond to 100% of their calls. Quite frankly, even I'm surprised at these stats. That's scary, IMHO.


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And this is regarding the shortage of people willing to volunteer.

...

"Nationwide, volunteer fire departments are responding to more calls but with fewer volunteers.

Since 1984, the number of volunteer firefighters in the United States has declined by more than 8 percent, while the number of calls to fire departments has more than doubled since 1986, according to the National Volunteer Fire Council.

"It just seems to be an overall trend across the country, of departments struggling with getting new volunteers in," said Kimberly Ettinger, director of communications for the council.

For many small and medium-size communities, volunteers serve as the first line of defense during an emergency. As volunteer fire departments dwindle in size, many have been asked to do more with less.

...As older firefighters retire, fire departments struggle to find younger volunteers to replace them.

"The challenge is quite simply recruitment of people who are willing to take the time to get the certification it takes to be a firefighter today," said Michael Hunt, chief of the Clearwater Volunteer Fire Department in Beech Island, S.C., an Aiken County township of about 4,000 people.

About 19 miles from Beech Island in Belvedere, S.C., Assistant Chief Todd Durance of the Belvedere Fire Department also has a recruiting problem, and sees it as a twofold challenge: People are busy, and training is more demanding, said Durance, explaining that South Carolina requires volunteers to complete 300 hours to become become certified."

http://abcnews.go.com/US/busy-fire-depar...

Submitted by CA renter on December 12, 2012 - 10:00pm.

I would also add that there are many people from different professions who volunteer their time. People like doctors, nurses, lawyers, accountants, etc. Should all hospitals, law firms, CPA firms, (and banks, for goodness sake!), etc. use as much volunteer labor as possible in order to reduce costs for consumers?

Not saying that's a bad thing, necessarily. Maybe that's one way we can tackle our spiraling healthcare costs...require more doctors and nurses to become volunteers.

Submitted by davelj on December 14, 2012 - 11:33am.

CA renter wrote:

"The challenge is quite simply recruitment of people who are willing to take the time to get the certification it takes to be a firefighter today," said Michael Hunt, chief of the Clearwater Volunteer Fire Department in Beech Island, S.C., an Aiken County township of about 4,000 people.

All true - including the points from your post above - but... clearly there are still a reasonable number of folks who want to be part-time volunteer fire fighters. Yes, all of the limitations you note apply. But that doesn't mean that we couldn't integrate some small percentage - say to reach a goal of 15%-20% of the total over a decade or two - into our current workforce. The reason this doesn't happen is simple: the unions won't stand for it, as it diminishes their power.

And therein lies the problem. We have budget and pension issues that could be largely solved at the margin (where everything important happens) by increasing - not substituting with - a volunteer component. The unions, however, won't have it - they're all or nothing. And that does not seem to me to be a reasonable position.

I'm not anti-union, per se. But, wowsers, these unions take some outrageously unreasonable positions that are real head scratchers. And the total and complete opposition to integrating any volunteers into anything is one of them. Great for the union reps, not so great for everyone else.

Submitted by CA renter on December 15, 2012 - 5:45pm.

Again, I agree with you about some of the pension issues, and have been opposed to the pension boosts enacted in ~2000 since day one.

Still, there are LOTS of people who are overpaid, many of whom are far more overpaid than union employees, and we ALL have to pay for it, whether they are "private sector" employees or "public sector" employees.

The financial problems currently being experienced at the local, state, and federal levels was not caused by union members -- not by a long shot. They should not the the only ones who shoulder the burden of the crisis caused by **many** self-interested parties. I

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