[bearishgurl]

[quote=sjk]…Public-private pay comparability has become a major political issue in the past year, with some claiming that public workers are overpaid and others claiming they are paid too little. An important aspect of this debate is the difference between federal workers on the one hand and state and local workers on the other. Although federal workers earn higher wages and benefits than comparable private workers, the state-local situation is more complicated. Compared to private workers, state-local workers tend to earn less in wages but more in benefits. The net impact on overall pay is controversial….[/quote]

Civil service Federal jobs (thru GS-9/WG-9 levels) typically have ten pay steps, “maxing out” in 9.5 to ten years (depending on classification – some have 6 mos probationary period and some have one year). Thus, persons in Federal employment do not have to move around in order to get a raise, like state and local workers do. Ironically, it is easier for them to do so, by simply putting in a request for a new locale (for a lateral transfer in the same classification they are working in). This is done all the time, state to state and often in conjunction with military transfers of a spouse.

State and local civil service positions typically have 3-8 pay steps (avg of 5) in each classification. So at the 4.5 or 5-year mark, the employee is “maxed out” and can’t get a raise no matter how well they do on the job. They MUST get “promoted” to a higher classification (and serve a new probationary period) in order to advance … or stagnate in their positions. Many public employees don’t mind “stagnating” and do so voluntarily for many years simply for a particular work location and not wanting to serve another probationary period and for no other reasons.

If a local, state or Federal employee does NOT pass probation in the position they were promoted to, they have “bumping rights” back to the position they left, with no guarantees it will be in the same work location (but will be local to it). This happens all the time and the agency they promoted from is obligated to find them a “make work” position wherever they can, if they don’t currently have an opening in their classification.

It should be noted that “passing probation” is often political in nature and has absolutely nothing to do with prior experience, skills and abilities of the job at hand.

[bearishgurl]

[quote=no_such_reality]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.[/quote]

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.

[bearishgurl]

[quote=no_such_reality][quote=bearishgurl]
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.[/quote]

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.[/quote]

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.

[bearishgurl]

[quote=sdduuuude]…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.[/quote]

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.

[bearishgurl]

[quote=SK in CV]…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.[/quote]

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.

[bearishgurl]

[quote=CA renter] . . . 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.[/quote]

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.

[bearishgurl]

[quote=UCGal]Only anectdotal. . . .

Neighbor went to work for the county. Lasted 1 year before he ran screaming back to the private sector. . . . [/quote]

LOL, UCGal! I have a (young) neighbor who did this, too. I think it’s a Gen Y trait. This generation has infinitely less patience in dealing with “BBH” (Bureaucracy, Bullshit, and Hierarchy) than previous generations. :=]

[bearishgurl]

[quote=EconProf]I’ve heard that the public sector workers almost never quit, suggesting that they know they have a good deal. But that’s only anecdotal. Any Piggs have any statistics?[/quote]

EconProf, I don’t know about recent years (since unemployment has been higher in SD). But in the past, there WAS a big danger of losing an employee who has already spent 6 mos to 1 yr (depending on position), on probation and “training.” These were employees who were not yet vested, which took five years (with no LWOP or State Disability Leaves in that five years which were not paid back).

There is an abyss of hoops to jumps thru (and putting up with a load of BS that goes along with that jumping) between an employee’s hiring and vesting, much moreso when on probation. And every time an employee changes classifications (even if a “lateral” move), they are put back on “probation.” It is not uncommon for a public employee to serve 2-3 probationary periods back to back. This in no way implies they will be treated “fairly” while serving a probation.

Employees who were hired with marketable degrees/skills tend to defect before vesting. The danger of staying and vesting (even losing 3-4 years of an employees prime working years) is that they will use a computer on whichever agency they work for’s “network” day in, day out which is entirely proprietary to that agency. The procedures they have to follow day in, day out are also proprietary to that agency. Hence, the need to serve a *new* probationary period at each agency they go to. Many of the job classifications are proprietary to one agency only. After 3-4 years on the job, even if an employee WANTS to get out and work in a “private” job, their resume is now full of duties which have no value to private employers. Especially if their gov position was their first “real” job, a gov employee would very likely have to take a big downgrade in pay if they quit and took a position in the private sector.

After five years, vacation and sick leave accurals typically increase, making it harder to find a gig with even close to similar benefits elsewhere.

One thing private sector employees have over public sector employees is more freedom on the job, namely:

-freedom to visit websites they want to on the “company” computer (within reason);

-ability to telecommute (don’t have taxpayers coming in for services or have to see the agency’s “clients” day after day. And agency’s computers/proprietary information isn’t allowed to be taken home);

-and, don’t have to follow a strict dress code (ex. courts and taxpayers expect professional attire at all times).

Even AFTER vesting, there isn’t a great deal of incentive to work year after year in the public sector unless the public employee just LOVES their duties, their clients, their bosses/coworkers, etc. If they have skills which could get them hired in the private sector immediately (and the job market is such that they can), they often DO quit. The amount each year their pension grows is minuscule in proportion to the hoop-jumping, politics and other BS they have to put up with on a daily/weekly basis year after year.

The above applies to “rank and file workers” who obtained their positions by scoring on an examination and are protected by civil service rules. These employees are the vast majority of government workers.

The above does NOT apply to executive-level workers or officials who are brought in on interviews and reference checks alone (often from another city, county or state and perhaps even from the private sector), and who hammered out their contacts out with the public hiring agencies. These workers have no civil service protection and can (and often do) sue for breach of contract if they are let go before their contract expires. Hence the massive payouts in the OP, which were either in these employees’ contracts to begin with, or paid a lump sum to an employee to get rid of them early (settlement of breach of contract).

I CAN tell you that governments NEVER pay out humungous sums for former employees unless said employee has them over a barrel in some way! Here are three examples where they WOULD pay out but there are several more:

The employee had an ironclad, enforceable contact with the agency to get paid a certain sum over a certain period of time and the agency decides to terminate it early (for any reason);

their own employees made HUGE, GLARING and embarrassing mistakes with said employee;

or, an employee can properly substantiate in a government tribunal or court of law substantial fraud, waste or abuse perpetrated by any officer or employee of said agency, informed their supervisor and/or agency head and the agency PTB looked askance at the complaint(s) and actually retaliated against said informer (whistleblowing statute or qui-tam action filed).

In fact, the opposite is true. Every single government has a passel of attorneys on staff who do NOTHING every day but fight off monetary claims coming from ouside AND inside the agencies of the jurisdiction they represent. The small governments contract out this function to private law firms, but nevertheless, they operate in much the same way as attorneys representing insurance companies, except public entities are “self-insured” (excluding worker’s comp coverage).

If these agencies are “stuck” and/or don’t want a bright flashlight shown to the public on a particular issue (don’t want the press to get wind of it), and/OR they can’t possibly win in court, they’ll quietly pay an employee to “go away” but not without an indefinite “gag order” as part of the deal.

The payouts come out of the following year’s budgets of said offending agencies, as do their “attorney fees.” This often results in “billets” being removed from their budgets (cuts in staff resulting in layoffs or unfilled vacancies dropping from their staffing list).

There is always much more to these large payouts (upon an employee’s termination/retirement of a government job) than meets the eye.

[bearishgurl]

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.

[bearishgurl]

[quote=davelj]…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…[/quote]

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.

[bearishgurl]

[quote=davelj][quote=CA renter]In bankruptcy, employee compensation is a priority claim. These pension contributions are a part of employee compensation.
[/quote]

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.[/quote]

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.

[bearishgurl]

[quote=AN][quote=bearishgurl]If your parents (or grandparents) presumably had this “wonderful opportunity” (to buy 30 yr bonds at a 15% yield) in 1980 with even half or less of $150K back then, why don’t you ask THEM if any of them took advantage of it?

Obviously, if they did, you would likely be supported by a trust fund today instead of toiling away as a “worker bee,” don’t you think :=]

It doesn’t matter whether or not they were average joe6p’s at the time. Go ahead, ask them if this was “doable” at the time whilst still paying their monthly bills to live and even raise a family.[/quote]It doesn’t matter whether one can take advantage of the 70s inflation and early 80s bond rate or not. That’s irrelevant. What I’m saying I can take advantage of it if we see it repeat again.

Obviously, you couldn’t. But some people on this board obviously could and did.[/quote]

To be fair, those on this board that *did* would have had to have been old enough to purchase their own bonds in ~1980, since we haven’t seen the likes of ~15% yields since ~1983.

If we should see yields like this in the future (and I don’t think we will), of course I will be too old to buy 30 yr bonds (if their yields at maturity are intended for my own use and not that of my heirs). But there would be nothing precluding me from buying lesser-yielding bonds for myself which mature in 5, 10 or 15 years :=]

[bearishgurl]

[quote=AN]BG, I was referring to a couple of rentals, not your primary resident. Secondly, where did I said this is for your joe6p? Your average Joe6p doesn’t have a couple of rental properties. Your average joe6p are the renters of these rentals, not the landlord. So, the rest of your argument about student loans, expectation, etc wrt your average gen x/y doesn’t apply.[/quote]

The “great-timing” scenario you described (which would have yielded boomers or older $9.9M today) is still a “pie-in-the-sky” conjecture, IMHO.

[quote=AN] . . . If history repeats itself and we’ll see the 70s/80s again, can you imagine back then buying a couple of median priced houses in 1970 and selling in 1980 for over 3.5x more? Then take that $150k gain and buy a 30 years CD in the mid teens? If you put $150k in a 30 years CD making 15%, that $150k will be about $9.9M today.[/quote]

If your parents (or grandparents) presumably had this “wonderful opportunity” (to buy 30 yr bonds at a 15% yield) in 1980 with even half or less of $150K back then, why don’t you ask THEM if any of them took advantage of it?

Obviously, if they did, you would likely be supported by a trust fund today instead of toiling away as a “worker bee,” don’t you think :=]

It doesn’t matter whether or not they were average joe6p’s at the time. Go ahead, ask them if this was “doable” at the time whilst still paying their monthly bills to live and even raise a family.

[bearishgurl]

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 :-]

[bearishgurl]

[quote=AN] . . . Just for fun, I ran the scenario I just described above but use today’s housing price instead. Lets assume you have 2 houses that averages out to be $350k/house. If price goes up 3.5x, those two houses will be worth ~$2.45M. If you then put that in a 30 years CD making 15%, that $2.45M will be at $162M after 30 years. Man, old folks seems have all the luck. Hopefully us Gen X/Y will get to see some of that luck someday soon.[/quote]

AN, most “old folks” ahem (if you mean boomers), were likely raising families in 1980 (like you are now). They couldn’t sell their home to buy bonds because they (and their families) were living in it. Very few owned rental homes as well, and if they did, they had mortgages on them and so had little profit to spare every month which had to be saved for vacancies and repairs. And many of the WWII Gen and Greatest Gen before them who WERE invested in these high-interest bonds (because their homes were paid off) had to LIVE OFF of their bond income and pay for board and care, nursing homes and even hospice with it. Medical insurance plans back then did not cover such things and SS payments and even government pensions were nowhere near what they are today.

Your “pie-in-the-sky” scenario likely only applied to a few of the “rich” at the time … who had perfect timing. It did not generally apply to joe6p..

Due to changes in labor law over the last 2-3 decades and greater access to money for higher education, more of your generation (Gen Y?) has FAR greater earning power and FAR better working conditions than ANY generation before it. The reason why most of your brethren don’t have as many assets at the same age as your predecessors did is because your generation (and to a large extent, Gen X) has a much higher expectation of standard of living than boomers did and so most of you spend your money every month to achieve that instead of save it. Many, many Gen Y are saddled with higher-interest student loans, as well, so that “greater access to money for higher education” has proven to be a two-edged sword for many :-0

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