It is time to restore a semblance of sanity to the white hot debate over public employee pensions. The discourse has reached a pitch of fever-level intensity. Critics of public employment retirement benefits have all but placed the blame for the worldwide financial meltdown a couple of years ago, and the resulting “Great Recession,” on government pension obligations. One of the lobbyists for the Police Officers’ Research Association of California (PORAC) told the SFPOA Board of Directors at its December meeting how some “pension reform” advocates were – amazingly – holding him directly responsible for the world’s financial debacle on account of work he did promoting legislation passed by the California Legislature in 1999 that set the stage for public safety unions and their respective employers in California’s Public Employee Retirement System (PERS) to negotiate the 90% of final-average-salary benefit after 30 years of service. This, quite obviously, is nonsense and cannot go unanswered.
First, let’s remember that on Wall Street, the Great Recession proved to be of a remarkably short duration. Here is financial writer John Cassidy’s summary of the extent of the economic damage suffered by Wall Street:
Having sustained losses of $42.6 billion in 2008, the securities industry generated $55 billion in profits in 2009, smashing the previous record, and it paid out $20.3 billion in bonuses. In the spring of 2010, the Wall Street gusher continued to spew money. Between January and March, Citigroup’s investment banking division made more than $2.5 billion in profits. Goldman Sachs’s traders enjoyed their best quarter ever, generating an astonishing $7.4 billion in net revenues. Barely a year and a half after the collapse of Lehman Brothers, Wall Street was once again doing well for itself – obscenely well, it seemed to many people.
While the challenges posed to state and local government finance from ongoing pension obligations are not to be ignored, attributing the nation’s economic woes to public employees is indefensible in light of Wall Street’s largesse. We will not begin taking a realistic step toward solving any of our budgetary problems until such hyperbole is abandoned.
On the other hand, any self-respecting advocate for public employee labor will be neither honest nor responsible in denying wholesale that a pension problem exists in the first place. But this is why, indeed, public employee unions have been at the forefront of efforts to do what is necessary to create sustainable retirement systems that provide equitable benefits to public workers while at the same time safeguarding the public fisc.
In San Francisco, the SFPOA and other City unions stepped up to the plate in supporting amendments to the City Charter that increased retirement contribution rates for new employees and redefined how final average salary was to be determined. They also took the lead in changing the vesting rules and structure of retiree medical benefits. And for two years in a row now, the SFPOA has voluntarily agreed to wage and benefit concessions despite the fact that a “closed” labor contract obligated the SFPOA to do nothing. Doing nothing would, of course, have proven our critics to be at least partially correct in their hyperbolic denunciation of all things union.
In San Jose, the SJPOA was the first union anywhere to have its members shoulder the rising costs of medical care for retired employees, going back almost two years now. Last year, the SJPOA negotiated a concession of approximately 5% of salary to go into San Jose’s retirement system for the purpose of diminishing the City’s required contributions to that system. And this year, the SJPOA has already initiated negotiations with the City for a second, lower tier of retirement benefits.
Similar efforts have been underway around the state. Last year, three of California’s largest state public safety unions negotiated a second, lower tier of retirement benefits in order to address the statewide pension issue in as rapid and responsible a manner as possible.
Such efforts are a far cry from what one might be led to believe, given the vitriol from the proponents of pension reform. Good and durable public policy regarding all aspects of public employee compensation will never be achieved if a certain level of sanity is not restored to the discussion.
“Roll the Union On . . .”
