April 15, 2011

Local Governments Founded in Deception

Justin Katz

One can't call the vote "party line" because Rhode Island's Pension Review Board is technically non-partisan, but as Marc observed on Wednesday, the vote to bring investment estimates closer to what the pension fund has actually been earning nearly fell along what might be called a "union picket line" vote. Basically, the question was about whether to give Rhode Islanders a better sense of just what their elected officials have promised, and that's not a reality that the unions want the public to face.

The perspective of one public figure who often falls on the other side from the unions is very interesting:

With school districts now facing a $55.5-million hike in pension costs in 2012-13, beyond the increases they were already expecting, Tim Duffy, executive director of the Rhode Island Association of School Committees, said: "I don't know how local government is going to continue to exist, given all the financial stresses."

If it's true that the pension promises of government amount to a self-inflicted and fatal wound, maybe local officials should lead the way in accepting reality, especially school committees. That's going to mean completely rethinking the way in which they structure compensation. Like countless private-sector organizations, families, and individuals, they're going to have to begin doing much more with much less. If that's an impossibility, as Duffy seems to imply, then local government is a failed experiment, anyway.

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"With school districts now facing a $55.5-million hike in pension costs in 2012-13, beyond the increases they were already expecting"

Part of Gov Chafee's budget was an increase (funded by the tax payer, ultimately) in the employees' contribution to the pension fund. There were two problems with it: first, there really was no money to fund it. And it amounted to a drop in the bucket of the unfunded liability. My reaction at the time was to take the side of the employees: why should they put one more dollar into a busted pension system? Until the system is fixed, it was most likely money down a rat hole.

Now, with this re-valuation revealing that even MORE money has to be put into the fund, I feel more strongly than ever: not one dollar more from either the employee or the employer until the pension system is reformed.

Posted by: Monique at April 15, 2011 7:09 AM

Isn't the job of people like Ianazzi, Walsh, and others to make sure that their union members get what's coming to them? To get what's been contractually promised? So then why don't they have someone constantly running the same numbers that the state's General Treasurer runs and see for themselves what a mess the pension system is, and then sue the state to make sure the money is there. Kinda like the Providence fire fighters did last year. Instead they just figure, "Hey we have a contract, it'll all be there!"

The problem is too many politicians see these massive funds as their own checking accounts. They'll just pay it back later, but when later comes, they're no longer in office and the new guy not only feels no obligation to pay the money back, but instead to repeat the actions of their predecessors. Take more out, not make payments, etc.

The politicians are the ones ultimately at fault here, but I am surprised that the union leadership never did much to ensure that the money promised was actually going to be available. If they had, there might not have been this pension reform coming up.

Posted by: Patrick at April 15, 2011 9:45 AM

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, COLA’s, 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 statures 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.

Posted by: Timothy Duffy at April 15, 2011 9:53 AM

Thanks Tim.

"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."

If that's the case, then why don't you and all the mayors around the state sue the General Assembly to live up to the law?

Posted by: Patrick at April 15, 2011 10:10 AM

The unions in RI exhibit the same characteristics of the Greeks. Recall the vicious, violent strikes in Greece when austerity measures were imposed for any bailout help for that wasteland from the IMF/EU. These pigs just do not care. They want what they want. Period.
Witness the 6 union clowns on the retirement board that voted against the reduction in the rate of return - despite overwhelming evidence that the new rate was still way too high. THEY JUST DO NOT CARE!!
Now, imagine a mayor sitting across the table trying to negotiate with this type. At the end of the day, you just can't listen to the union pigs.
I am waiting for the day when some politician please just says this - You work for us; we don't work for you!
Because that is the reality.
Nothing better illustrates the perverse mentality we have allowed to take hold in this state than the DMV.
One day I left work early to go to the registry. I got there at @3:15 and was told I was too late, I had to be there by 3:00. Now just think of this f'n stupidity. What time do MOST people get a chance to do this kind of stuff? It is outside of working hours. But the state has decided that the DMV is going to work around the workers schedules. If I was running the DMV, I would have hours from 7:00am to 9:00pm.
There would be no bumps/shift differential/OT, or whatever else the union pigs like to call it. Some people would have hours from 1 to 9, because that is what is good for the customer. And that is all us taxpayers are. Can you imagine running any business and staying in business with the mindless mentality that our state operates because of the union pigs??
It's time to take the state back from these union pigs!

Posted by: Mike Cappelli at April 15, 2011 11:13 AM

"If I was running the DMV, I would have hours from 7:00am to 9:00pm."

If I was running the DMV, I'd have it open 24/7/365. In other words, put most of it online. I believe the photo ID is the only thing that really needs to be done in person. Everything else can be done online. So shut down the DMV for anything other than photo ID and drivers tests. Put 3-4 kiosks in there for people who don't have computers to do everything else. Eliminate everyone except about five employees, those who can click a button to tak a picture and those who can sit in a passenger's seat and not have a heart attack watching 17 year olds nearly kill themselves in a car.

How much did I just save?

As for the "You work for us", why not take it a step further. Haven them work for themselves. Sign a contract with the union that the town/school committee will treat them like a subcontractor. Here's the check, you staff the school, we'll run the school. The whole contract is about 1 paragraph. The union knows best how to take care of its employees, let it. They can decide how to dole out the benefits and raises and bonuses. Then each year, open the bidding to a new subcontractor until you can get the best deal.

Posted by: Patrick at April 15, 2011 11:57 AM

Patrick - you got the job!

Posted by: Mike Cappelli at April 15, 2011 1:34 PM

Thanks Mike. Where's the HR department? Where do I get my pension, Blue Cross insurance and low number license plate?

Posted by: Patrick at April 15, 2011 1:55 PM

One of my early job duties working for government was to categorize hundreds of comments sent in by the public. This was a recurring task for the agency, so I suggested creating a website that would have commenters categorize their own comments in response to a series of prompts. I was looked at like I had two heads. "But that's what WE do."

Posted by: Dan at April 15, 2011 3:48 PM

THE BIG BUT (what you don’t know)!!!
The DMV computer systems are run by Office of Library and Information Services (OLIS) now known as Department of Information Services (DOIT). This department had no RI state budget assigned to it. It is a charge-back department (unless that has changed in the last 5-years) in other words OLIS purchased the computer systems, networking, software programs, did the technical installation, specific customized programming, operator training, and did database management and backup for DMV.

OLIS charged DMV for monthly services just like all the other departments and divisions they provided services for.

Budget crunch time!!!! Cut budget and reduce costs!!! OLIS was providing 24/7 essential services but charge-back funds were cut to adhere to mandated budget cuts. OLIS had to continue to provide services cutting into needed updated and modernization of computer and network systems.

DMV and other departments and divisions happily cut their charge-back budgets knowing OLIS still had to provide the services. When OLIS became DOIT a bond was authorized to upgrade and modernize DOIT plus state-wide network as part of moving and centralizing computer services to a new location at the old Howard Cranston Complex in conjunction with moving Emergency Management Agency out of RI National Guard HQ but state voters voted the bond down at the polls.

So in essence, RI state central computer information system services and modernization was NOT treated as a budgeted essential 24/7 service with modernization scheduled upgrades and RI state-wide voters vetoed the upgrade bond issue to improve essential State of RI computer services.

Posted by: Ken at April 16, 2011 3:15 AM

But voters approved open space purchases of Rocky Point and the Providence water front during a recession. We truly are our own worst enemy.

Posted by: Max Diesel at April 16, 2011 4:38 PM
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