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Myth: “Government Employees are insulated from the reality of the current recession and accompanying job losses.”
Fact: There is no insulation. The Orange County Register reported on May 29, 2011 that in California 100,000 state, federal and local government jobs have been eliminated since 2008 and that over the last year the loss of government jobs has been the biggest drag on California’s job recovery.
On May 23, 2011 Reuters reported that 300,000 government jobs were eliminated in the U.S. the last year, and that another 400,000 could disappear in 2012. In addition California and many local government agencies, including school districts, have implemented pay reductions through such techniques as mandatory furloughs and negotiated salary reductions. It is increasingly common to see state and local government agencies requiring their workforce to contribute more of their pay to the cost of their health insurance and retirement funds, further reducing take home pay.
So, government employees are feeling the pain of the recession too – from now being unemployed to forced salary and benefit cuts.
Over, I notice you say “jobs” were lost, not people laid off. How many of those jobs were of the budgeted only sort and not filled by a breathing human being? I wonder.
If actual government layoffs mirrored the private sector then I would be happy to agree with the premise of no insulation. Sadly, I believe this not to be the case.
As to contributions into health and retirement plans all I can say is any reductions are simply long overdue. Pain is relative. When the taxpayers have been paying 90% or more of your retirement contributions and insurance premiums, well, hell, you get used to it. But describing as painful having to pay more of a fair share is a stretch.
You nailed it Tony – good job!
Tony, good point on the jobs vs. actual layoffs. The quoted articles did not distinguish, so I don’t know – speculation, as is often the case on the topic of public sector emloyees – is all you and I are left with I guess. I presume you know some actually laid-off government employees, such as teachers – I sure do. The point of the post is that government employees have not been totally insulated in this recession, I guess you are saying “Well, they are more insulated then the private-sector employee though.” I have no data to prove or disprove that one.
As to your generalized statement that taxpayers pay 90% or more of retirement contributions and insurance premiums, that is a sweeping generalization that is untrue for all public sector employees and retirees, unless the game is played that because the employee’s salary is taxpayer-paid then that means the deductions from the employees’ paycheck for retirement and insurance are taxpayer-paid. My experience is that most government employees contribute a good chunk of their paychecks to their retirement and other benefits each month – in Orange County government I believe it is running 10% or more for most employees.
As you know, it varies from city to city and county to county and state to state – that is why broad generalizations like yours are not accurate. Even a recent Register Editorial got it wrong when it wrote that county managers have not been contributing to their retirement – this kind of incorrect statement may or may not have been calculated to inflame on the editorial writer’s part, but it is wrong. My research is that there were three years, 2001-2004, where the county picked up some or all of the employees’ retirement contribution – that was the result of contract negotiations and something that the county, not its unions, insisted on. That few year’s practice stopped some 7 years ago.
An interesting tidbit is that when a county employee contributes to their retirement fund, that contribution is his or hers and should they leave employment before retirement age they can draw out their contribution, but if the county contributes that money it is not the employees’, it is the county’s Thus the county stands to get back some of any employee contribution it makes when an employee leaves the county before retirement age – and most employees do leave before retirement age.
So, there is some advantage to the employer (county) in paying some or all of the employee share of retirement on a monthly basis as the county will get some (I am told it is actually most of it, but I have not seen the data) of it back eventually. Another way to hide available public funds for a future rainy day perhaps? The county money is there, but it is off the books of the county. I wonder how many cities have money squirreled away in a similar manner.
Come to think of it, a municipality should be able to show how much of its money is in a retirement fund and statistically how much of it will eventually flow back to that municipality. That amount, brought down to a present value, could be used to offset some of the theoretical unfunded liability in its retirement fund. I am going to have to look into that one – it could mean that these unfunded liability figures that are being thrown around are overstated. Interesting concept —
I dunno. Many public safety employees have had ALL their pension contributions picked up by their employer (the taxpayers).
The medical insurance pick-ups by most government agencies are also extremely high in most places – like the Orange County “Wellwise” PPO where the taxpayer’s portion does indeed surpass 90%; and in some places – as in the County’s “Sharewell” plan employees are PAID to opt for less expensive plans. They pay no deductibles at all.
Anyway, like I said pain is a relative concept.
There have been many people laid off. When you people talk about free pensions you need to check your facts. Almost everybody pays now and the County of Orange employees pay the highest. I am at almost 900 a month which causes me financial hardship. Don’t be looking at working people, look at the top 1 percent and how they are using misinformation to start a class warfare!
Jason, you are right-on about people throwing out broadly generalized statements they apply to all public sector employees, when it turns out what is galling them is a portion of public employees and their generalization does not apply to the majority. In the caseof Bushala’s comment about not contributiong to retirement, he backs off and cites public safety jobs as his justification for his all encompasing blast. There are a lot of myths out there applied to all public employees, such as free retiremetn, free health care, no layoffs and salary increases. Unfortuntely, there are enough of those situations for some to seize and use a broad brush to try and taint all government entities and public employees. Truth be known, these examples are the exception, not the rule, but those on the attack refuse to admit that.
Okay, clue me in. I’m willing to be educated.
What % does the County (taxpayers) contribute to OCERS vs. the employee contribution for 1) OCEA members and 2) OCMA members?
Tony, your question is a fair one. I do not have that information but will see if I can get it.
Tony, On Saturday I passed on your question to the most expert person I know on the county HR system – this person worked in the system but is now retired. This morning (Sunday), I got his answer. A copy is below. From his response I think it is safe to say that (1) non-safety member county employees are and have made significant contributions to their own retirement and continue to do so (2) statements that they do not contribute are untrue and unfair, and (3) it is a complex subject. Hope this helps.
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Two sources can be used to come up with at least an approximation. One is the OCERS CAFR and the other is the OCERS Actuarial Report. The most recent reports available on line at the OCERS web site are for 2009.
The County contribution for 2009 for the 2.7% at 55 benefit was 19.06%. The average employee contribution was 10.73%. The OCEA employee makes up such a huge percentage of the population that presumably their average would not move much if OCMA was excluded. My guess is between .25% – .75% or 11% to 11.5% in total. Some general member employees are paying up to 15.17%. Note that in a small percentage of employees including OCMA represented employees, some of the County conributions are by law counted as employee contributions for purposes of crediting each individual account should the Management employee leave the County without retiring and withdraw contributions.
Based on the current contract OCMA employees pay 8.09% of pay in actual deductions (I am going by memory, did not look at the actual MOU’s for this response so please keep that in mind). They also pay 2.45% of pay towards Medicare if hired after April 1, 1986. They are not eligible for Social Security through employment with the County. Those hired before April 1, 1986 are not eligible for Medicare through employment with the County.
As a general rule employee rates remain fairly consistent from year to year. Total contributions tend to go up every year because salaries tend to go up. However, the employee rates fluctuate very little every year. This is not the case with employer rate. The employer does extremely well when returns on investment are consistently high and very poorly when investment returns are consistently low. For example in the year 2000 employees contributed a total of $61 million and the employers paid a total of 16 million (.96% of pay). Where in 2009 the employers paid $378 million while employees paid $172 million. Employees actually contributed approximately the same amount in 2009 as they did in 2008. Where the employer contributions were reduced by $56 million from 2008.
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In other words non-public safety personnel pay less into their pensions than their employer (us) does. And that contribution rate is quite recent – after Campbell, Silva, and Wilson gave away the store with a 2.5@55 deal for paperpushers. Also the employee rate will depend on age on entry so I’ll bet the rate your friend cites is an older entrant.
Most private sector employees that have 401K plans are real lucky if their employees put in anything in the past few years.
BTW, looks like your friend got out of HR just in time – before the Performance Audit that exposed department wide abuse and incompetence. I wonder if the County will ever release the data on which executives got the multiple raises and unsubstantiated re-classifications.
2.7@55!
My primary point is that claims that employees have their retirement 100% funded by the employer and do not contribute themselves is not true when applied with a broad brush to all public sector employees, so please resist the temptation to make such sweeping statements.
With regard to private sector 401k’s, I think you may be right for hourly or low skilled private sector participants, but others get an employer match. Even so, I think that the goal of retirement security – defined as enough income in retirement to enable a person to maintain their standard of living – is not met by 401k’s for most people.
My reading about 401k’s is that the tax code was changed to allow them as a supplement to retirement funding, never envisioned that such plans would be adequate. However, the private sector has switched to them to cut costs and increase profits and now we have legions of private sector folks saying “it isn’t fair that they have only 401k’s while government workers have defined benefit programs.”.
It seems to have turned into a race to the bottom. I sure wish people would focus on what kind of retirement those in the work force will be facing vs. seeking to make sure that everyone has the poorest retirement plan possible. And, I think you left Spitzer out of that 2.5% @ 55 decision. Interesting that we will probably see both Silva and Spitzer back on the Board. (that’s my bet).
If you mean to imply that 2.5% at 55 should never have been approved, I agree – simply because 55 is too young to retire, employers should be trying to keep long term employees at that age, not getting rid of them. The brain drain is too dramatic – witness your HR audit for instance.
The HR Department “brain drain” seems to have had little effect one way or the other. The department appears to have been brain dead for the last ten years, at least.
Keeping the current director around is nothing but a face saving gesture by Mauk.
Anyway we agree on one thing: permitting retirement at 55 is disastrous.
Also, the County has provided virtually guaranteed raises in the form of the ridiculous PIP program and performance evaluations that are tantamount to automatic raises inside the “step” process. The managers get their raises in a similar way: P4P in which almost everybody gets an “exceeds” or “exceptional” evaluation.
Predictably, the HR Department was the poster child for the rampant abuse of unsubstantiated evaluations.
While I appreciate the dialogue, I have to observe that discussing a topic with you is like trying to contain a blob of jello – push back on one place and you get a shot from some other angle.
Clearly, I get it that you do not like the compensation and benefits of public employees in most (all?) places and even if one of your views (ie.-taxpayers pay 90% or retirement contributions) is effectively countered with current and historic data, you just move on to the next aspect you do not like – now it is the PIP program and step raises (The PIP program was a give-way to the unions that was approved by the esteemed Supervisors over a decade ago – the fact that such a give-away was granted to the county rank and file is one of the motivating forces that prompted county managers to form their own union, OCMA, as the PIP program was a major erosion of management rights – and the step-system of salaries has been in effect for the County for over 50 years that I know of and it has not been a secret – in fact job postings have included information about step raises being part of the system).
It all makes for an interesting dialogue but I must have missed you saying “gee, I guess maybe I exaggerated that one”. Later.
The step system is only relevant as an absolute cap. The performance evaluation system that grants everybody pay raises based on their above average performance is something that flies in the face of logic.
The public keeps hearing about pay freezes. That is obviously balony – for both the OCEA and OCMA alike.
P.S. There’s always room for jello.
You sure that’s not Kool Aid?