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RETIREE HEALTH INSURANCE MEETS THE KNIFE By Ronald J. York, President POLICEPAY.NET, Inc. 211 North Robinson, Suite
350 Oklahoma City, OK 73102 (405) 234-2235 www.policepay.net © POLICEPAY.NET, Inc.
2006 GASB-45
is about to descend on retiree health insurance. This new rule requires cities to report the
cost of fully pre-funding retiree health insurance. For most cities this means that the amount
reported will be about double the currently reported cost. The key thing to remember is that reporting
and paying are two different things.
Nothing requires any city to actually pay this additional amount. They must only show it in the annual
financial statements. However, this has
not stopped a stampede of local finance directors that are claiming that it
must actually be paid into some type of a trust plan. They are wrong. They know that they are wrong. But, when did being wrong ever stop
people. Full funding of retiree insurance
is the new erotic and seductive fetish being pushed by the municipal finance
people. Unfortunately,
most police unions are taking the Rhett Butler position – “Frankly my dear, I
don’t give a damn.” This too is not
hard to understand. If you are not
currently impacted by this, then why should you care? Most unions only have voting members that
are currently employed. Retirees have
no portfolio on these issues. Based on
the feedback I have received, most police unions are
not going to resist this impending, but irrational, funding plan. Okay,
where does this leave us? There are
five options for dealing with this loss of cash flow as a result of
pre-funding retiree insurance 1 - The city eats the entire amount (fat
chance of that happening) 2 - The contribution by the city for retiree
insurance is cut in half 3 - The benefits provided retirees are cut in
half 4 - Current employees eat the increase in the
form of reduced pay raises 5 - Current employees eat the increase in the
form of payroll deductions I
know, you pick door number 1, but you will be forced to choose between 2, 3,
4, and 5. If you want my guess, you
will settle for 2 or 3. Selling 4 and
5 will be impossible. There are two
more options - 6 and 7. 6 - Do not pre-fund retiree insurance (this
should be your goal) 7 - Eliminate retiree insurance (most cities
real goal) This
issue has elicited almost opposite reactions from cities and police
unions. City finance directors are
behaving like evangelical zealots while police unions are consumed with
apathy. I am surprised by the
reactions of both sides. When this
rule was first announced, I figured it was just another non-starter that
would only be dealt with by the geeky inner-circle of municipal auditors. I was wrong. When I discovered that municipal finance directors
were actually going to promote full funding, I assumed that there would be a
big uprising by police unions. I was
wrong again. Hey, I hear you now. To avoid being caught in the “three strikes
and your out trap” I will drop the subject. For
those of you already retired, don’t be surprised to receive a letter saying
that your benefits have been cut in half or that your contribution is going
up dramatically. It did not have to be
like that but sometimes reality bites.
Ouch! Tentative pay
pact calls for better police pension plan From the Osceola News-Gazette, June 9, 2006 The city of Kissimmee and its police officers reached a
tentative agreement Wednesday on a new contract. A key element of the proposed agreement calls for the city to
use reserve funds to increase the amount that an officer would receive when
he retires. The proposed contract also reduces the amount that officers would
contribute toward the pension plan. The proposed contract, if approved by the Kissimmee City
Commission, would go into effect Oct. 1. The city views a cut in employee contributions to the pension
plan as a good recruiting tool. “Through mutual compromise we were able to come to that
agreement,” said Kissimmee Police Officer Ralph Herrera, spokesman for both
the city police department and the police union. The city had declared an impasse in April. The next likely step
was to bring in a state mediator to make a recommendation on how to resolve
the contract dispute. But declaring an impasse did not prevent both sides from trying
again, said City Manager Mark Durbin. The city and representatives of the Central Florida Police
Benevolent Association reached an agreement Wednesday. “We kind of let things cool down a little bit,” Durbin said,
referring to a period after declaring the impasse. The city will use nearly $1 million in a state cash reserve
pension fund to increase the benefit multiplier from the current 3.25 percent
to 3.50 percent. At retirement, an officer with 10 years of service would
receive 35 percent of his annual salary in pension benefits rather than 32.5
percent. Increasing the multiplier by 0.25 percent will consume the
entire cash reserve fund plus an additional $99,091 annually. But because the
fund is set to receive $308,614 annually from reserve fund sources, there
would be a remaining annual amount of $209,527. Those funds will be used to
reduce the employee contribution from 7 percent to 3.7 percent this coming
fiscal year and then gradually to 2 percent. The multiplier change will mean officers will pay less out of
their paychecks toward retirement and more money in their pocket, city
officials said. Of the 71 officers voting, 69 agreed on ratifying the contract
with two voting against it. The Kissimmee City Commission still must approve the agreement. “We believe that we, the citizens and the city were best served
by working on that agreement,” Herrera said. A policy on which officers can take home their patrol cars
remains the same. Officers can take patrol cars home at no charge if they live
within city limits. If they live within a 10-mile radius from the police
department but outside city limits, officers will pay $10 per pay period.
They’ll pay $20 if they live within a 20-mile radius. Officers hired after Oct. 1, 2003, cannot take cars out of the
city, a situation that union officials said could be addressed later. “I want to personally thank everyone involved for the extra
effort to reach this agreement,” said John Park, president of the Central
Florida Police Benevolent Association. “This certainly shows that we can
really do the seemingly impossible.” City workers get best paychecks County,
private sector jobs lag Tucson in pay, benefits by a lot From the ARIZONA DAILY
STAR, June 11, 2006 While city employees grumble about meager 2 percent raises and
eroding benefits next year, a comparison of local public and private jobs
indicates that if you're looking for work, the city of Tucson will feather
your nest the best. The survey by the Arizona Daily Star indicates working for the
city gives you more money in many jobs, and much better benefits — hands down
— than anywhere else in the region. On Tuesday, the City Council is expected to finalize the annual
pay and benefits for all of the city's employees. City Manager Mike Hein originally proposed raises of 3 percent
for public-safety workers and 2 percent for others, with no raises for highly
compensated employees and no merit raises for anyone. A new report from Human Resources Director Cindy Bezaury recommends increas-ing
that to 4 percent for public-safety officers and 2.5 percent for all others,
including the highly compensated. The recommendations have sparked criticism from some city
employees, who traveled to the latest council meeting to express their
displeasure. "What I'm hearing in the halls and at the water cooler is
that city employees are overpaid and that employees don't need merit raises for five years because they are paid more than
county employees," Anita Lange told the council. She questioned why city workers should be penalized for making
more than county employees, adding "apparently there is no democracy
when you are a city employee." The Star compared pay and benefits for police officers,
firefighters, equipment operators, secretaries, landscapers and garbage-truck
drivers with five years' experience, using records from the city, Pima County
and Northwest Fire/Rescue District, along with a regional pay report from
SalaryExpert.com. The analysis found city workers in three categories — police
officer, firefighter, and secretary — far outpace the competition in wages
and benefits. Police officers make 68 percent more than the Tucson regional
average, while firefighters are 56 percent higher. A city survey used to set
public-safety pay doesn't consider Tucson pay scales, however. It's based on
selected Phoenix-area cities, where the pay is higher. City secretaries make 27 percent more than the Tucson average. Two other jobs — garbage-truck driver and equipment operator —
eclipsed the average paychecks by 19.5 percent and 7 percent, respectively. The only job where city pay didn't come out on top is for parks
maintenance workers, who are paid 22 percent less than the regional average. With one exception, benefits provided by the city easily
outstrip those provided by other employers, with only a county sheriff's
deputy better off. The cost of paid days off, health and life insurance premiums
and retirement plans averages about 35 percent of the employee's pay in the
city. County benefit packages average about 28 percent of the
employee's pay, except for sheriff's deputies, who receive 39 percent. Most regional employees, many of whom work for private
businesses, receive between 14 percent and 17 percent. City employee Jill Moreno said that when compared to the region,
it is likely that city workers do make more. But she said what concerns her
is the inequity with which raises are spread in the city. She said public-safety workers are compared to the Phoenix area,
while all other jobs are compared to the Tucson region. Moreno said that
skews salaries higher for public safety. "What's the logic behind
that?" she asked. Jyl Maratea, a project manager for the Transportation
Department, said the city compensation study doesn't take into the account
all the other jurisdictions the city compares itself to, such as the
University of Arizona and Pima Community College, which she said provide
educational opportunities to their employees. The city does reimburse its employees for educational classes,
but Maratea said it does so at a lower percentage
than the colleges. "Our benefits package is being continually eroded," Maratea said, citing an increase in the share of health
insurance premiums retired city workers have to pay. County Administrator Chuck Huckelberry
said city pay is usually higher than the county's, and that the city
"offers a much richer benefit package." A county report nearly two years ago showed city personnel
services are 28 percent higher per employee than the county's, and if the
county had the same personnel expenses as the city, its budget would balloon
9 percent — or $98.6 million. Hein said when employees have come into his office complaining
about the lack of merit raises, he asks them how many people in their
neighborhood got a 7 percent raise last year. He said most employees never
come back after that. Hollywood,
police agree on 12.5% raises in new pact From the South Florida Sun-Sentinel, June 10, 2006 A bitter struggle between Hollywood city leaders and the police
union came to an end this week after both sides agreed on a new police
contract that would give officers a 12.5 percent raise and let them retire
earlier. Shreveport City Workers to Get Pay Raise From KTBS.com, June 13, 2006 Nearly 3,000 city workers will soon have bigger paychecks. Gautier weighs pay raises From the SUN HERALD, June 16, 2006 GAUTIER - The City Council next week will take
up the issue of funding pay adjustments for city employees. City Manager Christy Wheeler said the adjustments, which would
equal two years of 3 percent increases for all employees, would cost about
$600,000 a year. Wheeler and the officials have talked about pay adjustments
during the last several council meetings, and this week she and finance
personnel provided the officials with an in-house study designed to rectify
problems with the city's pay structure. Wheeler said there is no consistent pay scale for employees to
move across a pay table, there is no pay scale at all for the Police
Department, and that workers have not been placed on a pay table based on
experience. "We've been trying to come up with something that would
address all of these concerns, in addition to trying to stop the loss of
personnel, particularly in our patrol division of the Police
Department," she said. She said part of the pay adjustments could be funded by excess
sales taxes. The council could also opt to provide merit pay. "It's almost $700,000 for the next four months and next
year, and that becomes cumulative," Wheeler said. "We believe our
revenue base will support that long-term if they're willing to use the sales
tax we've gained this year to initially pay for it." Mayor Pete Pope and Councilman Hurley Ray Guillotte
have pushed for pay raises for several months, and during budget hearings
last year. Councilman Jeff Wilkinson agrees with raises but defended health
benefits provided last year that he said more than equaled a pay increase. Wheeler said two pay studies were done within the last five
years but neither was followed, which left the city with significant issues
in its pay structure for employees Fed Up With Negotiations Failure? Are
you wondering why you are failing even though you are doing all the things
the "big boys" do or following the advice of the negotiations
"experts?" The answer is easy. They are wrong - plain and simple.
Alright,
that's "kickin' their butts." The only
problem is - it does not work. If it did, New York and Philadelphia
would be the highest paid departments in the country.
In
case you did not recognize this method, it is the trendy "interest
based" or "win-win" method. It is actually good stuff. The
only problem is that it usually fails for police associations. It is too
tempting for the city to "jump ship" and retreat to positional
bargaining after you "drop your pants." When you finally end up in
arbitration, the city has every document, idea and concept that you have, but
you have little or nothing from them. Under the "expert method,"
negotiations are nothing but a deposition of you by the city. |
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The POLICEPAY Journal
Published
by:
POLICEPAY.NET,
Inc.
Oklahoma
City, OK 73102
(405)
234-2235