Why Was Alvin Brown's Pension Reform a Bad Deal?

[SunKing]

Okay Sun King, let say the city creates 500 new employees(public sector jobs). That's 500 more people to pay dues into the pension plan at 3% per salary of 30k per year(450,000 in pension contributions) plus the resulting taxes will "rebate" themselves back into the system growing it from an estimated 945 million(estimated for next year).

The 15,000,000 cost of creating 500 new public sector jobs, at a stable wage, will circulate more money back through the system - and local business - bringing more tax revenue that will pay for the job creation and kick start modest growth.

That's not a solution, that sounds like Detroit.  Why not just sprinkle fairy dust on it and make it all happy again?

Here's a proven solution.  Privatize 500 existing positions thereby 1)eliminating any future pension obligation, 2)create savings to fund existing obligations and 3)create competition with the unions to potentially negotiate pension reform.

Done.

[SunKing]

and by "privatize" I mean take jobs AWAY from the union, not privatize the pension plan.  Whatever side of the fence you sit on politically, you cant honestly believe that expanding a broken system and incurring debt in order to do so makes any sense at all.  The City (we) owe what we owe and there may be a deal to cut with the union but who knows?  Stop the bleeding by moving away from that tired old system.  It is simply unsustainable.

[Bridges]

and by "privatize" I mean take jobs AWAY from the union, not privatize the pension plan.  Whatever side of the fence you sit on politically, you cant honestly believe that expanding a broken system and incurring debt in order to do so makes any sense at all.  The City (we) owe what we owe and there may be a deal to cut with the union but who knows?  Stop the bleeding by moving away from that tired old system.  It is simply unsustainable.

Privatize police and fire? 

[SunKing]

and by "privatize" I mean take jobs AWAY from the union, not privatize the pension plan.  Whatever side of the fence you sit on politically, you cant honestly believe that expanding a broken system and incurring debt in order to do so makes any sense at all.  The City (we) owe what we owe and there may be a deal to cut with the union but who knows?  Stop the bleeding by moving away from that tired old system.  It is simply unsustainable.

Privatize police and fire? 

I wouldn't.

[SunKing]

and by "privatize" I mean take jobs AWAY from the union, not privatize the pension plan.  Whatever side of the fence you sit on politically, you cant honestly believe that expanding a broken system and incurring debt in order to do so makes any sense at all.  The City (we) owe what we owe and there may be a deal to cut with the union but who knows?  Stop the bleeding by moving away from that tired old system.  It is simply unsustainable.

The broken system is really the fact that we have a moocher/looter 'conservative' government.  It doesnt believe in paying its own bills and has subsidized both its development and its maintenance through taxing other parts of the state for decades.

THAT is what needs to change.

Meh, maybe but that's another conversation. 

We are discussing pension reform and when you really think about it, isnt it sad that so much time, talent and treasure is tied up in an issue that really is not what government is set up to do? Its really not a political argument, its fiscal and it has nothing to do with how other money is spent.  Its a bad financial deal for the City and it needs to be changed.

Fix the pension problem and you can have the money and time to go back to arguing about more important matters.

[Cheshire Cat]

and by "privatize" I mean take jobs AWAY from the union, not privatize the pension plan.  Whatever side of the fence you sit on politically, you cant honestly believe that expanding a broken system and incurring debt in order to do so makes any sense at all.  The City (we) owe what we owe and there may be a deal to cut with the union but who knows?  Stop the bleeding by moving away from that tired old system.  It is simply unsustainable.

The broken system is really the fact that we have a moocher/looter 'conservative' government.  It doesnt believe in paying its own bills and has subsidized both its development and its maintenance through taxing other parts of the state for decades.

THAT is what needs to change.

Its a bad financial deal for the City and it needs to be changed.

Just don't forget that this bad deal for the City was brokered by the City.  That fact is what makes this issue bigger than it is on the surface and why things like lawsuits need to remain a part of the discussion when talking about "pensions". The police and fire fighters did not create the mess.  City officials did from the original barter of the deal to it's ultimate mismanagement exasperated by "pension holidays". 

Beginning with the Peyton administration, dealing with this issue became instead the bashing of both police and fire fighters.  Both folks who had oddly enough worked to help get Peyton into office.  His attempts to talk pension became instead an standoff complete with insults being readily traded.

Then we get the Alvin Brown crew, mostly untested, that as it turns out cannot even write a "real" budget trying to fix the problem.  That was a non starter to begin with.  For Brown this was and is about political points and not about fixing the problem now.  He and his deal was not only faulty but based upon unproved projections.  All he did was kick the can further down the road.

Privatizing Police and Fire is frankly a very bad idea for several reasons.  The number one concern in our city is the protection of our citizens and their safety.  This is why such a large part of our budget goes to that effort and why I suspect the original contract was according to some, too generous.  While we talk numbers and solutions what has to be at the top of that discussion is the reality that we are talking about a contract made with some of our most important employees, which are the police and fire fighters and that cannot be forgotten.

The outcome here is going to be impacted by what the court does.  As I mentioned earlier, there is a "quiet" mindset at city hall that holds the attitude that this will end up being decided by the actions of the court.

[SunKing]

and by "privatize" I mean take jobs AWAY from the union, not privatize the pension plan.  Whatever side of the fence you sit on politically, you cant honestly believe that expanding a broken system and incurring debt in order to do so makes any sense at all.  The City (we) owe what we owe and there may be a deal to cut with the union but who knows?  Stop the bleeding by moving away from that tired old system.  It is simply unsustainable.

The broken system is really the fact that we have a moocher/looter 'conservative' government.  It doesnt believe in paying its own bills and has subsidized both its development and its maintenance through taxing other parts of the state for decades.

THAT is what needs to change.

Its a bad financial deal for the City and it needs to be changed.

Just don't forget that this bad deal for the City was brokered by the City.  That fact is what makes this issue bigger than it is on the surface and why things like lawsuits need to remain a part of the discussion when talking about "pensions". The police and fire fighters did not create the mess.  City officials did from the original barter of the deal to it's ultimate mismanagement exasperated by "pension holidays". 

Like I said I wouldnt support privatizing police and fire.  but there is another $200million in the General Fund that I would.

[Cheshire Cat]

and by "privatize" I mean take jobs AWAY from the union, not privatize the pension plan.  Whatever side of the fence you sit on politically, you cant honestly believe that expanding a broken system and incurring debt in order to do so makes any sense at all.  The City (we) owe what we owe and there may be a deal to cut with the union but who knows?  Stop the bleeding by moving away from that tired old system.  It is simply unsustainable.

The broken system is really the fact that we have a moocher/looter 'conservative' government.  It doesnt believe in paying its own bills and has subsidized both its development and its maintenance through taxing other parts of the state for decades.

THAT is what needs to change.

Its a bad financial deal for the City and it needs to be changed.

Just don't forget that this bad deal for the City was brokered by the City.  That fact is what makes this issue bigger than it is on the surface and why things like lawsuits need to remain a part of the discussion when talking about "pensions". The police and fire fighters did not create the mess.  City officials did from the original barter of the deal to it's ultimate mismanagement exasperated by "pension holidays". 

Like I said I wouldnt support privatizing police and fire.  but there is another $200million in the General Fund that I would.

Those funds would be?  Are they one time money, unencumbered and not earmarked for other uses?  Curious to know where you got the number. 

[theduvalprogressive]

Where Sun King is coming from is a school of thought I grew up with in college. The idea is to take 500 jobs  at 30k and turn them over to the private sector thus one removes one and a half millions dollars from the public sector and thus from tax rolls. (Do you see where this is going?)

Basically in real terms let say we contract a private sector company. We'll call the company "Waste Management Systems" as I'm not feeling very imaginative right now. We eliminate 500 garbage collectors at 24k a piece removing them from pension rolls under a low ball start up contract. "Waste Management" absorbs those jobs a starting wage of 22k a year and benefits plus what ever private insurance they decide to give them. The taxpayer is still going to pay for the contract including the expense of vehicle maintanence etc. in what is figured into the low ball figure.

(Note the magic wand twirling)

Let's say for the next couple of years at contract time that service goes up as they also price the 1st year losses to the next years in succession. At some point the contract price for privatized service will make it's way back up due to profit motive and imagined cost leaving the city where it was.

But it gets worse. The income loss to labor affects the local economy due to reduced purchasing power. The lower wages creates a situation where labor opts out of healthcare coverage because of its hit on the paycheck creating net loss at hospitals. Or if labor keeps benefits, that additional loss of purchasing power rings the bell one time less in a restaurant or coffee shop. So what value came from privatization? None. Basically the taxpayer will end up with the same expense that will worsen.

All privatization is is a redistribution of public wealth to private corporations using government as the method of delivery.

Again I'd like to remind you who missed the point that the allowance of financial services companies to gamble pension fund on the stock market lead to the bankrupting of pension funds in Birmingham, Detroit, and 34 other cities nationwide. How's that for waving a "magic wand".

[theduvalprogressive]

Another thing people need to understand is that running deficits in slim times can hold the local economy together until times get better. This whole fear of debt thing is just DNC/RNC propaganda.

[JayBird]

Where Sun King is coming from is a school of thought I grew up with in college. The idea is to take 500 jobs  at 30k and turn them over to the private sector thus one removes one and a half millions dollars from the public sector and thus from tax rolls. (Do you see where this is going?)

Basically in real terms let say we contract a private sector company. We'll call the company "Waste Management Systems" as I'm not feeling very imaginative right now. We eliminate 500 garbage collectors at 24k a piece removing them from pension rolls under a low ball start up contract. "Waste Management" absorbs those jobs a starting wage of 22k a year and benefits plus what ever private insurance they decide to give them. The taxpayer is still going to pay for the contract including the expense of vehicle maintanence etc. in what is figured into the low ball figure.

(Note the magic wand twirling)

Let's say for the next couple of years at contract time that service goes up as they also price the 1st year losses to the next years in succession. At some point the contract price for privatized service will make it's way back up due to profit motive and imagined cost leaving the city where it was.

But it gets worse. The income loss to labor affects the local economy due to reduced purchasing power. The lower wages creates a situation where labor opts out of healthcare coverage because of its hit on the paycheck creating net loss at hospitals. Or if labor keeps benefits, that additional loss of purchasing power rings the bell one time less in a restaurant or coffee shop. So what value came from privatization? None. Basically the taxpayer will end up with the same expense that will worsen.

All privatization is is a redistribution of public wealth to private corporations using government as the method of delivery.

Again I'd like to remind you who missed the point that the allowance of financial services companies to gamble pension fund on the stock market lead to the bankrupting of pension funds in Birmingham, Detroit, and 34 other cities nationwide. How's that for waving a "magic wand".

Could you give an example of one city/county/parish/province/country utilized this method which resulted in a proof positive benefit?

[mtraininjax]

It doesnt believe in paying its own bills and has subsidized both its development and its maintenance through taxing other parts of the state for decades.

When we need gut check decisions, we'll make sure we look back at what they did 40 years ago. Stop living in the past and move forward! Everything should be up for discussion, including consolidation.

[JFman00]

Where Sun King is coming from is a school of thought I grew up with in college. The idea is to take 500 jobs  at 30k and turn them over to the private sector thus one removes one and a half millions dollars from the public sector and thus from tax rolls. (Do you see where this is going?)

Basically in real terms let say we contract a private sector company. We'll call the company "Waste Management Systems" as I'm not feeling very imaginative right now. We eliminate 500 garbage collectors at 24k a piece removing them from pension rolls under a low ball start up contract. "Waste Management" absorbs those jobs a starting wage of 22k a year and benefits plus what ever private insurance they decide to give them. The taxpayer is still going to pay for the contract including the expense of vehicle maintanence etc. in what is figured into the low ball figure.

(Note the magic wand twirling)

Let's say for the next couple of years at contract time that service goes up as they also price the 1st year losses to the next years in succession. At some point the contract price for privatized service will make it's way back up due to profit motive and imagined cost leaving the city where it was.

But it gets worse. The income loss to labor affects the local economy due to reduced purchasing power. The lower wages creates a situation where labor opts out of healthcare coverage because of its hit on the paycheck creating net loss at hospitals. Or if labor keeps benefits, that additional loss of purchasing power rings the bell one time less in a restaurant or coffee shop. So what value came from privatization? None. Basically the taxpayer will end up with the same expense that will worsen.

All privatization is is a redistribution of public wealth to private corporations using government as the method of delivery.

Again I'd like to remind you who missed the point that the allowance of financial services companies to gamble pension fund on the stock market lead to the bankrupting of pension funds in Birmingham, Detroit, and 34 other cities nationwide. How's that for waving a "magic wand".

Could you give an example of one city/county/parish/province/country utilized this method which resulted in a proof positive benefit?

A Georgia Town Takes the People's Business Private

Cities have dabbled for years with privatization, but few have taken the idea as far as Sandy Springs. Since the day it incorporated, Dec. 1, 2005, it has handed off to private enterprise just about every service that can be evaluated through metrics and inked into a contract.

To grasp how unusual this is, consider what Sandy Springs does not have. It does not have a fleet of vehicles for road repair, or a yard where the fleet is parked. It does not have long-term debt. It has no pension obligations. It does not have a city hall, for that matter, if your idea of a city hall is a building owned by the city. Sandy Springs rents.

The town does have a conventional police force and fire department, in part because the insurance premiums for a private company providing those services were deemed prohibitively high. But its 911 dispatch center is operated by a private company, iXP, with headquarters in Cranbury, N.J.

...

Does the Sandy Springs approach work? It does for Sandy Springs, says the city manager, John F. McDonough, who points not only to the town's healthy balance sheet but also to high marks from residents on surveys about quality of life and quality of government services.

...

During a tour of city hall, Mr. McDonough bumps into Kevin Walter, the deputy director of public works. Mr. Walker has good news. Currently, Sandy Springs pays for two people to operate two road maintenance trucks five days a week — in effect, 10 days of work every two weeks. Well, Mr. Walker has just figured out a way to reduce the number to nine days every two weeks, saving $50,000 a year.

Does Mr. Walker, or rather his company, URS, get to keep a portion of that $50,000?

"No," Mr. Walker says. "But I get to keep my job. Our job is to run all these projects and programs very efficiently."

And your contract?

"It is renewed every year," Mr. Walker says.

"It can be renewed every year," Mr. McDonough clarifies.

"It can be renewed every year," says Mr. Walker, correcting himself.

There are a couple presuppositions behind duvalprogressive's critique:

• Privatized services being delivered under long-term, cost-plus contracts
• Privitized services being a monopoly without competition
• Paying private-sector employees serves less of a public good than public-sector employees

My response:

• The art of privatization is in well run bid/auctions and well-written contracts. Cities that resort to privatization are often there because they've already done a terrible job at defining missions and controlling costs, leaving them ill-prepared to create a robust privatization process. Given the trade-offs that come with scarcity, these cities often throw up their hands and try to do too much with too little. Case in point is transit. There's a push-pull between coverage and service quality. Cities are often forced to run little-used bus lines, or Amtrak to maintain long distance connections that don't serve many people and are expensive to maintain. At the same time there's the expectation of short headways and hours of service. Given limited resources, and legislative prerogative restricting them from making trade-offs, these systems are set up for failure. These same contradictions are often seen in privatization contracts and result in service just as poor and expensive as what they were supposed to replace.
• Monopoly providers often result from cities trading long-term stability for short-term return. Chicago parking meters, or the 99-year lease of the Chicago Skyway are great examples of this. When the motive is for the city to make a quick buck, it's confusing to blame the buyer for the problems.
• The implied distinction between private and public sector employment is spurious unless one considers a *primary* function of government and government agencies is to provide employment. How are an excess (relative to worker productivity) of employees any less redistribution than privatization? The very premise of privatization is that it provides more efficient service and lower cost, allowing for lower taxes (benefiting *all* taxpayers). Surplus government employment only benefits the government employees (which I count myself part of as a lucky recipient. Thanks taxpayers!).

And as another argument, besides 3P (public-private partnerships), that the public/private dichotomy is overly simplistic and incomplete: The Case for Letting Nonprofits Run Public Transit

[JFman00]

My article is 2 years more recent than yours.

[JFman00]

Residents happy and officials in Sandy Springs, Ga., get re-elected with huge margin

This one from June 7 this year.