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base pay and benefits for public employees

Posted: Mon Apr 11, 2011 8:20 am
by Bret Callentine
Next question...

Seeing as cities, counties, and states are having such a hard time cracking the code on how to deal with negotiating public employee wages and benefits, I would like to see what would happen if a city simplified the process for the voters and only paid wages.

Take the combined costs of wages, healthcare benefits, retirement benefits and any other ancillary cost for each employee and wrap it up into one amount. Then pay the employee that amount. The city would no longer manage their benefits, and would no longer have any responsibility for retirement savings, etc.

Have the employees get insurance through their unions, and make their own private arrangements for everything else.

The employees could then negotiate with their union for the best services and providers and the city would no longer have any legacy costs that can really tie up long term budgeting.

your thoughts?

Re: base pay and benefits for public employees

Posted: Mon Apr 11, 2011 2:43 pm
by Stan Austin
Bret--- I see an immediate problem in terms of how wages paid in one lump sum would be viewed in terms of taxation. Now, the contributions to health insurance aren't taxed as income (jump in tax specialists). Also, as long as private health insurance is the avenue of health care, I think the larger aggregate of all public employees as opposed to only those who are unionized gives a greater bargaining lever over premiums.

Re: base pay and benefits for public employees

Posted: Mon Apr 11, 2011 3:48 pm
by Will Brown
I'm thinking that it would probably be illegal for an employer to not have his workers covered under an established retirement plan. City employees are not covered under social security because they are covered under one of three or four state plans. If the city got them out of one of the state plans, then they would go under social security, which requires employer and employee contributions.

I'm no expert on state retirement plans, but apparently there may be underfunding during the years the employee is working, and a requirement for continued employer payments after the employee retires. That would make sense only to a politician, who would view it as saving money now (and obligating the employer to future payments after the politician has left the scene. I have also read that the state plans, which apparently have greater freedom in investing than social security, have often found themselves with excess resources, and rather than holding those resources for lean years, have given it away.

Those are problems with the current system, but until they are fixed, we will have huge debts hanging over our head and becoming worse. I would also favor, as a taxpayer, switching to a defined contribution. rather than a defined payment plan. I know a lot of people are hysterical about investing, but the historical data is pretty convincing that careful investment, over a long period of time, will give good results. Those employees who don't trust the market could be given periodic opportunities to have their contributions, plus earnings, put into a private annuity.

As for medical coverage, the way to get the best rate is to negotiate from a position of power. I believe Lakewood buys hospitalization for its employees (who may or may not pay a part of the premium, depending on their contract. Now the reality is that Lakewood is relatively small. If we created a consortium that covered all public employees in the state of Ohio, we should be in a position to get a better deal. The consortium could cut deals with ten or twenty plans, and the employee could select among them; the cities could pay a standard premium, and if the employee wanted one of the more comprehensive plans, he could pay the excess over the standard premium.

I don't know what to do about medical coverage for retired employees. I think a few years ago the federal law was changed so that employees who were not under social security still had to pay the portion of the social security that goes to medicare, and became eligible for medicare at retirement age. That should solve the problem for current workers, if true, but there are still a lot of older workers or retirees that would not be eligible. I retired from federal civil service. I paid my share of the health insurance premium until I became eligible for Medicare, at which time my retirement plan became in effect a medicare filler; I anticipated my share of the premium would go down, but those crooks kept it high, so I just canceled my retirement plan and came out ahead. I think if the consortium had a low cost filler plan for those who have become eligible for medicare, that would be a money saver.

Re: base pay and benefits for public employees

Posted: Tue Apr 12, 2011 7:03 am
by Bret Callentine
I don't know what the legal restrictions would be, but I think if the insurance companies knew that hundreds of public employees were going to be shifted to private insurance all at once, competitive bidding could produce some viable rates packages including different coverage levels.

I guess the main goal would be to separate the pension plan from the books so that politicians no longer have to worry about life expectency, etc. Once a person is no longer an employee we no longer have to budget for them.

Re: base pay and benefits for public employees

Posted: Wed Apr 13, 2011 2:06 pm
by Charlie Page
So cities would pay an amount equal to wages plus benefits to an employee and the employee would be responsible for his/her own health insurance and retirement or unions could take all that over. Interesting. Right now, this amount is about 150% of the hourly wage or salary. I would think a percentage of employees would say lets gamble and not get healthcare insurance, vision, dental or save for retirement. Much of America these days seems to be living for the moment with very little regard for tomorrow. Most people need to be forced into healthcare insurance and saving for retirement through automatic deduction from their paycheck or it doesn’t happen.

I think an alternative would be to enact legislation requiring an ‘out the door price’ to be attached to any negotiated labor contract (it would have to be legislated because I don’t think many would do it voluntarily). Think about when you buy tires for your car. You’re lured in with the sales price of $79 per tire but by the time you add in mounting, balancing, road hazard protection, shop fee, disposal fee, environmental fee, this fee, that fee and sales tax, it adds up to a pile of money. It’s much easier and less confusing to ask for the out the door price. It could be the same with labor contracts.

Re: base pay and benefits for public employees

Posted: Fri Apr 15, 2011 5:45 am
by Jim O'Bryan

Interesting but I have to think the real problem was the politicians giving in year after year
to the whims of the unions in return for support at reelection time, instead of worrying about
what the actual contract even says.

Watch where the union money goes in an election, and then watch that person negotiate
with the group that just got them elected? For a long time here in Lakewood, the Firemen
had the best phone room and mechanism in place to get a mayor elected or re-elected.

Maybe the problem is not the contract but the negotiators for the cities.


Re: base pay and benefits for public employees

Posted: Mon Apr 18, 2011 8:39 am
by Bret Callentine
Jim O'Bryan wrote:Maybe the problem is not the contract but the negotiators for the cities.

yes, but with the current system, one bad contract negotiation can handcuff the city for years to come, regardless of who wins the next election. If contracts are done knowing, to borrow the term, the "Price out the Door" as well as no lasting legacy costs or commitments, then an administration is better able to deal with short term market fluctuations.