Warnings of looming pension bankruptcy aren’t just overblown. They’re politically dangerous.
When vacancies are high, there are consequences — and many places are feeling them. …. Some vacancies are expected, even normal, but when they get too high, there are consequences: Permits aren’t renewed, inspections are missed, backlogs grow, overtime costs swell and services are reduced…..
From the summary:
A new case study examines the impacts of the actions of the Town of Palm Beach when substantial changes were made to the retirement plans offered to the town’s employees. The case study details the 2012 decision by the Palm Beach Town Council to close its existing defined benefit (DB) pension systems for its employees, including police officers and firefighters. Retirement Reform Lessons: The Experience of Palm Beach Public Safety Pensions outlines how the “combined” retirement plans offered dramatically lower DB pension benefits and new individual 401(k)-style defined contribution (DC) retirement accounts. Following a large, swift exodus of public safety employees to neighboring employers that increased costs in human resource areas, the town reconsidered the changes. In 2016, the Town Council voted to abandon the DC plans and to improve the pension plan.
While many current retirees are reasonably comfortable because they have pensions, the future does not look bright for those yet to retire.
Traditional defined-benefit pensions are rapidly disappearing in the private sector—less than 15 percent of workers have them. Most public sector workers still have them—more than 20 million are either now receiving or looking forward to a pension. However, public sector pensions are coming under attack from the American Legislative Exchange Council (ALEC) and other right-wing groups.
Over the last four decades employers have been anxious to convert the traditional defined-benefit pensions into defined-contribution 401(k) plans.
The difference is that with a defined benefit, the worker is secure while the employer does not know exactly how much it will have to pay in. Workers are guaranteed a lifetime benefit based on their salary and years of service; the employer’s bill depends on the worker’s longevity and on stock market performance.
With a defined-contribution plan, the employer knows just how much it will pay each year, and the worker shoulders all the uncertainty. This means that workers face the risk that the market will plunge just after they retire—and they may quite possibly outlive their savings.
By getting rid of defined-benefit plans, employers are transferring risk to workers. In addition, they often contribute less to a defined-contribution plan than to the defined-benefit plans they replaced, in effect cutting workers’ pay. ….
Source: Tracy H. Porter, Nancy Day, Patricia Meglich, Employee Responsibilities and Rights Journal, Online First, December 19, 2017
From the abstract:
Workplace bullying is a counterproductive behavior that has captured the attention of researchers in recent years. The extent of reported bullying behavior in US organizations varies however; it is estimated to affect 15% to 50% of workers with projected annual costs of over $40 billion including direct and indirect costs. Workplace bullying poses a serious ethical challenge by sending messages about appropriate conduct within the organization’s culture. In this study, we focus on environmental factors as predictors of self-reported bullying in a public-sector organization. Specifically, the factors of interest are organizational culture, commitment to change, and leader-member exchange (LMX). We also investigate newcomer status and its relationship to reported bullying. Findings demonstrated perceived stability in the organization and higher levels of LMX showed lower levels of workplace bullying. Further, an organizational culture that emphasizes rewards lead to higher levels of bullying and newcomers are subjected to more bullying than longer service workers.
Historically, public-sector unions have focused their attention almost entirely on negotiating for higher wages and better benefits. These days, though, many are showing up at the bargaining table to fight not just for themselves but also for the people they serve — like students, foster children and taxpayers. ….
Source: Gregory B. Lewis, Jonathan Boyd and Rahul Pathak, Public Administration review, Early View, December 28, 2017
From the abstract:
Are state governments fulfilling their responsibilities to be model employers of women and minorities? Using U.S. Census Bureau data on individual employees from 1980 to 2015, this article looks at how much progress state governments have made toward eliminating racial and gender pay differences. It examines whether differences in education, age/experience, citizenship, English ability, hours worked, and occupation explain the pay differences. Patterns and explanations vary substantially by group, but state governments are doing a better job than private firms of closing pay gaps on almost every measure.
Source: Moody’s, Sector In-Depth, December 19, 2017
Retiree health benefits vary considerably among states. Despite generally greater legal flexibility to change these benefits compared to pensions, large liabilities and significant costs persist for some state employers who offer generous benefits. We do not expect new accounting rules to have a material impact on costs, but the new rules will facilitate probing credit risk, especially important for those issuers whose retiree benefits have stronger legal protections.
Source: Moody’s, December 19, 2017
This cross-sector rating methodology replaces the Adjustments to US State and Local Government Reported Pension Data methodology published in April 2013. We have updated the description of our standard balance sheet adjustment and included a description of our standard income statement adjustment. Both of these reflect the implementation of Governmental Accounting Standards Board Statement 68 accounting standards, which requires adjustments that were not previously necessary. We have retired the concept of amortizing adjusted net pension liabilities on a level dollar basis over 20 years, a cost metric not included in any scorecards of primary rating methodologies. We have also added a description of how we calculate the “tread water” indicator….
Source: Moody’s, Sector In-Depth, December 14, 2017
Adjusted net pension liabilities (ANPLs) rose in fiscal 2016 for 42 of the 50 largest local governments, ranked by debt outstanding. Pension pressures will remain elevated due to coming ANPL spikes in 2017, even with moderate declines expected to follow in fiscal 2018. Most governments are contributing insufficient amounts to contain growth in net liabilities, and some are exposed to sizeable investment losses in the event of a market downturn. Retiree healthcare and other post-employment benefit (OPEB) liabilities are also significant for a handful of governments, and will likely increase due to lower discount rates under new accounting….