Category Archives: Public Sector

Pension Reforms and Public Sector Turnover

Source: Evgenia Gorina, Trang Hoang, Journal of Public Administration Research and Theory, Published: June 24, 2019

From the abstract:
Over the past decade, many states have reformed their retirement systems by reducing benefit generosity, tightening retirement provisions, introducing non-defined-benefit (DB) plan options and even replacing DB plans with defined-contribution plans. Many of these reforms have affected post-employment benefits that public workers will receive when they retire. Have these reforms also affected the attractiveness of public sector employment? To answer this question, we use state-level data from 2002 to 2015 and examine the relationship between state pension reforms and public employee turnover following the reforms. We find that employee responsiveness to the reforms was tangible and that it differed by reform type and worker education. These results are important because the design of public retirement benefits will continue to influence the ability of the public sector to recruit and retain high-quality workforce.

A correction has been published.

Service Professionals’ Response to Volunteer Involvement in Service Production

Source: Mette Kjærgaard Thomsen, Ulrich Thy Jensen, Journal of Public Administration Research and Theory, Advance Access, Published: October 15, 2019
(subscription required)

From the abstract:
Involving volunteers in the production and delivery of public services is a core policy objective of governments around the world. While existing research on volunteer involvement in service production, for example, has focused on advantages and disadvantages of such involvement and different dimensions of volunteer involvement, little is known about service professionals’ response to volunteer involvement in public service production. Integrating perspectives from multiple theories, we build a theoretical framework for understanding how and when service professionals come to see volunteers as a threat to the quality of service, the profession’s privileged position and monopoly, and professionals’ own work tasks and job security. Based on a central distinction between production of core and complementary tasks, we propose that volunteers come to be seen as a threat in the eyes of service professionals when volunteers solve core rather than complementary tasks. Using a survey experiment among health assistants at nursing homes, we find partial support for our argument. Health assistants are more likely to perceive volunteers as a threat to the quality of care when volunteers solve core rather than complementary tasks. The study guides research toward a more nuanced understanding of volunteer involvement in service production in public organizations.

Antipolitics and the Hindrance of Performance Management in Education

Source: Jeffrey W Snyder, Andrew Saultz, Rebecca Jacobsen, Journal of Public Administration Research and Theory, Volume 29, Issue 4, October 2019
(subscription required)

From the abstract:
Performance management reforms are a popular way to try to create responsive and improving government. These types of reforms have become commonplace in education policy and the Journal of Public Administration Research and Theory (JPART) has been one of the leading venues for research on these topics. However, under-analyzed are the ways in which performance management policies represent antipolitical bent to education reform. We outline an argument that avoiding political decisionmaking in favor of reforms that create authoritative or purportedly neutral data risks undertaking policy change are not as meaningful as hoped. We select eight articles that represent research on performance management broadly and are thought provoking for a broader consideration of performance management in education policy.

Infographic: Pension liabilities continue to trouble Illinois, Kentucky, Connecticut, New Jersey and others

Source: Moody’s Investors Service, October 3, 2019

Adjusted net pension liabilities (ANPL) declined in states’ fiscal year 2018 reporting due to healthy investment returns in fiscal 2017, though unfunded pension liabilities remain high for some states.

Pension liabilities continue to trouble Illinois, Kentucky, Connecticut, New Jersey and others

Related:
Medians – Adjusted net pension liabilities spike in advance of moderate declines
Source: Pisei Chea, Marcia Van Wagner, Timothy Blake, Nicholas Samuels, Emily Raimes, Tenzing T Lama, Moody’s, Sector In-Depth, August 27, 2019
(subscription required)

Adjusted net pension liabilities (ANPL) spiked in states’ fiscal year 2017 reporting due to poor investment returns in fiscal 2016, according to our state pension medians data. States typically report their pension funding levels with a one-year lag. Thus, favorable investment returns in fiscal 2017-18 will lead to a decline in pension liabilities in fiscal 2018-19 reporting.

Adjustments to Pension and OPEB Data Reported by GASB Issuers, Including US States and Local Governments Methodology
Source: Moody’s, Cross Sector Methodology, October 7, 2019

Credit FAQ: How S&P Global Ratings Will Implement Pension And OPEB Guidance In U.S. Public Finance State And Local Government Credit Analysis
Source: S&P, October 7, 2019
(subscription required)

On Oct. 7, 2019, S&P Global Ratings published “Guidance: Assessing U.S. Public Finance Pension And Other Postemployment Benefit Obligations For GO Debt, Local Government GO Ratings, And State Ratings Methodology.” Here, we answer the most frequently asked questions from investors and other market participants.

Elsewhere, we have also provided an overview on our approach to U.S. state and local government pensions within the context of our three government criteria: See “Credit FAQ: Quick Start Guide To S&P Global Ratings’ Approach To U.S. State And Local Government Pensions,” published May 13, 2019.

U.S. State Pension Reforms Partly Mitigate The Effects Of The Next Recession Primary Credit
Source: Carol H Spain, S&P, September 26, 2019
(subscription required)

Table of Contents:
• Average State Funding Levels Plateau With Notable Exceptions
• Many States Continue With Pension Reforms, Avoiding Backward Measures
• Most States Still Fall Short Of Minimum Funding Progress
• Despite Reforms Despite Improved Assumptions, Plans Remain Vulnerable To Market Volatility
• Demographics Influence The Funded Ratio And Budgetary Vulnerability
• Pension Costs Remain Affordable For Most States, With Notable Exceptions
• Policy Decisions, Not Markets, Will Likely Pose Greatest Future Risks
• Survey Methodology
• Related Research

Despite investment gains in 2018, U.S. states have made relatively slow progress since the Great Recession in improving funded ratios, with S&P Global Ratings’ most recent survey data indicating that the average weighted pension status across state plans was 72.5% compared with 83% in 2007. However, looking at the funded ratios alone falls short of understanding whether or not states have made progress toward improving the overall pension funding picture. Indeed, poor investment returns in select years and maturing pension plan populations have stunted state funding progress. Also, in the years immediately following the Great Recession, many states had reduced plan contributions as a short-term means of balancing budgets, resulting in funding setbacks from which many have yet to recover.

However, in recent years, many states have made conservative changes to actuarial methods and assumptions that, while hindering actuarial funding ratios, show a more realistic assessment of market risk tolerance for states, thus better enabling them to make funding progress. We have also witnessed that many states have learned lessons from funding discipline mistakes over the past ten years and better understand sources of pension liability and costs, and have therefore demonstrated a commitment to actuarially based funding. In this sense, states may be better prepared heading into the next recession despite weaker funded ratios. Yet, in our view, despite some progress, many plans’ current contributions, discount rate assumptions, and investment allocations still fall short of fully mitigating the market volatility that increasingly appears to lie ahead….

Ballotpedia releases research on public-sector union membership

Source: Dave Beaudoin, Ballotpedia, Daily Brew, September 20, 2019

Nearly 50% of the country’s public-sector union employees are located in five states, according to a new Ballotpedia study released this week. This finding is based on data for 228 of the most prominent public-sector labor unions nationwide as selected based on media reports, consultation with local and state experts, and our own research efforts. In total, we counted 5,654,109 members in those 228 public-sector unions. Throughout 2019, Ballotpedia researched and analyzed the membership, finances, and political spending of public-sector unions. We’ll be sharing these findings in the weeks ahead in Union Station — our newsletter covering the latest developments in public-sector union policy.

Since it is nearly impossible to collect comprehensive data on membership of every public-sector union, we identified the most prominent public-sector unions in each state and determined their membership. This included state-level affiliates of national unions, such as the American Federation of Teachers, AFL-CIO, AFSCME, and the Fraternal Order of Police. ….

Among the 228 unions, these five states had the highest number of public-sector union members:

– California: 811,483 members belonging to six large unions—approximately 14% of the nationwide total.

– New York: 808,669 members belonging to five unions—14% of the nationwide total.

– Illinois: 342,518 members belonging to five unions—6% of the nationwide total.

– New Jersey: 324,750 members belonging to four unions—6% of the nationwide total.

– Pennsylvania: 324,411 members belonging to five unions—6% of the nationwide total…..

Family-Friendly Policies, Gender, and Work–Life Balance in the Public Sector

Source: Mary K. Feeney, Justin M. Stritch, Review of Public Personnel Administration, Volume 39 Issue 3, September 2019
(subscription required)

From the abstract:
Family-friendly policies and culture are important components of creating a healthy work environment and are positively related to work outcomes for public employees and organizations. Furthermore, family-friendly policies and culture are critical mechanisms for supporting the careers and advancement of women in public service and enhancing gender equity in public sector employment. While both policies and culture can facilitate women’s participation in the public sector workforce, they may affect men and women differently. Using data from a 2011 study with a nationwide sample of state government employees, we investigate the effects of employee take-up of leave policies, employer supported access to child care, alternative work scheduling, and a culture of family support on work–life balance (WLB). We examine where these variables differ in their effects on WLB among men and women and make specific recommendations to further WLB among women. The results inform the literature on family-friendly policies and culture in public organizations.

For Public Employees, Speech Is Free, But Is Anyone Listening?

Source: Dina Kolker, Employee Relations Law Journal, Vol. 45, No. 1, Summer 2019
(subscription required)

In the current political environment many groups feel that “government” is not listening to their needs and issues, but most would be surprised to discover that the government has no legal obligation to listen to any of us. This legal “secret” is of particular import to the long-run wrestling match between the public sector labor movement and their right-wing opponents, where the so-called “right to work,” presented as a positive, often translates into the right to be ignored, a decided negative.

The “Right to Work” movement often touts its focus on empowering workers through the First Amendment. The name itself is designed to indicate a right to a job and implies some individual control over the terms of that employment. “Give yourself a raise,” and other variations of that sentiment, are declared on mass mailings targeting public employees in the wake of the Supreme Court’s decision in Janus v. AFSCME, overturning a four-decades old precedent that had permitted unions to collect fair share fees from nonmembers. The decision is praised by some as a win for worker free speech, but what does it mean for a public employee’s right to be heard? Anyone who has ever repeated the same request multiple times to a distracted child knows that there is a world of difference between speaking and being heard.

Indeed, the admittedly catchy invitation only thinly veils the reality of what was won and what was at risk of being lost in Janus. The mailing does not say call your boss and demand a raise higher than the one your union was able to negotiate for everyone in the last contract. Yet, individual negotiation of terms and conditions of employment is implicit (if not explicit) in the employee-facing rhetoric of Right to Work groups. The implication is that by turning down the volume knob on public sector unions you somehow inherently amplify the voices of individual workers. Nothing could be further from the legal — and practical — truth. The simple fact is that, absent collective bargaining laws, the government, neither as employer nor as sovereign, has any obligation to listen. In fact, government generally has no obligation to listen to any citizen, from the president on down…..

Fiscal Consolidation and Public Wages

Source: Juin-jen Chang, Hsieh-Yu Lin, Nora Traum, Shu-Chun Susan Yang, International Monetary Fund (IMF), IMF Working Paper No. 19/125, June 2019

From the abstract:
A New Keynesian model with government production, public compensation, and unemployment is fit to U.S. data to study the macroeconomic and fiscal effects of public wage reductions. We find that accounting for the type of government spending is crucial for its macroeconomic implications. Although reductions in public wages and government purchases of goods have similar effects on total output and the fiscal balance, the former can raise private output slightly, in contrast to the substantial contractionary effects of the latter.In addition, the baseline estimation finds that exogenous public wage reductions decrease private wages. Model counterfactuals show that sufficiently rigid nominal private wages can reverse the response of private wages, as the rigidity dampens the labor reallocation effect from the public to private sector that exerts downward pressure on private wages.

Ten Years After: The Development of a University Staff Pay System—Reflections and the Lessons Learned

Source: Steven L. Thomas, Lyn M. McKenzie, Compensation & Benefits Review, OnlineFirst, July 22, 2019
(subscription required)

From the abstract:
This article documents the development and implementation of a new staff pay system for a large, comprehensive, public university. It discusses decisions that were made, alternatives chosen, important process issues and outcomes, as a guide to administrators and human resource staff into what can be expected as new job structures, pay and performance management systems are developed. The authors review program successes and remaining challenges from the perspective of 10 years after system implementation.

US Public Pension Landscape Series – July 24, 2019

Source: Thomas Aaron, Timothy Blake, Moody’s, Sector In-Depth, June 24, 2019
(subscription required)

Many US states and local governments, though certainly not all, face heightened credit challenges stemming from exposure to pension obligations, resulting in a highly varied and complex landscape. The severity of public pension challenges can differ substantially between, and even within, states.

Unfunded liabilities in many cases have reached historic highs, rising costs increasingly pressure some budgets, and aging demographics leave government finances increasingly susceptible to pension asset volatility. Yet in some cases, low or declining levels of pension risk bolster the credit profile of a given state or local government.

Governments grappling with pension challenges must often navigate legal protections for employee benefits that can limit reform options. However, litigation on a variety of pension reforms continues to work its way through courts across the country, offering the potential for precedent-setting decisions.

This series provides a state-by-state, in-depth review of the key issues related to pensions facing state and local governments. ….

State listing:
California
Colorado
Connecticut
Florida
Illinois
Louisiana
Minnesota
New York
Ohio
Oregon
Pennsylvania
Tennessee
Texas
Wisconsin