Category Archives: Public Sector

Final Report on Connecticut State Retirement Systems: SERS and TRS

Source: Jean-Pierre Aubry and Alicia H. Munnell, Center for Retirement Research at Boston College, November 2015

The report’s key findings are:
– Connecticut’s pension systems for state employees and teachers face large unfunded liabilities, despite recent efforts by the State to fund.
– A significant source of the problem is the “legacy debt” built up before the State began pre-funding its pensions in the 1970s.
– Since pre-funding began, inadequate contributions from the State and low investment returns have added to the problem.
– One way to address the problem is through a two-step approach:
– separately finance the legacy debt over multiple generations; and
– fund ongoing benefits using a level-dollar amortization method over a reasonable rolling period; and reduce the long-term assumed return.

Why U.S. States Need Pension Waiver Credits

Source: Randall K. Johnson, Mississippi College School of Law Research Paper No. 2015-03 September 29, 2015
(subscription required)

From the abstract:
This article identifies a novel approach to public pension reform. It does its work in, at least, four ways. First, the article encourages better use of public sector resources by calling for the elimination of public pension inefficiencies. Next, it explains how to reduce public pension inefficiencies, at least on a prospective basis, by moving away from defined-benefit pension plans. The article also describes a way to move beyond defined-benefit pension plans, which calls for the creation of a new tax expenditure program (Pension Waiver Credits). Lastly, it explains how to implement this new tax expenditure program: so as to optimize the use of public sector resources.

The Motherhood Wage Penalty and its Determinants: A Public–Private Comparison

Source: Chloé Duvivier, Mathieu Narcy, Labour: Review of Labour Economics and Industrial Relations, Vol. 29 Issue 4, December 2015
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From the abstract:
We investigate whether public and private sector employees bear a different wage penalty for having children. According to our estimates, the total motherhood wage penalty is much larger in the private than in the public sector. Nevertheless, in both sectors, we find no unexplained penalty once we control for potential determinants of the family pay gap, namely, a reduced labour supply of mothers, child‐related career interruptions, less access to management positions, and adjustments in working conditions. Finally, only child‐related career interruptions play a different role in explaining the motherhood wage penalty in each sector.

How Much Are Public School Teachers Willing to Pay for Their Retirement Benefits?

Source: Maria Donovan Fitzpatrick, American Economic Journal: Economic Policy, Vol. 7 no. 4, November 2015
(subscription required)

From the abstract:
Public sector employees receive large fractions of their lifetime income in the form of deferred compensation. The introduction of the opportunity provided to Illinois public school employees to purchase additional pension benefits allows me to estimate employees’ willingness-to-pay for benefits relative to the cost of providing them. The results show employees are willing to pay 20 cents on average for a dollar increase in the present value of expected retirement benefits. The findings suggest substantial inefficiency in compensation and cast doubt on the ability of deferred compensation schemes to attract employees.
Other versions:
How Much Are Public School Teachers Willing to Pay for Their Retirement Benefits?
Source: Maria Donovan Fitzpatrick, National Bureau of Economic Research (NBER), NBER Working Paper No. 20582, October 2014

Rating State Government Payroll Cards: Thumbs Up for Cash Access; Thumbs Down on Overdraft Fees

Source: Lauren Saunders, National Consumer Law Center, November 2015

Employers are increasingly eliminating paper paychecks and using payroll cards to pay workers who do not have direct deposit. In 2015, more employees are expected to receive payroll cards than paychecks. Payroll cards can be a safer, faster, more convenient, and cheaper way to receive wages than a paper paycheck. However, payroll cards that are loaded with fees can chip away at thin wages.

This report surveys the payroll cards used by state governments to pay their own employees. Nineteen states currently have active payroll card programs. Each of these states uses payroll cards appropriately: as a second choice pay method, with the vast majority of employees paid by direct deposit. Direct deposit into an account of the employee’s own choosing should always be the first choice for how to receive pay.

The fees that state employees can incur on their payroll cards vary considerably state to state. We were unable to determine the average amount of fees that state employees actually pay because not a single state asks the card issuer to provide that data. This “don’t ask, don’t tell” policy is unacceptable. The data is easily available, and states should know if a payroll card is causing low wage workers to lose their pay to fees. Judging by the fee schedules, however, we made an attempt at assessing how easy it is for workers to avoid fees.

Every state payroll card is capable of being used for free if the worker is careful. Every card allows workers to withdraw their entire wages at least once per pay period at a bank teller window, gives the worker at least one free ATM withdrawal per deposit, charges no fees for purchases, and permits some free customer service calls. But some state payroll cards make it hard to avoid fees with normal usage…

On Friedrichs v. California Teachers Association

Source: Jeffrey Keefe, Economic Policy Institute, EPI Briefing Paper #411, November 2, 2015

From the summary:
The inextricable links between exclusive representation, agency fees, and the duty of fair representation. … The U.S. Supreme Court in its current session will consider Friedrichs v. California Teachers Association, a case that may require all states to enforce public-sector open-shop laws. Specifically a question before the court is whether to overrule Abood v. Detroit Board of Education, 431 U.S. 209 (1977) and find public-sector agency-shop clauses unconstitutional. Agency-shop clauses allow unions to collect agency fees (also called fair-share fees) from employees who are not union members but whom the union is legally required to represent. The fees are calculated as a percent of union dues. The Court in Abood upheld the constitutionality of agency-shop clauses, provided that the agency service charges are used to finance collective-bargaining, contract-administration, and grievance processes, but not for political or ideological purposes. Since World War II, 25 states have enacted so-called right-to-work (RTW) laws prohibiting the enforcement of agency-shop provisions in the private sector, and then they extended these laws to their public-sector employees. These laws create “open shops,” where all workers, union and nonunion alike, have the right to union representation but are not required to pay the union fees for that representation. If the Supreme Court overturns Abood and eliminates agency fees, it would essentially make all states right-to-work states (also known as “no-fair-share” states) in the public sector.

This briefing paper responds to a claim by the Mackinac Center for Public Policy, in its amicus curiae brief, that there is not an inextricable link between exclusive representation and the agency fees that allow public-sector unions to fulfill their duty of fair representation for all bargaining unit members. “Unions are in fact able to fulfill the duty of fair representation despite whatever incentive workers might have to ‘free ride’ on the union when they do not face any agency fees,” the brief states (Mackinac Center 2015)…. Simply put, this briefing paper asks whether agency clauses, which eliminate free-riders, are needed so that unions can carry out their obligations to serve all members of a bargaining unit. It finds that agency clauses are needed because free-riding reduces resources and thus undermines the ability of a union to serve all workers in the bargaining unit. Having fewer resources, for example, likely makes it harder for the union to pay the costs of an arbitration, which could include the costs of investigation, lawyers’ fees, the arbitrator’s fee, and staff time…..

Related:
Press Release

Retirement Security: A Moving Target – Local Governments Grapple with Benefit Plans

Source: Elizabeth Kellar, PM Magazine, Vol. 97 no. 10, November 2015

Local governments have faced fiscal pressures over the past decade, often exacerbated by higher pension and health care costs. They have made significant changes to their benefits, especially for new hires, and have increased employee and employer contributions to their pension and health care plans.

Who’s Behind Friedrichs?

Source: Adele M. Stan, American Prospect, October 29, 2015

The right-wing one-percenters who are funding a mega-attack on unions.

…The right of unions to collect fair share fees was settled by the court’s unanimous decision in 1977’s Abood v. Detroit Board of Education. In her dissenting opinion in Harris, Justice Elena Kagan noted that the fair-share issues Alito brought up were not even before the court in Harris. Alito’s questioning of the Abood precedent, however, signaled an inclination by the conservative majority to revisit it.

Alito’s invitation to reconsider Abood helped ensure that Friedrichs tore through the legal system at high speed. But the real force propelling Friedrichs’ gallop through the courts was the Center for Individual Rights (CIR), the right-wing pro-bono law group that is representing teacher Rebecca Friedrichs and her fellow plaintiffs: At each stage in the legal process, CIR attorneys asked the courts to rule against their own clients, with the apparent interest of moving the case up to the Supreme Court as quickly as possible…..

….Since its founding, the Center for Individual Rights has maintained a special focus on challenging civil-rights measures, especially affirmative action….. The list of foundations and donor-advised funds supporting the Center for Individual Rights reads like a who’s who of the right’s organized opposition to labor. …. According to journalist Laura Flanders, earlier in its history CIR also enjoyed the support of the Pioneer Fund, a white supremacist organization devoted to the promotion of eugenics. Flanders, writing in The Nation in 1999, found through an examination of the group’s tax records that the Pioneer Fund had made three separate grants to CIR. While the involvement of the Pioneer Fund in CIR may seem unrelated to the law group’s anti-union work, it is not uncommon for organizations opposed to the interests of labor to also have histories of antipathy to other forms of civil rights…..

Taxes and Ability to Pay in Municipal Bankruptcy

Source: John P. Hunt, University of California, Davis – School of Law, Legal Studies Research Paper No. 463, July 20, 2015

From the abstract:
Scholars and commentators have argued that municipalities can and should use bankruptcy to shed unwanted liabilities, particularly employee healthcare and pension commitments. Courts increasingly have agreed: Detroit’s approved bankruptcy plan cut pensions, and the bankruptcy court overseeing the bankruptcy of Stockton, California brought down barriers to pension-cutting. Both courts found their way around state provisions arguably protecting municipal pensions.

Now that pension-cutting in bankruptcy has momentum, we can expect to hear arguments for using bankruptcy not just in cases like Detroit and Stockton where the municipality can’t meet all its obligations, but also in cases where residents or politicians come to regret municipal promises to workers.

This Article presents the most sustained, straightforward, and comprehensive argument to date that existing law requires bankruptcy courts to provide relief only when municipalities are reasonably unable to meet their obligations. The legislative history of the municipal bankruptcy statutes consistently sounds this theme, and judicial precedents are in agreement.

Congress did not provide a clear standard for courts to apply when looking at tax levels in municipal bankruptcy. Although the legislative history and caselaw provide some support for the proposition that municipalities should be required to tax at the level that maximizes revenue, the Article suggests a more moderate criterion: courts could require that a municipality tax at the top of its peer group as a condition of bankruptcy eligibility and plan confirmation.

Labor-Management Relations in Public (and Business) Administration: A Textbook Case?

Source: James S. Bowman, Jonathan P. West, Journal of Public Affairs Education, Vol. 21 no. 3 Summer 2015

From the abstract:
Unions are a perennial topic of controversy in American society. This article examines the attention
that labor-management relations receive in introductory public administration textbooks. These
publications define the focus of the field, its paradigm, and its essential elements; they also likely
affect how the subject is presented in the classroom. Given the interest in labor-management
relations and their place in the administrative state, how is the topic portrayed in beginning texts?
This investigation provides an overview of contemporary union activity and a description of the
methodology used, followed by the study findings. While all books reviewed give some attention to
employer-employee relations, the context and content of the coverage is, at best, modest. The
analysis briefly compares public and business administration texts in each subsection of the findings,
and generally reveals small differences between them. The conclusion discusses the implications of
the data.