Category Archives: Public Sector

Significant Reforms to State Retirement Systems

Source: Keith Brainard, National Association of State Retirement Administrators (NASRA), Spotlight On, June 2016

From the introduction:
Although states have a history of making adjustments to their workforce retirement programs, changes to public pension plan design and financing have never been more numerous or significant than in the years following the Great Recession. The global stock market crash sharply reduced state and local pension fund asset values, from $3.2 trillion at the end of 2007 to $2.1 trillion in March 2009, and due to this loss, pension costs increased. These higher costs hit state and local governments right as the economic recession began to severely lower their revenues. These events played a major role in prompting changes to public pension plans and financing that were unprecedented in number, scope and magnitude.

2015 Annual Survey of Public Pensions

Source: U.S. Census Bureau, Census Bureau News, CB16-TPS.112, June 14, 2016

The Annual Survey of Public Pensions provides a comprehensive look at the financial activity of the nation’s state and locally administered defined benefit pension systems, including cash and investment holdings, receipts, payments, pension obligations and membership information. Statistics are available at the national level and for individual states.

Total contributions were $180.2 billion in 2015, increasing 7.9 percent from $167.0 billion in 2014. Government contributions accounted for the bulk of them ($131.7 billion in 2015, increasing 8.3 percent from $121.5 billion in 2014), with employee contributions at $48.5 billion in 2015, climbing 6.5 percent from $45.5 billion in 2014. The other component of total revenue ─ earnings on investments ─ declined 68.4 percent, from $534.4 billion in 2014 to $168.7 billion in 2015. Earnings on investments include both realized and unrealized gains, and therefore reflect market fluctuations.

The total number of beneficiaries increased 4.3 percent to 10.0 million people in 2015 (from 9,559,956 people in 2014 to 9,971,726 in 2015). The payments they received rose 5.1 percent from $272.5 billion in 2014 to $286.5 billion in 2015.

Meanwhile, total assets increased 3.0 percent, from $3.7 trillion in 2014 to $3.8 trillion in 2015.

Public Sector Unions, the First Amendment, and the Costs of Collective Bargaining

Source: Aaron Tang, New York University Law Review, Volume 91 Number 1, April 2016

From the abstract:
Labor laws in twenty-two states permit government employers to compel all employees to pay “fair share fees” to support a union’s collective bargaining activities, even if the union advocates policies to which some workers are ideologically opposed. Thousands of collective bargaining agreements include provisions to this effect, and hundreds of thousands of objecting workers are forced to pay such fees each year.

At its core, this practice implicates a significant tension between two important principles: the First Amendment’s objective of protecting individuals from compelled support of unwanted messages, and labor law’s concern with fostering the collective benefits of worker representation. When confronted with a challenge to fair share fees nearly forty years ago in Abood v. Detroit Board of Education, the Supreme Court held that labor law takes precedence, such that the First Amendment intrusions produced by fair share fees are constitutionally justified. Twice in the past four years, however, the Supreme Court has indicated that it is poised to reverse course and strike down fair share fee clauses under the First Amendment, overruling Abood in the process. And on the last day of the 2014 Term, the Court granted certiorari in a case presenting just that opportunity.

In this Article, I challenge the conventional wisdom that public sector union financing implicates an inevitable trade-off between First Amendment principles and labor law’s core objectives. There is a simple alternative to the fair share fee union financing model that would permit public employers to pursue their broad interests in effective workplace representation without sacrificing the individual expressive interests of objecting employees: In lieu of fair share fee clauses, government employers can negotiate provisions under which they reimburse a union for its collective bargaining costs directly. Such an approach would free objecting workers of the compulsion to support an objectionable message and ensure that unions have the financial security they need to zealously represent worker interests. Moreover, the government can implement this alternative in a cost-neutral fashion, reducing future wage raises or gratuitous benefits to offset the added costs of union reimbursement.

But this government-payer alternative is not just a theoretical solution to what has been widely understood as an intractable debate—it has doctrinal significance, too. For once identified, the government-payer workaround becomes part of the constitutional analysis itself. That is to say, under First Amendment doctrine, the government’s ability to reimburse a union for its bargaining costs directly is a less restrictive alternative that renders fair share fees unconstitutional by comparison.
This Article explores the theoretical and doctrinal consequences of the government-payer alternative to fair share fees. In doing so, it proposes an answer to a longstanding puzzle in the Court’s First Amendment jurisprudence regarding the proper standard of scrutiny for compelled fees—a puzzle that the Supreme Court has explicitly recognized yet left unresolved. The Article concludes by offering a few observations concerning the impact of the government-payer alternative for the future of public sector labor unions and the First Amendment more broadly.

Public Pension Funding Practices: How These Practices Can Lead to Significant Underfunding or Significant Contribution Increases When Plans Invest in Risky Assets

Source: Donald J. Boyd, Yimeng Yin, Nelson A. Rockefeller Institute of Government, Pension Simulation Project Policy Brief, June 2016

Public pension funds provide benefits to nearly 10 million people, invest over $3.6 trillion in assets, and are deeply underfunded. A new Rockefeller Institute report and policy brief put a spotlight on how the methods that public retirement systems and governments use to fund pensions are affected by investment return volatility. The analysis concludes that a typical 75-percent funded public pension plan has a one in six chance of falling below 40-percent funded within the next 30 years, a crisis level currently faced by only a few major plans. The research brief and associated report are the beginning of a series from the Rockefeller Institute of Government’s Pension Simulation Project.

Mandatory Union Dues: A Constitutional Challenge in the Public Sector

Source: Brian J. McKenna and Nancy K. McKenna Labor Law Journal, Spring 2016
(subscription required)

On June 30, 2015, the United States Supreme Court granted the Petition for Writ of Certiorari in the case of Friedrichs v. California Teachers Association, the third constitutional challenge in the last three years to the legality of mandatory union dues imposed upon nonmember public-sector employees. This article will examine the primary issue raised in the Friedrichs case: whether the First Amendment permits a State to compel state employees to subsidize speech on matters of public concern by a union that they do not wish to join or support. This article will not address the second issue raised in the case involving the opt-out procedures utilized in California for nonmembers requesting a refund of nonchargeable expenditures. Mandatory union dues also known as fair-share fees, agency-shop provisions or the union security issue.

Federal Workforce: Distribution of Performance Ratings Across the Federal Government, 2013

Source: U.S. Government Accountability Office (GAO), GAO-16-520R: Published: May 9, 2016

From the summary:
In calendar year 2013 (the most recent data available at the time of our review), of approximately 1.2 million permanent, non-Senior Executive Service (SES) employees at the 24 Chief Financial Officers (CFO) Act agencies, GAO found that about 71.4 percent (or about 836,900 employees) were rated using a 5-level performance appraisal system. This was followed by a 2-level pass/fail system (about 12.7 percent), 3-level system (about 9.4 percent), and 4-level system (about 6.2 percent).

As figure 1 shows, about 99 percent of all permanent, non-SES employees received a rating at or above “fully successful” in calendar year 2013. Of these about 61 percent were rated as either “outstanding” or “exceeds fully successful.”

Puerto Rico and Pensions: the Basics

Source: Tyler Bond, National Public Pension Coalition (NPPC), June 7, 2016

Puerto Rico and its debt crisis remain in the news as Congress considers legislation to help the island territory restructure and manage its debt. Puerto Rico’s pensioners remain trapped in this crisis as well. Just last week, a new audit of the territory’s pension system by KPMG found that the pension system there could run out of money next year. Puerto Rico’s retirees risk being cast into poverty if the pension system is not properly funded- a risk that becomes even greater if the territory is forced to repay vulture hedge funds rather than put needed funds into its depleted pension.

Puerto Rico’s debt crisis, its causes, and its consequences are all complicated and, as a result, there is a lot of confusion about what is happening there. While we’ve written about it before, let’s cover some of the basics:
Puerto Ricans are American citizens ….
The legislation Congress is considering is not a “bailout” ….
What’s happening in Puerto Rico is not going to happen in a state …..
Related:
Puerto Rico, Pensions, and Vulture Hedge Funds
Source: Tyler Bond, National Public Pension Coalition (NPPC), March 23, 2016

The Special Value of Public Employee Speech

Source: Heidi Kitrosser, University of Minnesota – Twin Cities – School of Law, Minnesota Legal Studies Research Paper No. 16-14, May 4, 2016

From the abstract:
In this article, I use the 2014 decision of Lane v. Franks as a jumping off point to revisit the rule of Garcetti v. Ceballos, that speech conducted pursuant to one’s public employment is unprotected by the First Amendment. I explain that Garcetti is emblematic of the Supreme Court’s failure to dig beneath the surface of its own long-standing acknowledgment that public employee speech holds special value. If one tunnels into that subterrane, one finds that the value of public employee speech is a function not just of content, but of form. Public employees play a special role under the First Amendment by virtue of their privileged access both to information and to communication channels for conveying it. The special communication channels to which employees have access – including internal channels – can be uniquely effective in supporting accountability and the rule of law, and thus in fulfilling core free speech values.

I consider how a fuller conception of special value – as well as a more sharply defined government interest in limiting employee speech – ought to impact the doctrine of public employee speech. I propose that, where work product speech can confidently be identified, courts should consider whether employees were disciplined based on a genuine, not pretextual assessment of work product quality. Crucially, in cases where employees were hired to render independent professional judgments, disappointment with those judgments, not because they reflect low quality, but because they are politically or personally inconvenient for employers, should not be deemed quality-based assessments. Only disciplinary actions based on quality-based assessments should be exempt from further scrutiny. As a second-best, but perhaps more realistic near-term alternative, I also consider means to limit Garcetti’s reach.

When a Promise is Not a Promise: Chicago-Style Pensions

Source: Amy Monahan, University of Minnesota – Twin Cities – School of Law, Minnesota Legal Studies Research Paper No. 16-17, May 9, 2016

From the abstract:
Cities and states around the country have promised their workers – most often teachers, police officers, and firefighters – retirement benefits, but have in many cases failed to set aside adequate assets to fund those benefits. Several of these plans are predicted to become insolvent within the next decade and innumerable additional plans appear headed for insolvency in the decade that follows. Once insolvency occurs, pension benefits due to retirees will either have to be paid out of the government’s cash on hand, or else will simply not be paid at all. Based on their current financial positions, most jurisdictions appear unable to fund pension benefits while maintaining essential governmental services, unless taxes are raised significantly. This article is the first to examine whether and to what extent retirees will have effective legal recourse to secure the payment of their pensions in the event of retirement plan insolvency – a critical issue not only for pensioners, but also for taxpayers. It concludes that law is unlikely to provide effective recourse for retirees due to the inability of courts to force legislatures to appropriate funds, raise taxes, or incur debt. As a result, even in cities and states with apparently iron-clad legal protection for pension benefits, pension fund insolvency leaves payment of benefits in doubt, with any solution resting solely with the legislative branch. Understanding that solving the public pension problem is a political problem, rather than one that can be easily addressed through law, is critical to moving forward toward a solution that is fair to both employees and taxpayers.

Role of psychosocial work factors in the relation between becoming a caregiver and changes in health behaviour: results from the Whitehall II cohort study

Source: Nadya Dich, Jenny Head, Naja Hulvej Rod, Journal of Epidemiology & Community Health, Online First, 23 May 2016

From the abstract:
Background: The present study tested the effects of becoming a caregiver combined with adverse working conditions on changes in health behaviours.

Methods: Participants were 5419 British civil servants from the Whitehall II cohort study who were not caregivers at baseline (phase 3, 1991–1994). Psychosocial work factors were assessed at baseline. Phase 4 questionnaire (1995–1996) was used to identify participants who became caregivers to an aged or disabled relative. Smoking, alcohol consumption and exercise were assessed at baseline and follow-up (phase 5, 1997–1999).

Results: Those who became caregivers were more likely to increase frequency of alcohol consumption, but only if they also reported low decision latitude at work (OR= 1.65, 95% CI 1.15 to 2.37 compared with non-caregivers with average decision latitude), or belonged to low occupational social class (OR=2.38, 95% CI 1.17 to 4.78 compared with non-caregivers of high occupational social class). Caregivers were more likely to quit smoking if job demands were low (OR=2.92; 95% CI 1.07 to 7.92 compared with non-caregivers with low job demands), or if social support at work was high (OR=2.99, 95% CI 1.01 to 8.86 compared with caregivers with average social support). There was no effect of caregiving on reducing exercise below recommended number of hours per week, or on drinking above recommended number of units per week, regardless of working conditions.

Conclusions: The findings underscore the importance of a well-balanced work environment as a resource for people exposed to increased family demands.